Why Excellent Customer Service is Crucial to Improving Sales
Want a better understanding of the relationship between customer service and sales? We've got your back.
May 22nd, 2017
We spend a lot of time talking about the positive effects of customer service (CS). We’re experts on it. But how does customer service help boost your sales, and what happens if your CS isn’t as great as it should be?
How does customer service affect sales?
Happy customers buy more. Retaining loyal customers leads to repeat purchases and keeping your customer satisfaction high is great for getting referrals.
The better your customer service, the more likely that your customers’ price sensitivity will drop. Satisfied customers - who feel like they are valued by the company - are generally much more willing to spend more than new customers.
Not only are existing customers more likely to spend more, they’re also easier to upsell to – 10 times easier actually. If you’re about to launch a new product, or you want to increase sales for a certain item, your loyal customers are one of your best options.
Customers who have consistently received good CS, along with good products, are more likely to be loyal to your brand. Because of how high their satisfaction is, they’re much more open to trying new products.
Remember that their price sensitivity is also lower! Not only are they more willing to try a new product, they’re probably going to pay the most for it. Provide excellent customer service and half the work of your advertising is done for you.
Higher Lifetime Value
This all leads to a much higher lifetime value (LTV) for your customers. Happy customers can have an LTV six times higher than regular customers.
And LTV is important. If a customer’s value is higher, they’re more profitable for your company and much more important to keep.
These customers can be five times as likely to buy from you again and are four times as likely to refer your company to another potential customer. So it isn’t only important to make sure your CS is top notch, but also to make sure that it stays that way. Retain those happy customers!
Acquisition vs Retention
Why customer acquisition is important too
The referrals your satisfied customers give are just another way to help boost those sales.
Although retaining customers is incredibly important, that doesn’t mean that customer acquisition is redundant. Every company wants – and needs – new customers to keep the business alive and growing. And it’s especially important for small businesses.
If your CX is good, your customers are much more likely to talk about your company to friends and family. They may even post about it online, where their reach is far wider.
After having a positive experience with a business, 83% of people are actually willing to refer that company to another person. The relationship between customer service and sales is symbiotic, so why not take advantage of it? Improve your CS today and you could potentially increase your customer base by that 83%.
When you consider that it costs 4 – 10 times more to acquire a new customer than it does to retain one, it’s obvious that creating a fantastic CX is a much more cost-effective path.
How customer acquisition and retention can affect your sales
The difference between acquisition and retention can be vast. Not only in cost, but in growth. Retained and loyal customers can help increase your incremental growth by up to 20% a year. And that’s nothing to be sniffed at. Without customers, any business would be redundant.
It’s important to appreciate the customers who are loyal to you and consider their needs. If you get your CS and your CX right, they’ll reward you through purchases and free endorsement.
In fact, 89% of companies consider CX to be important to retaining customers. This kind of gradual growth is vital to any business. It’s the bedrock that keeps you grounded (grounded; get it?).
However, acquiring new customers is important for rapid growth. Although it is far more expensive to your company, it can often be worth it. New customers can be up to 2.8 times more important for rapid revenue growth than retained customers. If retained customers can increase your growth by 20%, consider what acquired customers can do for your company.
So what does that have to do with customer service? We’ve talked about how referrals are a good way of gaining new customers, but your fantastic CS shouldn’t just stop there.
Customer service can no longer just be an aftercare thought. If potential customers are browsing your website, this is when your CS can change that lead into a conversion.
On-site advisors and webchat features are always helpful in pushing customers toward a sale. If a customer is finding your website difficult to navigate, or they can’t find the item they want, 78% of them may simply abandon their cart if the customer service isn’t good enough to help them.
But with excellent CS, you can avoid this. Your operators should be there to lend a hand when it's needed; they should be actively looking for people that they can help on your website.
Train your operators well and make sure they’re where they need to be to help turn potential customers into acquired ones. Otherwise, the meagre CS you’re providing can affect your sales in more ways than abandoned carts.
What happens if your customer service is poor?
