How to calculate the cost of customer service
How important is customer service? Well, 91% of dissatisfied customers simply won’t do business with you again. Worse, only 4% will let you know. On the other hand, many more will tell others about their negative experience with you. Nearly 60% will take their business elsewhere if they believe they will be treated better.
Doesn’t it seem obvious that improving customer service should be high priority? Unfortunately, many C level folks don’t see things that way. To them, customer service is a source of cost, not a source of profit. So, they are reluctant to spend money in that area. Unfortunately, what they don’t realize is that good or bad customer service can have as much of an impact on the bottom line as marketing does.
The way to get executives to shift their thinking on this is to help them understand the true costs of customer service. Keep reading for more insights.
Consider The Cost of Customer Acquisition
The likelihood of acquiring a new customer is much lower than the likelihood of getting an existing customer to make a purchase. In addition to this, it costs more to retain an existing customer than it does to acquire a new one. In fact, it costs five times more to attract a customer than to keep one.
Good customer service practices helps employees to keep customers in the fold. In fact, it is the most important factor in customer retention. Of course, this doesn’t mean that acquiring new customers isn’t important. It is. However, nobody should assume that a lost customer can be easily replaced by a new one.
Customer Service Impacts Employee Retention
Nobody wants to work in a place where their interactions with customers are overwhelmingly negative. When customers are upset, they often take out their frustrations on the people who they interact with directly. This means that call center employees, floor staff, help desk technicians, and others get the brunt of it.
Executives are often far removed from these situations, and don’t understand how poor customer service and the resulting fallout impacts morale. Employee retention rates in customer service positions are relatively low to begin with. Why drive employees away and increase the cost of recruiting, hiring, and training.
Consider The Physical Costs of Operating or Outsourcing a Customer Contact Center
Of course, there are very real expenses when it comes to offering up good customer service. This is true whether you outsource your solution or keep things in house. With outsourcing, there is frequently a cost per call as well as monthly fees to cover.
If you keep your solution in house, you have the costs of running a call center. These costs include furniture, computer equipment, monthly utilities, telephony, etc. However, when considering these costs, it is important to also calculate the potential ways that money can be saved. For example, using a flexible managed office space solution can lower costs while allowing for future growth.
Adding up Sales Returns And Average Order Value
Good customer service entails much more than handling customer inquiries and complaints. It involves the sales process, customer education, and more. When customer service is done right, sales increase, returns decrease, and in many cases the average value of each order goes up as well.
However, when staff don’t have the proper training, equipment, time, resources, and empowerment to offer up great customer service, the opposite happens. For example, if a retail clerk has had adequate training and is knowledgeable in all of the products sold, they can help customers by passing their knowledge along. The result is that customers are more likely to get what they need the first time, and less likely to return or exchange items.
Calculate The Cost of Reputation Management
As mentioned above, dissatisfied customers are most likely to stop doing business with an organization without ever logging a complaint. However, they are very likely to broadcast their dissatisfaction to others. Negative feedback, delivered by word of mouth can travel quite quickly.
In addition to this, unhappy customers have other options to broadcast their negative experiences. Considering that millennials rely very strongly on the opinions of their peers when making purchasing decisions, this can be a big deal. A rant on Facebook can reach many people, especially when the one ranting has a large audience. There are also multiple consumer review sites that provide a platform for people to share their experiences with businesses.
All of this can leave a real mess to clean up. Reputation management costs money. Good customer service can significantly reduce these costs.
The best way to get executives onboard when it comes to investing in customer service is to convince them to shift their thinking. Customer service is essentially a sales tool that can have an amazingly positive experience on the bottom line. Finally, the value of a customer must never be underestimated.