Every business should be aware of the fact that customer service massively impacts the company’s revenue. In fact, it predetermines the financial success of your enterprise. Sure, customer service is a vital component of your company’s prosperity, but if you combine it with great products, you will thrive. However, if you fail to provide good client service, even an amazing product won’t save the day.
The truth is that until a company understands what financial impact customer service has on business, they won’t pay enough attention to it. Proper customer service retains clients and attracts new ones, therefore having a direct impact on your financial wellbeing. There are two key points to consider when it comes to how the core functions of customer service affect revenue: communication channels and pricing
The first way of generating revenue with the help of customer service is using a communication channel. If you manage to turn your clients into loyal ones, they become the advocates of your brand. Their positive reviews regarding the experience they’ve had with your brand will have a very beneficial impact on your company. Communication channels are a powerful marketing tool because people are inclined to trust their friends, family members and acquaintances and the experiences they’ve had.
It is important to keep in mind that if a new customer who was attracted to your brand via a communication channel is happy with your services, he or she is likely to recommend you to peers as well. However, remember that people share negative reviews with even greater enthusiasm than when they talk about a positive experience.
Customer service impact on prices
Besides communication channels, another influential tool of good customer service is pricing. You probably expect us to say that to retain clients, a company should keep prices at a certain level. The truth is that, according to the latest data, about 90% of customers will accept price increases as long as the customer service provided satisfies them. This means that you can increase prices without losing your customer base as long as you manage to provide a great customer experience.
What is the worth of a customer?
To fully understand the significance of customer service, ask yourself: What is the worth of each client to your company? This is a critical issue. It is actually possible to calculate the exact amount of money your client is worth. It depends on how big your company is, the number of customers you have, and the annual revenue of your business. If you do calculate an individual customer’s worth for your company, you’ll find that the number is striking.
Please note that unhappy clients do not always complain – they may simply leave. This means that you should encourage them to give you feedback so you can identify problems as early as possible. Luckily, however, some customers do complain. Pay high attention to these complaints as indicators of your overall service; otherwise, you may lose these customers, which might mean you’re also losing countless others who did not complain, resulting in hundreds of dollars of lost revenue.
For instance, let’s say you run a company with 1,000 customers and an average annual revenue of $100 per client per annum. If you get 10 complaints (which is only 20% of the real number of unsatisfied clients) and do not react, you might lose 50 customers. If they leave without complaining, you lose about $50,000, or $5,000 for each unresolved complaint. Noticeable figures, right? Now think about the communication channels we discussed earlier. This number can grow if a larger number of dissatisfied customers don’t return to the company and talk about their negative experience.
For example, if you lost 100 customers and 80% of them left without complaining, that’s already 80 people. Now think of everyone they can share their experience with. If each of the clients tells this negative experience to 10 other people, 800 people will know that something isn’t working right within your company. Imagine the potential revenue loss due to this number.
Now add some extra costs related to poor customer service. These are the costs spent on employees trying to solve the problem and reworking things to make the customer happy. Yes, this is a lot of calculation, but now you see the picture clearly and understand the link between good customer service and its impact on revenue.
How to provide good customer service and avoid losing revenue
Our main recommendations are:
- Always be consistent when you’re delivering customer service;
- Encourage your clients to give feedback and to complain.
Consistency is important because it translates into customer loyalty and fewer complaints. Encouraging your clients to complain is vital as it helps you to identify problems at an early stage and solve them before customers leave. To do this, offer various channels for sending complaints and read reviews of your company on the internet and social media on a regular basis.
The financial impact of customer service is huge. Customer service is not something you can take for granted. As you can see from the calculations given above, poor client service inevitably results in revenue loss. Modern communication channels increase the number of people who will be informed about negative experiences people have had with your company. Therefore, you must do everything possible to provide good customer service and bring it to a certain standard to avoid revenue loss.