The High Cost of Poor Customer Service

the high cost of poor customer service

Few things are as destructive to a brand’s good name as a shipment that arrives damaged and late. One Wisconsin-based manufacturer of customized office furniture learned this the hardway when Canada-bound shipments would leave its manufacturing center on time but arrive at their destination late, often with significant breakage. The problem was exacerbated for this particular manufacturer since replacement items often had to be rebuilt from custom specifications, a process taking up to six weeks.

As this manufacturer quickly realized, the inefficiency of its transportation company was putting at risk its good name and reputation. In fact, “blaming” a manufacturer or retailer for a third party’s performance is a common occurrence. Fair or not, ensuring an on-time delivery is an important part of the overall service consumers expect from the businesses with which they interact. And it is just one part. Other expectations include a convenient returns policy, knowledgeable customer service representatives, omnichannel purchasing and delivery options, customized solicitations, loyalty programs, inventory visibility, competitive pricing, and an easy-to-navigate website, among other things.

The fact is that good customer service has become a cornerstone to an overall positive customer experience. Customer experience, defined by Forrester Research as “how customers perceive their interactions with your company,” is—or should be—the driving force behind all decisions a retailer makes about interacting with customers.

A company that fails to recognize the importance of offering flexible shipping options, for example, should not be surprised when customers turn to a competitor that does offer options. Your customers are paying attention and will not hesitate to vote with their wallets if service levels are not up to their standards.

But understanding what those standards are, and making sure the tools are in place to satisfy customers, can be challenging, especially for the many businesses new to eCommerce and omni-channel retail. The good news though, for a business committed to making the necessary changes, is that delivering high levels of customer service is often easier than it looks. In many instances, the tools are already in place but just haven’t been deployed properly. A retailer with a transportation management system in place that insists it cannot offer flexible delivery options is likely not taking full advantage of its system’s capabilities.

A good first place for any business to start is by asking the question: “Would I want to be my customer?” Take a hard look at the processes and policies currently in place. Are they efficient? Do they prioritize the customer or internal efficiency? And what are your customers saying? If you have a mechanism for collecting feedback, pay attention to this invaluable source of information. Check consumer blogs and other online feedback venues. If your customers are strongly speaking out against your shipping practices, or your returns policy, it’s a good sign that something needs to change. Keepin mind that a typical business hears from just 4 percent of its dissatisfied customers.

The following discussion will shed light on the changes taking place with regard to customer service expectations. As we will see, the logistics and delivery phase of the consumer transaction weighs very heavily on consumers’ minds. The discussion will help businesses understand how a retailer can meet those expectations and the importance of having an experienced and trusted logistics partner on their team.

the high cost of poor customer service

How Much Is Poor Customer Service Costing Business?

How much can poor customer service or apathetic sales associates cost your business? The impact of bad customer service is more significant than you might think. Driving customers away from your business means they’re buying from your competitors, which can cost companies up to $41 billion in lost sales every year.

Of customers surveyed, more than 44 percent have switched to different businesses as a direct result of poor customer service.

Why Do Customers Leave?

What chases customers away from businesses and sends them sprinting into the arms of your competition? Many factors exist, but the most common include:

  • Rude or Unhelpful Staff: Nothing chases off potential customers faster than staff members who are rude or unhelpful.
  • Being Redirected Multiple Times: It’s one thing to point a customer to a colleague or manager to help them get the answers they need, but shuffling them around because you don’t want to deal with them will drive them away.
  • Not Answering the Phone: Letting your phone go to voicemail — or not answering the phone at all — will drive your customers away.
  • Not Being Able to Get Answers: You don’t have to know all the answers, but knowing where to get them can help you retain customers.
  • Being Left on Hold: There’s nothing worse than being stuck on hold, especially if you’re trying to get answers. Keep your hold times to 30 seconds or less — even if you’re still busy, just let them know you’ll be with them as soon as possible.

What Matters to Customers?

