What is the real cost of lousy service?

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Last week, we spoke of the VALUE of an Uplifting Service Culture.

It has been well documented that providing excellent service to your customers will reap both personal and financial rewards. We have all experienced this uplifting feeling, either as the service provider, or the grateful recipient. Surprising levels of service are heart-warming, illuminating, and sound business, too!

But what happens when service falls short? What happens when your staff members, your procedures, or your operations fails to fulfill the corporate goal of quality? Worse yet, what happens when even the desire to provide great service fades away, and the best you or your team can do is push the product out the door and hope the customer will forget, or not notice.

Think this never happens where you work?  Give pause to consider if any of your employees feels unappreciated, over-worked, undervalued, or ill-equipped to handle difficult customer situations. Do you really believe they care about your customers as much as you do?

The American Express Global Customer Service Barometer tells us that a lack of quality service is far more costly than most people realize. 81% polled said that a bad service experience was enough to keep them from returning to a business. Eighty-one percent!? That can only happen in a world where customers have plenty of choice, and it’s easy to switch. And that is our world today.

Can you imagine losing 81% of your paying customers next month, or this year? Where you would be next year? That’s easy to answer: out of business.

The good news is most people won’t leave after one bad experience if they have developed a strong relationship with you based on good service in the past. American Express survey respondents say it takes two times, two bad experiences, and then they are gone.

But these bad service experiences don’t have to be blatantly egregious acts. Absolutely not. Even small inconveniences and disappointments can result in your customers walking out the door, hanging up the phone or clicking to the competition.

When was the last time that you went to a restaurant and were treated poorly by the waiter or waitress? When was the last time you were left waiting far past the time of your reservation?  When was the last time that you went to the dry-cleaner and your suits were returned poorly done, or with a double crease in the pant leg (that one is my personal pet-peeve!)

Could these service lapses be attributed to just one employee having one bad day? Or could it be more chronic? The handiwork of an employee who feels unappreciated, undervalued, uninspired?

So great service gains you 9% additional revenue, and poor service could lose you 81% of your business. This picture is crystal clear; building a culture in your organization to educate and inspire everyone to deliver uplifting service (for customers and for colleagues) is not a luxury, not just a “good idea”, and no longer even an option.

Good service, no, GREAT service will establish the best companies as leaders. And poor service will put the rest out of business.

Posted On: 8 March 2011
Categories: Service Culture
Tags: , , ,

13 Responses

  1. Maren Perry says:

    The cost of lousy service for a company is HUGE:

    Someone who has a bad experience forms a new image of that company in their mind: “oh, that place, they’re the ones who treat you like dirt. Let me tell you all why not to do business there….”

    Creating a new customer is costly, and that’s just someone with no opinion. The amount of expense it takes to win over a customer that’s got a NEGATIVE experience of your company is even greater.

    So now the company is paying at least triple:
    You’ve lost the revenue from that customer AND have to spend money to replace them. AND, that expense is now greater since you’re combating negative word of mouth in order to do it.

    Uphill! Easier to please one customer once than try to convince multiple people down the line that the reputation you’ve earned is faulty.

  2. Gautam Mahajan says:

    Ron, I agree.
    We all need to quantify in dollars and cents what the loss is in % of profits or sales.
    Can we do this together
    Gautam

  3. Paula says:

    I truly believe in service but at times it is very challenging especially when the systems and processes are not as supportive to provide a good service. So what do you do in this cases? How can you promise your customers a great service everytime when the engine running your business is not efficient enough and not only that, to improve it is a big investment that the company cant afford?

  4. Erwin Steneker says:

    Hey Ron,

    It’s not ‘just’ the service… it’s in everything you do in your business that touches your customer:

    – lousy product = lousy service
    – lousy user instructions = lousy service
    – lousy invoice = lousy service
    – lousy usability of your website = lousy service
    – lousy newsletter = lousy service
    – lousy word of mouth = lousy service

    I think that companies should add a new P to their marketing mix; the P of Performance. Think about all the output of your company, directly or indirectly, what will it do to your customer? If anything rubs them the wrong way, the relationship may just grind to a halt.

    Great post!

