Have You Rewarded Your Fans Today? The Alarmingly High Cost Of Bad Customer Service

Some new stats are ugly: Nearly 70% of defecting customers would've stayed if a problem had been resolved with one call, instead of requiring multiple interactions. Here's Salesforce exec Peter Coffee on how to please the people you need most, and save your bottom line.

Customer churn is a headwind that companies can’t afford to continue fighting, especially as those winds are whipped by the power of social networks. Too many companies create that headwind themselves: a blowback from poor customer service and inadequate customer care. This tendency must not be merely minimized, but must be vigorously reversed.

It’s widely acknowledged that it costs six to 10 times as much to attract a new customer as it does to keep an existing customer, but a current report by Accenture finds roughly half of surveyed consumers saying that they had left at least one vendor because of poor service. More than half of those defecting customers say they would have stayed loyal if they had been rewarded for their loyalty; nearly 70% would have stayed if a problem had been resolved with one call, instead of requiring multiple interactions. Replacing these customers is commonly treated as an inescapable cost of doing business, in a classic case of failing to see a stationary object. It’s time for a different point of view.

The urgency is increased when one considers that the typical customer tells an average of 16 other people about a poor service experience, but only tells nine about the good ones. This multiplier effect of poor service, combined with the high cost of replacing a lost customer, combine to make customer service improvement a strategic target: not only as an opportunity for existing companies, but also as an opportunity for innovators to devise and offer new tools that will soon become baseline capabilities.

From Damage Control to Affirmative Customer Care

The immediate priority is to get on the good side of the global conversations on social networks, where customers and prospects all connect. Ignored, the social community of billions of customers--an environment specifically designed to identify and highlight influential voices--is an echo chamber, where any dissatisfaction with a brand is reinforced and spread at pandemic speed. Engaged, that same community can be transformed from critics to advisers; when rewarded for their input, those advisers in turn become advocates or even zealots for a brand.

Don’t fight or evade the community: Play into it. It might be tempting, for example, to respond to an unhappy tweet with a deflection to email as the means of addressing the complaint, but this means that the Twitterverse only sees Act I of the play: “The Unhappy Customer.” Resolve the complaint in the forum where it was made: reply to a tweet on Twitter, reply to a Facebook update with a comment on that same post. The community surrounding the complainer then sees the speed and quality of the response, at minimum mitigating the harm; potentially, creating favorable buzz around the brand.

You don’t do this because it’s cool: You do it because it moves the needle of preference, leading to profit. American Express, in its 2012 Customer Service Barometer Study, found that 66% of U.S. consumers would spend more if they expected better service, with that group willing to pay an average premium of 13% to that end: Importantly, both of those numbers were up (from 58% and 9%, respectively) compared to the same questions asked in 2010.

These are not just hypothetical behaviors: The same study found 75% of customers saying they had already spent more with a company in response to superior service, up from only 57% in 2010. When people feel they have less time and money to spare, superior service has an increasing effect on where they spend both.

Transforming Customer Service Into Brand-Building

Increasingly, products are equipped with various means of network connection, for purposes ranging from smartphone-app remote control to routine updates of embedded software. Don’t stop with connecting products: Connect the company to the customer. For every product you make, ask how it might be possible to add a "Like" button (literally or figuratively) that would let customers tell you (and tell friends) when the product has delighted them; ask how it would be possible to give every customer, in the moment, a way to tell you when and how the product has disappointed.

Work by Eric Von Hippel at MIT has documented the growing expectation of customers that they will be able to engage directly in the process of product improvement; customers who do so become invested in the brand.

Again, this is not something that’s merely done because it’s cool. There are bottom-line incentives to do it. Connected products, wired with sensors and processors in the normal course of improving operational convenience, can generate vast amounts of data. These streams may reveal, using so-called “Big Data” techniques of exploration and association, unanticipated and useful pre-failure signatures. These can become a basis for voluntary service campaigns: acts of positive outreach made before a customer has even noticed a symptom (let alone experienced a breakdown).

Is this about “the cloud”? Only in the sense that a conversation about gourmet cooking is about running water, or a conversation about home entertainment is a conversation about electricity. Ubiquitous, affordable utility services disappear into the background as high-value markets build upon them.

It’s no longer novel to talk about a global web of connections, and a surging acceptance of delivering capability on that network rather than requiring people and companies to buy and operate their own infrastructure. What’s novel is to see the opportunity to stop treating service as a cost to be minimized, and see it as the next huge opportunity for competitive advantage.

Incumbent market leaders must therefore get out of their comfort zone, and rise above costly mass-media marketing that maintains brand awareness but does not continually refresh customer delight. Social media engagement provides priceless, continual realignment of what the customer actually values with what the company’s marketing campaigns promise.

Industries with long supply chains must tighten and accelerate their feedback loops, using the potential of connected products to know more--and know it sooner, and far more accurately--about how their products are actually used, and how the customer feels about that experience.

Finally, new market entrants must recognize the opportunity and necessity to punch far above their weight, by being more accessible and far more responsive in making customers feel like clients and partners--rather than being merely buyers. Getting the buyer to invest in the vendor’s success, even if only psychologically, is the surest way to defy the winds of commoditization and create the next premium brand.

--Peter Coffee is vice president and head of platform research of Salesforce.com, Inc., an enterprise cloud computing company based in San Francisco, California. Follow him on Twitter at @petercoffee

[Image: Flickr user Justin Scott Campbell]

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3 Comments

  • Rebecca@takethisjoborshoveit

    It’s a good reminder for those companies who sacrifice their personal touch in customer service. Most businesses commonly delegate customer service method to automated machines, for the sake of maximizing their work time. In today's age, customers are more likely to choose a company with excellent and personalized experience, not  just a bunch of talking machines.

  • Baxter

    And yet we still have insanity-causing voice response systems in place that exist only to allegedly save on FTE expense by offloading that expense on the customer as he tries desperately to get the answer he could have had in ten seconds had he reached a knowledgeable person. 

  • Karren

    Lovely article. Thanks. I have shared with a number of our clients!! I find it scary that the response of some businesses is to threaten their clients if they complain - we have experienced that firsy hand, then there are others who seem to enjoy making it as difficult as possible to deal with them, to the point  that you dispair of ever being able to amend an account detail, or get the product replaced. 

    And yes, I value my time - so am prepared to pay that premium for great service, but I also make the effort to tell the individuals just how special they are.  You cant put a price on that :)