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How to lose your best customers in three easy steps

by Dr. Jan Ferri-Reed

Jan Ferri-Reed

As the customer service team filed silently into his office for an emergency meeting, John Tedesco was fuming. As the vice president of operations for a large West Coast distributor, he was proud of his firm's reputation for outstanding customer service. Now he was afraid that reputation was about to evaporate.

Tedesco had just received an angry phone call from an important client. The customer – a large manufacturer – was furious because an important replacement part had gone out very late, potentially causing expensive downtime for a key production line.

The customer's call had been really unpleasant, replete with threats of lawsuits and promises to take their business elsewhere. Tedesco gave assurances that he would personally get to the bottom of the issue for the customer. He realized that losing this client could cost his company several hundred thousand dollars per year!

Although he was angry about the debacle, Tedesco questioned the customer service team patiently. The team members could barely look John in the eye as they painted a picture of unanticipated problems, poor follow-through, lack of accountability and miscommunications. But Tedesco's stomach began to sink as he realized that this customer service disaster might well have been his fault.

Just a few months previously, Tedesco had promoted a bright young supervisor to take the place of the retiring customer service manager, a 20-year veteran. The young man, who had been outstanding supervising the shipping department, was enthusiastic about taking on the customer service manager position. By now, however, it was woefully apparent that he hadn't really been ready for the promotion. Tedesco found himself wondering, "Just what could I have done to make sure I had the right person for this job?" He had a feeling that this was going to be a lesson learned . . . perhaps a very expensive lesson!

Unfortunately, Tedesco's dilemma isn't all that uncommon. Many organizations only come to realize they are lacking in good customer service after a nasty run-in with a valued customer. On the other hand, there are also numerous cases of organizations that only begin to suspect a customer service problem when they confront declining business. In both cases not only is that too late, it's way too costly. The time to fix your customer service problems is actually before they occur (which, strange as this may sound, doesn't require a time machine).

The Costs of Poor Customer Service
In today's increasingly competitive economic environment, customer service is more important than ever. How your employees treat your customers – good or bad – has a direct impact on the bottom line. No matter how you slice it, customer service is a vital ingredient in any organization's success.

To put it another way, effective customer service is a competitive advantage in the marketplace.

Truth be told, this article isn't really about "how to lose your best customers." That's just a facetious way of making my point. But you sometimes wonder if some organizations don't go out of their way to promote bad customer service. How often have you found yourself complaining to a friend or coworker about a bad customer service experience, only to have that person jump in with his or her own bad experience from the same source? I won't name names, but we all know of certain organizations – even certain industries – that are famous for bad service!

Clearly, losing sales is a costly price to pay for bad customer service. But, losing sales due to a bad reputation? How costly is that? Consider these facts from Profiles International:

The average unhappy customer will tell eight to 16 people about it. Ninety-one percent of unhappy customers will never purchase service from you again. It costs five times more to attract a new customer than to keep a current one. If you make an effort to remedy customer's complaints, 82 to 95 percent of them will stay with you.

However, smart customer service managers know that it's also unwise to ignore "silent customers." You know the ones I am talking about, those customers who don't raise a fuss or bother to complain after a bad experience. They just don't come back! Experts at the University of Florida estimate that for every customer complaint you receive, there are another 25 unregistered complaints. So, even if you are tracking customer experiences closely you may not really know the depths of customer dissatisfaction.

Managers also have to contend with the impact that bad customer service may have on morale across the board. Imagine belonging to an organization that produces outstanding products or excellent services, only to have that reputation tarnished due to poor customer service.

Three Critical Factors that Drive Excellent Customer Service
Fortunately, customer service manages can readily get a fix on those factors which may be causing customer service problems. What it really comes down to is making sure you have the right person in the right job at the right time, along with making sure you know how your customers or clients perceive your organization. There are three key factors to consider:

Determining Best Fit – Making sure you have the best qualified employees in your customer-facing job positions is vital to good customer service. The best way to assure a good fit is to assess each individual's personality, behaviors and skills. Obviously individuals with poor communication skills or a negative attitude would seem like unlikely candidates for close customer contact. Sometimes overzealous employees (those who may be extremely detail-oriented, for example) can also be a poor fit for customer service. So, too, individuals who don't deal well with pressure may be poor candidates. That's why it's best to assess your customer service candidates against the job requirements to determine best fit. Well designed, validated assessments provide the best, most accurate information available to managers today.

Assessing Customer Service Beliefs and Expectations – Sometimes the standards of your individual customer service employees may not line up with your organization's standards. This is easy to understand since many times employees don't necessarily see "the big picture" when it comes to service. Nonetheless it's critical to make sure that your customer service representatives reflect the same expectations as your organization. Leaders are wise to assess employees' views as to what constitutes good customer service and compare those to the management's views of what is expected. For example, an employee may be inclined to give extra service to appease a customer but management is concerned about the hit on profitability.

Understanding Customer Loyalty – Of all the metrics organizations can use to measure progress, one of the most important gauges of success is customer loyalty. If you're not in sync with your customer's needs and expectations it won't be long before you lose your precious revenue streams. With a firm handle on your customer's loyalty you can readily position your organization for growth and success. Your customers may be satisfied with your service, but are you at risk of losing them to a competitor? That's why it is necessary to survey your top customers to assess who is at risk.

Gathering Customer Service Intelligence
Sir Francis Bacon famously said, "Knowledge is power." Indeed, in today's competitive world, the value of information is unquestionable. But it's surprising how many organizations are willing to settle for fuzzy or inadequate information when it comes to their customer service functions.

If you are serious about serving, retaining and growing your customer base you must take steps to conduct a comprehensive analysis of your employees, your expectations and the needs of your customers. After all, had John Tedesco assessed his customer service employees' skills and values, coupled with an assessment of his customers' loyalty, he may not have had to face the prospect of losing one of his biggest accounts.

Jan Ferri-Reed, Ph.D., is president of KEYGroup, a speaking, training, and assessment firm. She is co-author, with Joanne Sujansky, of Keeping the Millennials: Why Companies are Losing Billions in Turnover to this Generation and What to Do About It. www.KeepingTheMillennials.com, John Wiley Publications). For more information, visit www.keygroupconsulting.com.

COMMENTS: 1
Customer service
Posted from: Dave Vail, 8/25/11 at 8:14 AM CDT
Examples: No phone number or address on website, not returning e-mail request for info, automated phone that does not allow you access unless you know your contact's full name (And even then not in system even though been there for years). The list goes on and on.

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