The Mathematics Of Customer Loyalty

Not that the subject is a rocket science, but it struck me today to present a subjective idea rather empirically to make it simpler and understandable for those who are unable to focus on long uninteresting content and narrations about customer retention. So here goes the formula:

A customer saved = A dollar earned

Although depending upon your product the number of dollars can vary (if you notice there are “figurative” expressions in mathematics as well). Ever wondered what would happen if you shift your focus from customer acquisition to customer retention? Entrepreneurs and business persons have a tendency to fantasize things when it comes to products or customer services. I, for one, call it corporate narcissism. Although the term does not sound as derogatory as to make corporations avoid it but its repercussions are much worse and far reaching as suggested by “The Customer Experience Index, 2012″ released by Forrester. According to the aforementioned source 80% of businesses believe that they offer superior customer service as compared to their competitors while only 8% of their customers said that they actually experience a better customer service from those businesses. The stats are an eye-opener but there is much more to reveal that would likely disillusion the businesses about their supposedly superior practices and ways with the customers.

The study further unveils that almost 20% consumers left a regular service provider for better customer service, 55% abandoned an in-progress transaction on the account of poor customer service, 35% went bitter with the customer service reps last year due to bad customer experience and 24% of those who lost their temper with the customer service reps narrated the story of their bad experience on social media. Doesn’t this situation sound like a business nightmare?

To further aggravate it, the research says that on an average, people talk to 15 others about a good customer service experience but when it comes to a bad customer experience, they share it with around 24 people. Bad customer experience is powerful enough to make the US companies face an estimated loss of $83billion annually. If the situation is turned the other way it is believed that a customer would have spent an average amount of $289 with a company if only they hadn’t left because of poor customer service.

With all these scary statistics it is important to find out what causes the customers to be dissatisfied with a service? Apparently list of the damaging factors about customer service goes like: a) Deception b) Rudeness c) Incompetence d) Inflexibility e) Delay All of the above mentioned practices turn the customers off and instead of waiting for you to learn your lesson and improve your service they themselves teach you the lesson and switch to your competitors. It is needless to say that if a customer leaves because of poor customer experience, that is not just one customer lost rather a whole bunch of potential customers warded off since unhappy customers become voluntary brand detractors by sharing their experience with the others.

To keep the customer service disaster at bay, the companies should develop effective policies based on the insights of customers’ behavior and preferences. All customers expect competitive price, quality products and flawless services but it takes more to keep them loyal to your brand since almost everyone out there offers these features. What is the key to retention then? The answer is communication. A research conducted by “American Express” suggests that 46% customers want to talk to a real person on phone for difficult inquiries, 76% want easy access to customer service and 50% deem it extremely important for the customer service representatives to have the knowledge of the previous communication with the client.

For quick, smooth and easy to access customer service, CRM software is a treat for the corporations since the software ensures the smooth flow of communication with the clients and showcases the entire history of previous communication with a particular customer making customer service a pleasing experience for both client and sales reps.

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