Customer Service is a Better Investment than Marketing – Change My Mind!
Why do we think of spending money on marketing as an investment, but spending on customer service as a cost? Surely, retaining existing customers has at least as much value as winning new ones? Do happy customers have more value than ‘satisfied’ ones? 🤔
Could providing incredible customer service potentially be a better way to spend money than marketing, once a brand has an established customer base?
I reckon most customers would say ‘yes’! And every one of the truly great business leaders I’ve met seem to intuitively understand the importance of customer service. It’s one of the things that separates great business leaders (and businesses) from average ones. It’s not that they don’t believe in marketing – they absolutely do and are often very good at it – but that they know it is no use filling a funnel in one end, while getting a bad rep and leaking customers from the other end.
And the irony is that as soon as a business starts to view the customer service function as a ‘cost’ centre, an expense to be reduced, it becomes just that… an expense. Off-shored agents who aren’t empowered to solve a complex problem, bots that don’t understand the nuance of an issue, not doing the basics well to save a buck. I guarantee that’s customers out the door.
But great customer service, the kind that makes people raving fans, feeds the profit funnel in two ways. It takes people who have an issue with your brand and are going to leave and turns them into your biggest advocates. Not only do they NOT leave, they spend MORE money with you. And then consider they’ve gone from someone who will leave bad reviews about your brand online, or tell all their friends about their awful experience, to someone who leaves GOOD reviews about your brand, and tells all their friends about how you solved their problem!
‘Show me the money’, I hear you say (you shrewd operator).
We’ve actually run the numbers across approximately 2000 customers who came to us with problems and compared them to the average customer for that same brand. The result was that they spend 279% more in the next 12 months. In a business where the average customer spends $120 per year we’re looking at $429 600 in additional income. That’s not even including the $240 000 of sales we possibly saved from walking out the door. Or the brand impact.
And here’s the crazy thing… 2000 isn’t even a month of customer enquiry volume, so times that number by 12 for the annual impact.
Now this client spends roughly $250k per annum on around-the-clock outsourced e-commerce customer support with us. They get slightly more than $5M in additional revenue (not counting the $2.8M of sales that was potentially saved).