"I suspect there are very few people who can sit down and name five businesses where they receive exceptional service every time they deal with them," says John Tschohl, founder of the Minneapolis-based Service Quality Institute and author of several books, including Achieving Excellence Through Customer Service. "That doesn't sound like a service society to me."
Many organizations don't allocate the time, or the money, to educate and train their employees to deliver the service customers want. Often, says Tschohl, the reason is that those organizations don't realize how important customer service is to their bottom lines.
Any organization can focus on providing exceptional customer service and use it to its advantage. And, by focusing on customer service, developing a service-oriented work setting and teaching and educating employees, any business can enhance its current business strategies.
"Educating employees to provide quality service works to an organization's advantage in many ways," says Tschohl. "Of primary importance is that it improves customer retention. By finding out what services customers want -- and then delivering them -- businesses can develop and nurture a strong, loyal customer base."
Loyal customers are not only important, they are essential. Research shows 65 percent of a typical organization's business comes from current loyal customers.
How important is customer loyalty to your bottom line? "There is no better illustration of the value of customer loyalty than the consequences of disloyalty and loss of customers," says Tschohl. "Let's use a 100-store supermarket chain as an example. If each of those stores alienated only one customer per day, how much money do you think that chain would lose annually? The loss was estimated at $94.4 million for one such chain."
Besides making up a base of customers who continue to purchase a company's products or services, those loyal customers help drive the company's business by delivering the most powerful and cheapest form of advertising available: word of mouth. "A strong customer base is the most credible source to potential customers, spreading the reputation of the business, free of charge, and attracting new customers," says Tschohl.
There are many ways to get people into a business. Most managers are experts at that side of the business. Unfortunately, very few dedicate time and resources to turn those people into loyal customers.
"Education of employees is the key," Tschohl says. "Most organizations spend more money on the repair of their copiers than they do on training their employees to provide exceptional customer service. Once you get customers in the door, you are shooting yourself in the foot if you do not give them the service they want. You could be losing money right there on the spot. More importantly, you might be losing money weeks, months, even years from now."
Frederick Reichheld and W. Earl Sasser, writing in Harvard Business Review, point out that "as a customer's relationship with [a] company lengthens, profits rise. Customer defections have a surprisingly powerful impact on the bottom line. It is common for a business to lose 15 to 20 percent of its customers each year. When defections are cut in half, the average growth rate more than doubles. A five percent change in rate of retention swings profit increases from 25 percent all the way to 100 percent." That, says Tschohl, is powerful customer research.
Bad service has another pitfall: It causes employee turnover. "A study by the Forum Corp. found that employee turnover was inversely proportional to employee perceptions of the quality of service provided by their employers," Tschohl says. "When service is perceived as bad, not only do consumers not like to patronize the company, but employees don't like to work for it."
The Forum study found the highest turnover rates are associated with companies possessing the lowest employee ratings of service quality. That finding was confirmed when Sears surveyed customers in 771 of its stores. In stores that received relatively high customer service ratings, 54 percent of the sales force turned over in a year compared with 83 percent at stores with low customer service scores.
"Reduced turnover not only decreases the costs associated with recruiting and training new employees, it increases productivity," says Tschohl. After Bio-Lab Inc., Decatur, GA, installed a customer service system, productivity climbed steadily. Says Anne Pinkerton, then director of customer service, "We processed $5 million more in orders in [one year] than in [the previous year] with the same number of employees."
It's clear, says Tschohl, that a business that promises exceptional customer service -- and then delivers it -- will increase profits by retaining both its customers and its employees.
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