If we understand the business axiom that says it’s five times more expensive to attract a new customer than it is to earn more business from a past customer or through a referral, we begin to grasp the dollars-and-cents dividends to be reaped from excellent customer service.
The cost of customer acquisition is rarely quantified or understood and is almost universally understated. Whether you advertise in the phone book, local newspaper, local radio, household throwaways such as the Penny Saver, or on doorknob flyers, the money wasted on uninterested circulation is high.
What I observe today is a complacency or even laziness that comes from good times. “We’ve got more jobs than we can handle, and therefore I don’t even follow up on my leads,” people tell me. This is dangerous. It’s a belief that can lead to indifferent customer service. Why expend the effort to please customers when we are booked months ahead? The Boot Hill of American business is populated with companies operating with this misguided belief. Remember, business is cyclical. Times will change. Your phone will suddenly stop ringing. What then?
This brings us back to the economies of excellent customer service. You must understand that providing excellent customer service is not an expense but an investment. The cost of acquiring new customers through advertising rather than growing it with referrals from satisfied customers could eventually reduce your business to financial ruin.
Let’s tie customer service directly to profit. Who commands and gets the highest fees for services rendered? The slipshod operator who burns one customer after another? Or the high-quality business that has a huge referral book of happy customers? Have you ever noticed that when you are referred by one of your satisfied customers that price is rarely an issue? Why? Because the referral implies that you are good, professional and will deliver on your promise — you have a track record of success. People will pay more for a sure thing. Focusing on customer service is the path to becoming a sure thing. And what’s more, you didn’t spend a dime in advertising to attract this new business.
Here’s another way to look at the value of customer service. Think of your business as a brand, just as the Ritz-Carlton is a brand. A brand is not a logo or a “thing.” A brand is an experience. When you think of the Ritz-Carlton, you think of the experience of being pampered — of service that is off the charts. How would your customers describe the experience of your business? Are you competent, reliable, professional, true to your word, friendly, eager to please, detail-oriented, the Ritz-Carlton of your industry? Or are you sloppy, failing to deliver on your promises, difficult to work with, unprofessional, the Sid’s Roadside Motel of your industry?
Think of this: Both the Ritz-Carlton and Sid’s Roadside Motel offer you the same service — a place to spend the night. The difference is that the Ritz-Carlton charges you $400 per night while Sid’s is lucky to get $40 per night. The Ritz is booked a year in advance while Sid’s hangs a permanent “Vacancy” sign.
Sure it costs more to do business the right way. And sure, some customers are difficult, demanding nitpickers. But doing business the right way, with excellent and consistent customer service, allows you to maintain an acceptable profit margin. Furthermore, an excellent operation allows you to adjust when you know you are working for a difficult customer. You should not hesitate to charge up front for those customers you know are going to be difficult. In doing so, you can deliver the quality they expect and get your profit as well. Keeping demanding customers satisfied should be one of your benchmarks for excellent customer service.
Customer service is real and should be addressed with conviction and planning so that you secure the future of your business today in good times and tomorrow when times are not so great.
Richard Nutthall is national sales manager for the Residential Division of White Cap Construction Supply.