What is the relationship between customer service and business success? originally appeared on Quora: the place to gain and share knowledge, empowering people to learn from others and better understand the world.
While businesses talk a lot about the importance of customer service, there’s a surprising amount of confusion about just how important it really is to business success. After all, some companies with notoriously bad customer service continue to prosper.
Here are the facts: When customer service gets done right, it can tremendously boost a company’s bottom line. So there can be a strong positive relationship between customer service and business success, no matter how a company defines “success.”
But this positive correlation isn’t inevitable or unlimited. Some companies have poured too many resources into improving customer service -- and ended up paying too big a price.
The key is for companies to build customer service operations that succeed without vastly expanding the budget.
Customers reward good service
Surveys drilling down on this question have found that building a strong customer service operation can increase sales, revenue, and profits.
“Seven in 10 U.S. consumers say they’ve spent more money to do business with a company that delivers great service,” American Express VP Raymond Joabar said in announcing the results of one survey. And the value of customer service is increasing, as consumers say they’re willing to spend 17% more on those businesses, up from 14% a few years ago, the survey found. Part of this change is driven by millennials, who are the most willing to spend more for great care.
A group of researchers also examined this question by digging into more than 400,000 customer service-related tweets and following up with shoppers months later. Writing in the Harvard Business Review, the researchers announced their finding that “prompt and personal customer service does indeed pay off — customers remember good and bad customer service experiences, and they’re willing to reward companies that treat them well.”
Customers who received responses from airlines on Twitter were willing to pay about $9 more for tickets, while those who received responses from wireless companies were willing to pay $8 more every month. And when those responses came within five minutes, the figures jumped. Flyers were willing to pay $20 more for a ticket even months down the road, and wireless customers “were willing to pay a whopping $17 more per month.”
Effects are limited
To avoid overspending on customer service, organizations should measure the results of their efforts.
“For example, a large beverage distributor in the midwestern U.S. found that the return on its satisfaction efforts was negative,” researchers explained in MIT Sloan Management Review. “Despite increased revenue from more satisfied customers, customer service costs increased by 10% as a result of the program, which overwhelmed any benefit from increased sales.”
And since so many other factors affect people’s buying choices, sometimes companies with poor customer service -- like those Bloomberg once referred to as “America’s most-hated companies” -- can still dominate their markets.
Customer service on a budget
The good news is that excellent customer service doesn’t have to cost a great deal. Many of the most important steps a business can take are free.
Businesses should help their customer service representatives learn to use a personal touch, maintain a positive tone, respond promptly to queries and be proactive about resolving concerns. Self-service options online that are easy to navigate and actually help customers can also save time and money, removing some of the burden from personnel.
Building online communities, in which users of the product post questions and offer each other ideas and advice, can also boost the experience for everyone involved.
Multiple surveys are finding that, overall, shoppers believe customer service is improving.
But they’re also finding that customer service is becoming even more important. For example, Microsoft reported that “54% of respondents say they have higher expectations for customer service today than they had one year ago. This number jumps to 66% for the 18–34-year-olds surveyed.”
Of course, the relationship between customer service and business success depends on the definition of “business success.”
Business leaders -- from famous ones like Bill Gates, Arianna Huffington and Mark Cuban to entrepreneurs and consultants -- give different descriptions of what success means to them. More and more are focusing on social impact.
Some business leaders are now gauging customer satisfaction as a measure of business success in and of itself. As Home notes, “Praise from satisfied customers provides a feeling of accomplishment that for some business owners is as important as the financial rewards they earn.”