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customer defection rate
Customers Refuse To Accept Poor Customer Service|
by Janice Stefanus
How do you feel about the service you receive as a customer? Do you feel your business is appreciated? Are you happy to return with additional business? What about your customers, how do they feel about the service they receive? Are they happy? Loyal? Have you asked them?
Customers are fed up with the lack of service and appreciation for their business. The majority of customers don抰 feel it is worth the time and effort to let the companies know they are mad, because it is easier to take their business elsewhere. If companies aren抰 actively trying to understand their customers?needs and beliefs, they will never know until the customer fails to return with their business that they are unhappy梑ut then it is quite possibly too late to earn the business back.
In a May 24, 2002 Business Week magazine article,?Got a Beef with Customer Service??it stated that 揟he people who responded don抰 have much patience with bad service: Some 94% say they抳e stopped using a company抯 products or services after a bad experience, some 57% say they don抰 give an offending company a second chance (though 37% sometimes do)厰
Wow, 94% of customers refused to do business again with the company that provided the bad customer service! That is a tremendous customer defection rate. While the Business Week survey wasn抰 statistically controlled, it does send a major message to companies. What if that happened to your company? What if it was 50%, 25% or just 10%? That means new customer acquisitions are needed to replace the defecting customers梟ot to grow the business.
Do you know what your customer defection rate is? On average most companies lose 20% of their customers per year. That requires a lot of effort to replace 20% of your customers just to keep business at the same level. It takes a lot less effort and expense to provide excellent service to your existing customer base to earn their loyalty. What if you could reduce your customer defection rate from 20% to 15%, combined with a customer acquisition rate of 20%, you抣l have a 5% growth rate in the overall customer base.
According to Frederick Reichheld in The Loyalty Effect, 搮raising customer retention rates by five percentage points could increase the value of an average customer by 25%-100%.? Improving customer retention significantly increases profitability. If that is the case, then why do so many companies provide poor service? From my experience, they may not realize their service is poor because they don抰 talk to their customers. Additionally, many companies are not aware of their company抯 customer defection rate.
Companies should take a long-term view and assess their customers?perception of the service they are receiving, understand what their needs are and what it will take for them to become loyal customers.
For example, I am extremely loyal to my dry cleaners. When I first gave them my business, it was because I was fed up yet again with the poor service I was receiving from my existing dry cleaner (for me service includes the attitude, helpfulness, willingness to listen, sincerity to care, appreciation for business, desire and actions to correct problems). So begrudgingly I went to another dry cleaner, begrudgingly because I hate to change service providers, but I refuse to accept poor service.
What impressed me with my new dry cleaner, Yes Cleaners, was that he cared and he made it easy for me to do business with him. Both are displayed by his actions梙e remembers who I am, I never have to give him the receipt to identify my order, I don抰 have to hassle with taking off safety pins or tags, he is always friendly and has something nice to say. Once I had a silk suit that had gotten antifreeze spilled on it while it was waiting in my trunk to be dropped off. I almost threw the suit away, but it was new so I decided to waste the money to have it dry cleaned just in case. When I picked it up, my cleaner proudly professed they were able to remove the entire stain; it took them three times and lots of attention, but they made it as good as new. I told him how much I appreciated his dedication and that he should charge me for all three cleanings, but he refused. He said he just wanted to make sure I was happy. WOW! You know in the past I received coupons in the mail from their services and I never use them. I抦 happy to pay full price because I feel he deserves it for the high quality service and care that he delivers. In addition, I refer him to all my friends and they have taken their business to him too. Service like that makes you want to go out of your way to help increase their business.
Wouldn抰 it be great if your customers felt the same way about your customer service? They could, but first you must find out how they define excellent customer service and then follow through to give it to them.
Janice Stefanus, (firstname.lastname@example.org) is chief strategist for Customer First Strategies, LLC, a company that provides management consulting and executive advisor services that focus on strengthening customer relationships.
© St. Louis Small Business Monthly, The Source for Business Owners October 2002.