Customer service has developed several different titles over the years; service, customer success, account management, client management. Whatever you want to call it, the customer service principles haven’t changed, and they’ve never been more critical.
With most companies developing similar products, service has become a battleground on which many customers are won and lost. In this article, Andy MacGregor, managing director at virtual receptionist provider Face For Business, outlines how customer service affects business success.
Customer retention vs new customer
The old rule of thumb used to be that it cost 5x more to win a new customer than it did to retain an existing one. It’s debatable whether that ratio is still accurate, but the sentiment is still valid.
It makes sense if you think about it. To win a new customer, you must spend money on marketing, brand awareness, sales, post-sales – the list goes on.
With an existing customer, you don’t need to spend all that. You just need to provide the service that convinces a customer to stay, which is much cheaper. So providing a great customer experience can save you money on new business.
Win more referral business
Aside from customer retention, new business from referrals is one of the most effective ways to grow your business. With a referral, your existing customers do all your marketing for you by recommending you to other people in their network.
Again, this can save money on marketing and attract new customers. Considering that many customers would be willing to move to a new provider simply based on service, it can be a massive win for any business.
Increase renewals sales
Contract renewals can be a tricky time between a business and a customer. Even if you’ve delivered on results, this time can often feel like a natural point to part ways and ‘try something new’.
Remember, customer service isn’t just about delivering results. It depends on whether you have a good relationship with your client. Your chances of getting a renewal are significantly increased if you provide a brilliant service and generate results. This is backed up by the fact most customers would be willing to pay more with a supplier if they got better customer service.
Upsells are a great way to grow a business by relying more on existing accounts and customers rather than trying to sell more to new customers. But upsells can be tricky because you’re asking an existing customer to pay more with you.
But just like during a renewal phase, your chances of upselling a customer are much higher if they value the level of customer service you provide, know they can rely on you, and you deliver results.
If you deliver results but don’t provide an excellent service, you risk a customer just tolerating you for the results but being unwilling to invest any more with you. On the other hand, if you’re providing results and offer an excellent service, you’ll have more goodwill with the customer, and they’ll be willing to spend more with you.
Reduce customer churn
Customer churn is a natural part of any business, especially service-based businesses. Often there’ll be a natural point where it can make sense to ‘reset’ and go with another service provider.
Usually, this happens when the client feels the relationship has gotten stale. The other time is when the service isn’t living up to expectations. Customer service can help to solve this quite quickly. Suppose you continually deliver high customer service levels and remain valuable to your customers. In that case, they’re less likely to risk leaving you for someone else who might not be able to provide the same levels of service as you.
Increase lifetime customer value
A customer’s lifetime value is the amount of money you can make from a customer over the period they use your business against the money you had to spend to acquire them.
It’s essential to strike a balance between short-term financial goals and long-term success; extending a customer’s value over time is a simple way of doing this.
Customer success is now central to business success
With so many businesses trading on products and services that are increasingly similar, customer service has become the primary differentiator for customers to use.
So much so that two-thirds of businesses now say they compete primarily on customer service when trying to win new business. The vast majority of those who succeed at customer service (84%) reported an increase in revenue.
There’s no question that customer service has become just as crucial to success as the product, price and placement – and any business which chooses to ignore it is in for a difficult time.