    Kind regards,

    Erwin Steneker
    customerservicepoint.com

  5. Jana McBurney-Lin says:

    Dear Ron,
    Your e-mail comes at just the right time, as I’m in the midst of getting really poor service, and am hoping that they will lose 81% of their business. No, 100%. And I’m not normally that vengeful. Let me tell you what happened. The hottest toy at the high school where my son is are these little magnet toys, called Bucky Balls. I got him a box of them as a gift. On the box was a warning that if you swallowed the balls, to get to ER immediately, to keep the magnets away from pacemakers. So, they were strong magnets. Still, the website billed these little toys as the “hottest desktop toy.” My son was playing with this desktop toy while he used my laptop. The magnets fell on my screen. My screen went black. To spare you the details, I ended up having to buy a new computer. I sent a note to the company about what happened. I got a computer-generated response. “Bucky Balls has got your back. We’ll respond to your concerns as soon as possible.” Or some such note. A week later, when I hadn’t heard anything, I sent another note. Again the Bucky Balls has got my back thing. Finally, I called. They had received my notes, they said. But they didn’t believe it was their fault and if I could prove that the screen suddenly going dark had anything to do with their magnets, they would talk to me. I got a note from the computer store as well as a brief analysis by two computer experts and sent that on. Today, I got a two- line note saying they had reviewed my documents and didn’t think their product had anything to do with my computer issue. I feel as if I’ve been fighting for months to get them to listen…and they still have their hands over their ears while they continue to kick their product out the door. It’s so frustrating and disappointing.

  6. Vinit says:

    As Ron says the higher you set your bench mark for customer service and achieve it, the customer expectation keeps on growing.

    Therefore we have to find ways to exceed them by streching our selves.The front office staff are the face of the company and as rightly said the customer builds his opinion of the organization depending upon how he was treated by one individual who is having a bad day, although the company standards of customer service are very high, one individual can ruin it.

  7. Maddie says:

    Hi Ron

    Last week I was confronted angrily by a customer, because he was being pushed around by 4 other service staff. As I was the 5th service staff, he vented his frustration on me. When I told him that I will find out the information he has requested, and ask the correct person in-charge to call him personally. Imagine to my utter amazement, that the person in question decided to send him an e-mail and laugh it off as just ‘incident’.

    What make me so angry is that the person in question is mid management personnel. Sometimes, I feel that frontline staff are usually blamed for the poor service. As staff, we have to abide by the guidelines given by the management. When we do practise these guidelines, the management makes an instant decision to change the guidelines. We are not mind readers. I think that management should practise what they preach about providing good service to customers, instead of putting the blame on service staff.

  8. Andrea Ihara says:

    @Gautam Mahajan

    Gautam –

    This is indeed an important consideration! This is only truly attainable if the metrics of success are set out well in advance of the integration of Uplifting Service Culture. Then a clearly identified financial goal can be created against the pre-determined action item.

    There are lots of ways this could play out such as: Employee turnover, # of service interactions per client, rate of complaints, etc.

    Then, in working with the account, a dollar value of the resources gained or lost can be established.

    Hope to work on this with you…

    Andrea Ihara – VP Worldwide Sales
    UP! Your Service.

  9. Andrea Ihara says:

    @Jana McBurney-Lin

    Jana,

    I feel your pain! I too would have been completely exhausted by the process, and overwhelmed with disappointment on how poorly the company had handled the claim.

    I don’t want to be in a position of telling you how to move forward with your claim, although I would (if it were me), be ready to continue the path towards either (at least) partial repair of the situation, or transparency of the poor service you have been provided.

    That said. the best I can offer from a pro-active stance is what an amazing lesson there is on how NOT to treat a paying customer. I can count over 5 ways that this company could have **at least** helped you feel heard, and to help you believe that your complaint was a concern to them. It might not have changed the outcome, but it may have changed your perception of it.

    Andrea Ihara – VP Worldwide Sales
    UP! Your Service

  10. Andrea Ihara says:

    @Maddie

    Maddie –

    I believe many of the blog readers will be able to relate to your frustration. How sad that LOTS of middle-manager use their position to shield them from angry customers.