What matters to your customers? What brings them in and makes them want to continue to shop with you instead of switching to one of your competitors? Some examples include:

  • Low Cost or Free Shipping: If your customers have to order something or your storefront is entirely online, being able to offer free or low-cost shipping is a great way to entice customers to shop with you.
  • Expedited Delivery: Ordering stuff online is great, as long as it can get to your house quickly. The faster the shipping, the better. Standard shipping can take anywhere from five to seven business days. Meanwhile, Amazon offers two-day shipping for Prime members — and in some places, you can even opt for same-day or “hyper” same-day shipping to get your products just hours after you order it.
  • Guaranteed Delivery Windows: This is especially important for bulky items like appliances and furniture. If customers need to take time off to wait for delivery, it’s crucial that their delivery window is guaranteed.
  • Delivery Options: Ordering something online and having it delivered to your home isn’t the only option customers are looking for. Ordering online and having items shipped to the store or being able to order items online and pick them up from the in-store stock are all convenient options you could offer.
  • In-Store Return: Being able to order things online but return them in the store increases customer convenience. Re-packaging things they bought online and taking it back to the post office can be a huge hassle.
  • 24/7 Tracking: Give your customers the ability to track their purchase from the moment of purchase to the moment of delivery.
  • Inventory Visibility: Allow your customers to see what is available throughout your inventory channels.

Changing Consumer Attitudes About Customer Service

Before attempting to learn how to improve customer service, it’s necessary to understand what exactly “customer service” means in today’s increasingly digital-based environment.

Essentially, “customer service” is a component of “customer experience.” As Temkin Group market research expert and managing partner Bruce Temkin noted in a blog post: “Customer service is an organizational function, like marketing and sales, that manages a subset of interactions with customers. Customer experience, on the other hand, is the connection that companies make across all functions and touchpoints.”

But what exactly does good customer service look like? It’s worth considering what customers of some leading retailers have to say on the subject.

Amazon

Amazon.com is consistently ranked at or near the top of lists of companies with superior customer service. One survey conducted by Prosper Insights and Analytics, reported on by Forbes, found Amazon was cited for its low prices, reliable and low-threshold free shipping, and quick-response customer service team. Responding customers offered the following feedback:

  • “ Customer service always answers with a smile. Everything
    is laid out plain as day. Amazon Prime is awesome with
    free two day shipping. And they send you a label without
    question for refunds.”
  • “ Even though the site has millions of shoppers, they are fine
    tuned to each individual customer….”
  • “ I love Amazon.com because the shopping experience
    is always positive, and they have competitive prices, a
    massive product selection, great shipping times, and free
    shipping on most items I buy via Amazon Prime.”

L.L Bean

L.L. Bean, which was founded on the principal of “100 percent satisfaction,” also scored at the top of the Prosper survey.

Customer feedback about that iconic brand’s service included:

  •  “ Amazing, customer-centric policies (like lifetime
    exchanges).”
  • “ GREAT return policy and very easy to deal with across all
    channels. Plus their policies are largely consistent across all
    channels.”
  •  “ Their policy is that the customer is always right, and
    first. Their return and shipping policies are very customer
    friendly. Employees are knowledgeable and eager to help in
    any way they can, and they are empowered to do whatever
    needs to be done to make the customer happy.”

Worth noting is feedback received about companies consumers tend to rank at the bottom of customer service rankings. The American Customer Satisfaction Index, as reported by MarketWatch, ranked retail giant Walmart at the bottom of its list. Reasons for this subpar ranking included: unfriendly sales people and customer service representatives, rigid return policies, long checkout lines, frequent inventory shortages, poor quality, and difficulty finding items. As the analysis points out, although the retailer received high marks for low product costs, that attribute alone was not enough to keep customers happy, especially at a time when competitors have clearly embraced the importance of good service.

From this, clear trends emerge with regard to what specifically consumers expect in terms of service from the businesses with which they interact:

  • Consistency of experience across all channels
  • Customer friendly policies, including a hassle-free returns policy
  • Knowledgeable service agents empowered to make decisions
  • Courtesy
  • Fast, preferably free, delivery
  • Flawless last-mile service, including options and flexibility
  • Inventory visibility
  • 24/7 tracking
  • No surprises: proactive communication and problem resolution with regard to late deliveries/damaged shipments

The importance of great customer service is not up for debate. So, what can you do to change your company’s habits? A few examples of good customer service include to:

  • Value Their Time: About 73 percent of customers surveyed stated the most important thing a company can do to help retain their business is to value their time.
  • Offer Free Shipping: It doesn’t have to be the fastest option, but offering free shipping will encourage customer retention.
  • Offer Multiple Options for Delivery Service: Not everyone can have packages delivered to their home, so offering other delivery options will help entice more customers to shop with you.
  • Make Returns Convenient and Free: Don’t make returning unwanted or incorrect items a hassle. Easy and free returns are very enticing to customers.
  • Switch Carriers: If you’re having a problem with your carrier, such as packages getting lost or delivered late, switching to a company that can guarantee delivery can help to restore consumer confidence.

