It seems natural customer loyalty would follow good service. If you get what you want and you are treated right, why would you not return to a business? But sometimes it’s useful to have more than an intuitive argument. So I have done a bit of research and I have found two statistics that tell me there is a clear link connecting customer service and customer loyalty.
They also suggest some substantial benefits from improving customer service.
The first is a well-known number. It comes to us from the American Society of Quality Control (as best I can determine). According to an oft-cited study, 68 percent of customers who never return to a business choose to not come back because of they were treated.
In other words, poor service is the reason 68 percent of customers choose to take their business elsewhere.
That’s a striking number. It means that two out of every three customers are leaving because our employees do not treat them well. It had nothing to do with price, product quality, location, convenience, or other factors. It has everything to do with how willing and able employees are to serve their customers.
The other statistic I found is just as interesting. It’s from a study reported by Arthur Middleton Hughes. He talks about a company that grouped a selection of customers in two groups. One received the same service they always had. The other received a new, higher level of service. The increased level of service cost about $83 per customer. After six months, the customers who received better service spent 57 percent more than their peers who had the same old service. The revenue increase came to over $4,000 per customer.
Wow!
Both these are compelling, to say the least. One says we can keep a lot more customers coming back simply by treating them better. The other says they’ll likely spend more money with us if we offer them a higher level of service.
Hmmm. More customers coming back and spending more when they do come back. Not a bad idea.
If you combine these numbers, you have the potential for big revenue gains as a direct result of customer service improvement. But no matter what the actual numbers are, there is a strong case for improving customer service as a way to improve loyalty, retention, revenue, and profits.
{ 2 comments… read them below or add one }
It’s always nice to see real data confirm what we think.
Another thing that I’ve noticed is that customers are actually willing to pay the extra money to get better service. So, it actually costs nothing.
In a previous role, we had developed a premium support contract for our products and we charged a hefty premium for it. After delivering on the promise for a year we got 70% of our customers to renew at the premium level and kept a 98% renewal rate.
The only cost was the initial development of what we would deliver!
Eric – you make a great point when you say “delivered on the promise for a year.” This is something too many organizations forget. They either have no promise (or they fail to communicate their promise) or they fail at delivery. The formula is not complicated. Like one of my former manager’s used to say: “It’s blocking and tackling.” Just the basics. And when you do that well it can pay off as it did for your company.
Thanks for sharing your thoughts.
Kevin