Unhappy customers cost you money
If a customer has received a faulty item or is confused by a service you provide, helping them the first time should be a priority. First contact resolution (FCR) can save you money in the long-run.
Of course, your operators need to be well trained, have the right temperament, and be experts in the product or service in question. Without them doing a fantastic job on your frontline, those unhappy customers can become a nightmare.
One of the most famous examples is that of David Carroll and United Airlines. After United’s employees broke David’s guitar, the airline refused to admit its mistake or pay for the damage. This shameful CS lead to David writing a song about United – using his broken guitar as a prop – which eventually cost the company $180 million. You can still find the song online!
And it doesn't seem like they've learned from their mistakes. United have faced many scandals so far in 2017. From dragging a man off of a plane, to a scorpion falling from an overhead bin, United's faux pas don't seem to be letting up.
And you can rest assured that they're still refusing to admit that their CS is a little less than stellar. All of this saw their stock prices drop and their market capitalisation fall by as much as $770 million.
Another great example is the confrontation that took place between Ocean Marketing employee, Paul Christoforo, and a disgruntled customer of N-Control, a gaming controller manufacturer.
When the new gaming controller missed its launch date, in 2011, Paul was more than a little avid in his replies to unimpressed customers. Although N-Control had hired Ocean Marketing as a third-party marketing company, Paul didn’t seem to care about that responsibility.
From advice to “put on your big boy hat” to being told to “grow up you look like a complete child bro”, it’s safe to say that Paul’s customer service was not going the extra mile. And, unsurprisingly, N-Control made the decision to drop Ocean marketing pretty soon afterwards.
Losing an entire client’s business is a pretty heavy blow for any company. Add to that the public nature of this affair and you have a CS nightmare.
Unhappy customers tell others about their experience
Just like the encounter with Ocean Marketing, customers who have suffered bad CS will usually share this with others and will even tell them not to shop with that company.
Customers are much more likely to talk about negative experiences with a business than positive ones. And CS is no different: 95% of customers who have received bad CS will tell other people about it. 95%. Let that number really sink in.
If you’re still considering whether CS is important to your sales – and your business as a whole – that number should really convince you.
If the CS you’re offering is subpar, nearly all of your customers are going to be talking about it. And they’re not going to be nice about it either.
It can take up to 12 positive reviews for a potential customer to ignore 1 negative review. If 95% of your customers are willing to post a negative review online – formally or informally – it’s unlikely that a potential customer will find those 12 reviews.
And remember how important new customers are to the growth of your business. Expert customer service is simply vital to any company.
Loyal customers aren’t loyal forever
Even if you have a large base of loyal customers, meagre customer service can change all that. And that can be costly.
If your customers feel unappreciated, like they can’t get any help from your company, or that your staff are rude or impatient, they may take their money elsewhere. Yes, even if your products or services are top-notch.
Back in 2014, technology giant Apple fell down to 13th place from the top spot on Which?’s UK national customer survey. 13th place is still fairly high – no one can deny the extent to which Apple has infiltrated our everyday lives. But dropping 12 places is a fairly substantial fall and was likely accompanied by quite a loss of money.
So why did they lose out to other companies? Customers complained that getting an appointment with their Genius Bar was far too difficult. Because their customers felt like they were unable to even talk to a customer service representative, even a successful company like Apple saw a hit to their numbers.
If your company isn’t as huge as Apple, you can probably imagine what kind of an impact something like this would have on your bottom line.
According to Forbes, businesses are losing $62 billion a year because of bad CS. And this poor service causes customers to switch to other companies for a better experience, sometimes more than once. Don't let your competition get the upper hand.
Companies that focus on providing good CS and CX get the most out of it. At FM, we work hard to remain industry experts and provide our clients with the best CS, every time. We make sure that our operators know how to handle every situation and we use our cost-per-conversation model to ensure our clients only pay for what they need and use.
We know that if your company can offer the best CS, your customers will appreciate you for it and your sales will flourish. Want to work with a team that can do that legwork for you? Don't hesitate to contact us today. Alternatively, read up on our tips for providing great customer service; we're experts!