More than 75 percent of people are more likely to revisit an online retailer if they are happy with the speed of delivery and the quality of the packaging. On top of this, excellent customer service is essential to any successful business. Even something as simple as using a reliable delivery service can ensure you don’t lose money unnecessarily.

Further, Forrester Research identified specific customer service trends driving heightened expectations for service, which include:

service will become easier

1. Service will become easier.

Customers want to have their questions answered and issues resolved quickly and seamlessly, and they expect easy service interactions.

Forrester’s research found most consumers initiate customer service interactions online, with live-assist channels increasingly used as escalation paths to answer harder questions or address more difficult situations. As a result, companies are prioritizing processes to facilitate the service process, including self-service capabilities such as virtual agents and embedded technology.

The need for enhanced self-service capabilities is supported by UK-based Eptica research, which found that among the companies surveyed, answers were available for only 65 percent of questions asked on their websites. In addition, customer service expert Shep Hyken expects call centers to become largely obsolete in the coming years, as consumers increasingly turn to online options. Hyken further expects email to be replaced as a preferred customer service option in favor of social media, where a consumer can expect to receive a response in minutes versus hours/days when using email.

2. Consumers increasingly in control of their time.

Forrester’s research found 73 percent of consumers said “valuing their time” is the most important thing a company can do to provide them with good service, “whether on a call, in chat, or while waiting for a service technician to troubleshoot and fix their product.” Companies are expected to increase use of “field service management capabilities,” which allow customers to schedule their own service appointments and local agents to dispatch technicians and manage their schedules.

increased demand for effective service

3. Increased demand for effective service.

Consumers have no patience for being bounced among call center operators or for delivery technicians who arrive without proper parts or expertise. To ensure “the right service to the right user at the right time,” Forrester expects businesses to become more savvy at using technology-based solutions to better understand customer concerns—specifically, the use of “prescriptive technology,” which relies on analytics to steer consumers toward a positive outcome.

Poor Service Comes at a Cost

Smart retailers understand that customers expect good service and that failure to meet those expectations can come at a cost. Overall, according to research from New Voice Media, poor customer service costs U.S. businesses $41 billion annually. Important to note is that poor service will not deter consumers from making purchases—they will just buy from a competitor. New Voice Media found 44 percent of consumers had switched to a different business as a result of poor service, which is strong evidence that poor customer service comes at a hefty price.

Poor customer service costs U.S. businesses $41 billion annually.

poor customer service costs US businesses $41 billion annually

And many unhappy customers do not leave quietly. Research by PwC asked customers about the actions they have taken after a bad service experience:

  • 76 percent said they have told others
  • 29 percent have posted online
  • 35 percent have elevated to higher management
  • 35 percent wrote a review
  • 10 percent contacted a regulatory agency
  • 7 percent blogged about it

But critical to note is that most unhappy consumers won’t even bother to let you know. Research conducted by TARP Worldwide (now called CX Solutions) found roughly 4 percent of customers take the time to complain when they believe they have been ill-served. Of the 96 percent who do not complain, most simply stop buying from that company and tell an average of 9 to 10 others about their poor experience.

This, of course, causes a terrible word-of-mouth situation and a simmering of customer dissatisfaction among a group of hard-to-identify customers and would-be customers.

96 percent of customers won’t bother to complain about poor service.

Instead, most will simply stop buying from your company and will tell 9-10 others about their experience.

One other important consideration is the value of retaining a satisfied customer versus the cost of cultivating a new buyer. TARP founder John Goodman found companies spend five times as much “winning” a new customer as keeping a current customer.

There’s a high price to be paid then for a retailer that fails to listen to customer preferences. Customer service opportunities come in many forms, especially with regard to convenient on-time deliveries, hassle-free returns, and lastmile service that truly puts the customer first. Smart retailers understand the importance of seizing these opportunities at a time when customers are empowered as never before and when competitors remain just a quick click away.

Experience Excellent Customer Service with Purolator International

At Purolator International, our customers come first. We believe in offering flexible shipping solutions, and we will work with you every step of the way to ensure you’re satisfied with our services.

Contact us today for the best shipping to, from and within North America. We look forward to exceeding your expectations. 

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