The easiest way to understand why good customer service is essential, is to learn about the ways that bad customer service will damage a company.
Customer service is one of the keys to increased sales performance, customer retention, and ongoing brand loyalty. When businesses get customer service right, the rewards will start flowing, however, when they get it wrong, they can suffer from considerable financial losses and a number of negative side effects that can be difficult to recover from.
Any business owner wanting to better understand the relationship between customer service and success, will learn a lot from these three key ways that businesses can suffer from bad customer service.
Bad Customer Service Leads to Revenue Loss
According to data from SalesForce, bad customer service costs American businesses $84 Billion per year, and the total costs around the world are as high as $338 Billion. Up to 78% of customers will end a relationship due to bad service, and the loss of revenue can be hard to recover from. The loss of profit can spiral drastically, particularly if something is not done to address the business reputation.
A customer lost today can come with other negatives like a bad review, or the sharing of that negative experience with friends and colleagues. The negative financial effects can range from hundreds or thousands of dollars in small businesses, to millions of dollars in the largest businesses.
Loss of Reputation Leads to Poor Reputation
Reputation is important in business, and a consistent record of good customer service can lead to not only repeat business, but also referrals and testimonials that drive growth.
For businesses that don’t focus on customer service, the opposite is true. Bad customer service leads to a poor reputation, negative reviews, a lack of customer testimonials, and fewer customer referrals. A business that lets their reputation fall too much may even find that existing and old customers actively recommend against their brand.
Reputation is critical because a bad reputation can continue even after customer service issues have been resolved. Businesses need to constantly engage in reputation management, and providing good customer service is one of the fundamentals.
Without a strong reputation, a company simply won’t be able to grow. If poor customer service persists, then existing customer numbers will shrink, leading to a real crisis within the company or even a significant loss of income that leads to closure of the business.
Poor Customer Service Affects Employees Too
A culture of good customer service is something that needs to exist throughout an organization for it to be successful. When employees are not trained or effectively led in a way that promotes good customer service, then their morale and motivation will suffer.
Employees (especially front line staff) need to have the ability to service customers in a way that creates a positive customer experience. If employees cannot do that due to organizational failings, lack of training, or a lack of support from management, then they will eventually leave the company. The employees left will typically be those with fewer skills, or those who are not committed to providing a positive customer experience.
Losing staff is costly, and losing quality staff is even more so. Businesses need to place emphasis on customer service starting from the executive level, right down to frontline sales and support staff. Without a strategy that encourages and facilitates good customer service, a business simply can’t succeed in today’s competitive marketplace.
Good Customer Service Needs to Be Embedded in every Business Plan
The cost of not providing good customer service is too high for any business to endure over a long period. Even the largest and wealthiest companies wouldn’t survive when not focusing on customers and their needs, and the smallest companies won’t grow without building a reputation of good customer service.
Consider the impacts of poor customer service to be a warning, and learn the lessons from many businesses that failed to recognize the importance of good customer service and reputation in the past.