    When we set about building an Uplifting Service Culture with an organization, we prefer to start at the top with the C-Suite, VP’s, Directors, and Managers. We strongly advise them to them put their middle management through the training, while we work with the client facing front-line. We assist the client in building a steering committee, comprised of members of the organization at all levels. This holds every level accountable to the measures and metrics of success.

    It sounds as if your middle management is out of the loop. Has your organization put Uplifting Service Culture into action, or are you a “lone-wolf” in trying to do the right thing?

    Andrea Ihara – VP Worldwide Sales
    UP! Your Service

  11. Maddie says:

    @Andrea Ihara
    Hi Andrea

    My front-line colleagues (including me) are the ‘lone-wolf’ in our organization. Yes, the top management did put middle management through training, but they did not put into practice what they had learned. Instead, they would tell us to do this and that, and when a crisis comes around, they are quick to point the finger.

    I guess the whole situation boils down to one thing. Respect. When front-line staff does a right thing, there is no ‘pat on the back’ and every good things go unnoticed. On the other hand, if a customer is dissatisfied it is always the front-line staff’s fault; never mind that the customer is being totally unreasonable.

    Sure, sometimes we do make mistakes and forget ourselves when we deal with our customers. But this is usually a rare occasion. We made a pact a long time ago that it is easier to have good rapport with our customers, as that it is so much easier to deal with this queries. In fact, most of our customers know us by name.

  12. Cheeran Verghese says:

    When you say ‘great service’ are you just referring to interpersonal transactions or are you talking about the product, the system and the human element all being part of ‘great service’?

    If it’s the latter then your point is that nothing should ever go wrong twice and that’s almost getting to six sigma standards.

    My experience is that a lot depends on how the initial problem was handled. Most customers are quite forgiving and actually like to feel that they know someone in the organisation personally – the devil you know and all that. If you treat a problem as us against the problem instead of you against me, most customers will actually put up with lower standards once in a while because they are on yuor side.

    Maybe it’s a cultural thing and the customers in the west are more intolerant of mistakes than customers in India and the Middle East.

    Anyway, thanx for the insight.

  13. Ron Kaufman says:

    THE FUTURE IS ABOUT SERVICE

    “There’s no street address here,” the woman said to me. I had just handed in my US Immigration cards at the pre-screening section of Dublin Airport. I grimaced. I knew I had the full address on my computer somewhere but my computer was so slow to start and it would take about 10 minutes for me to find the address. Plus, I’d lose my place in the queue. “Hold on,” she said and started typing into her iPhone which was beside her. Within less than a minute she had the address.

    This is service! Small things, but things that can make someone’s day and stick in their memory. She didn’t need to do what she did but she did it because that’s what service professionals do. They aim to serve in order the make your life easier and better. It’s the human touch.

    In an age where so much is automated the human touch has never been more important. I’m totally for automation. (It’s how I make my living after all.) I want to book my flight online. It’s faster, easier. When building stuff for the Web by far the most important thing to remember is that:

    Human beings will use this.

    As I walked towards my plane I thought about the new Lenovo computer I’d just bought. I haven’t received it yet but I’m already dreading the experience. I bought the most expensive laptop they had. Price was not an issue. I wanted speed, lightness and reliability. I made a mistake entering my delivery address and emailed them. I got an automatic email back saying that they’d be in touch soon. They weren’t. I emailed three times, got the same automatic email but nobody got back to me.

    I’m quite loyal. Each car I’ve ever bought has come from one of two manufacturers. I didn’t have a problem with the garages I dealt with. I’ve bought even more computers but I constantly have to keep changing manufacturers. Things break, I accept that. But it’s how you deal with people when things break. Computer manufacturer support is appalling. Why?

    Because they see support as a cost. They don’t think of service. No, support is a cost to be minimized. But service is the new sales. Service is the new marketing. As the world automates, products will become more and more the same. Service is how you will differentiate yourself in the market. Service is how you will make the next sale. (We all know, of course, that it is easier and more profitable to sell to a current customer than to a new one.)

    Not just that! Service is increasingly how you will sell to new customers. From observing how many customers use websites I have noticed that they avoid traditional marketing content and go for the detail. They want to know about installation and troubleshooting and they hang around the online community section to see what people who have actually bought the product are saying. Support is the new sales. Support is the new marketing.

    mailto:gerry@gerrymcgovern.com

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