The experience a customer has in dealing with your business drives much more than the prospect of repeat business or sales growth. Typically, business believes that delivering great service will cost them too much, and so they simply deliver what they think they need to. Or worse still, they focus on the timeliness, not the quality.

What most businesses fail to understand is that bad service is actually more costly to your business than great service. Bad service drives much, much more than just a poor customer experience – it reduces revenue and drives up costs. It‘s the last half of the equation that so many people fail to understand.

The experience your business delivers is a reflection on your ability to balance the demands of customer service (volume and type of interactions) and the supply of resources and processes (effectiveness of response).

The hidden costs of bad service are:

• Rework: every error your business makes, costs money to rectify, and typically slows cash flow. Not all of those costs are measured or visible. The intangible cost is the effect on the customer
• Loss of potential business: as the level of competition increases across nearly all industries, product quality becomes less of a differentiator. If you make your service offering less attractive than your competitors, price not be the most important consideration.
• Higher contacts per transaction: the number of interactions you need to have with a customer at each stage of the process adds to your costs. Minimizing the number of quality interactions not only saves you money, but improves the customer experience.
• Staff turnover: despite what some people choose to believe, most staff want to take pride in where they work. They are the ones that typically “wear the heat” for poor service and it can have a major effect on loyalty. Every time you lose a staff member you incur the costs of recruitment and training, and the hidden costs of low productivity during the initial periods, and typically lower quality as they learn their roles. These are real costs that can be avoided if you can retain your frontline staff - a key driver in retaining them is the satisfaction of their job. Few staff find responding to service failures or fixing errors particularly satisfying

On the other hand, delivering great service delivers these savings:

• Lower cost to manage and service your client base = higher profits
• Increased customer loyalty = increased revenue and lower marketing costs
• Increased staff loyalty - low costs, better service = higher profits 

It’s often a hidden opportunity, so ask yourself these questions:

Address these issues and you’re on the road to improved profits.

Source: Steve Mitchinson, TeamRed Solutions

Is your customer service winning or loosing you business? Find out by nominating your business for an Australian Customer Service Award today.