Agent Retention

Guest Post: 4 Ways Customer Service Impacts Customer Retention

Dan Gingiss is an international keynote speaker, customer experience coach, podcaster, and the author of The Experience Maker: How To Create Remarkable Experiences That Your Customers Can’t Wait To Share.

Most practitioners in customer experience or customer service have committed two famous statistics to memory:

  1. Acquiring a new customer is anywhere from five to 25 times more expensive than retaining an existing one. (Harvard Business Review)
  2. By increasing retention by as little as 5%, profits can be boosted by as much as 95%. (Bain & Company)

Yet in 2022, we’re still talking about how important it is to focus budget and resources on existing customers—you know, the ones who keep the lights on and pay our salaries—instead of just on new customers. Retaining an existing customer is easier and cheaper than acquiring a new one, but the net effect is the same.

One of the best ways to focus on—and ultimately retain—customers is to be there for them when they need you most. And that often means providing outstanding customer service.

Chris Zane, founder and CEO of Zane’s Cycles, said in 2011 that “customer service starts when the customer experience fails.” How right he is! If you want to stop people from calling customer service, make the customer experience perfect. Of course, that’s a lot easier said than done.

When customers do contact us, we have the ability to convert someone who is upset with us (because the experience somehow failed or missed expectations) into a happy customer for life. And with that loyalty comes higher spend, longer tenure, and more referrals.

Here are 4 ways that customer service impacts customer retention:

4 Ways Customer Service Impacts Customer Retention

#1: Reducing Customer Effort

More than a decade ago, Harvard Business Review found that the number-one impact on customer loyalty was reducing customer effort. Guess what? Not much has changed in the intervening years. Customers still want an easy, seamless experience that doesn’t make them jump through hoops, aimlessly search for things, or take too many actions.

A great example of this is the return policies of various retailers. Amazon has consistently raised the bar for ease of returns, adding free drop-off points at Kohl’s, The UPS Store, and Whole Foods—sometimes without having to repackage the item or print a label. For some smaller returns, the online retailer will just tell the customer to keep the item and will issue a full refund. 

Contrast that to a UK-based clothing brand (which shall remain nameless to protect the guilty) which happily ships product to the U.S. but requires customers to ship it back to the U.K. if they want to return something.

Make things easy for customers, and they will come back again and again.

#2: Being Where Your Customers Are

Serve the customer in the channel of their choice, not the channel of your choice. If somebody called or emailed your company with a customer service question, would you tell them to tweet instead? Of course not.

So when people tweet at your company, don’t ask them to call or email.

A customer tweets at your brand because that is their channel of choice. Chances are, they already know you have a toll-free phone number and an email address, but they chose not to use those channels (or maybe they did and didn’t get a satisfactory answer). Don’t tell them what channel you want them to use; instead, meet them where they are.

Preferred channels have shifted over time, so companies must shift as well. According to Sitel Group, the telephone was the most popular channel for brand engagement as recently as 2018. But by 2020 it was in third place behind email and online chat, with social media not far behind.

Be where your customers are, and they will appreciate you even more—and want to keep giving you their business.

#3: Being Responsive

It is absolutely critical to respond to everyone who has genuine feedback about your products or services—positive, negative, or neutral. This has become a central expectation of customers across industries. In fact, HubSpot found that 90% of customers rate an “immediate” response as important or very important when they have a customer service question.

Set customer expectations about when you will be available to respond and how long a response usually takes. It’s not necessary to offer 24/7 customer service if your customers aren’t using your product or service at all hours, but it is definitely necessary to communicate your availability in order to manage expectations.

Remember that complaints are often more valuable than compliments because they tell a company how it is missing the mark in terms of customer experience. Often, complaints can identify hidden pain points or unintended barriers that once fixed can greatly improve customer satisfaction and retention. 

“While customers know that mistakes can happen, they also expect companies to at least match their level of effort to resolve the problem,” according to a study by Medallia and Ipsos. “Our research reveals that when consumers believe they have put in more effort than a company to resolve an issue, they are twice as likely to tell friends, family or colleagues about the bad experience, and four times more likely to stop purchasing from the company, switch brands, or use the company less.”

In other words, respond and resolve customer inquiries in order to retain the most customers.

#4: Empowering Employees

The best customer service usually comes from employees who are empowered to make the best decisions benefiting the customer whenever possible. 

Two of Amazon’s “Customer Service Tenets” include “Relentlessly advocate for customers” and “Trust our customers and rely on associates to use good judgment.” (Incidentally, eliminating customer effort is another one.)

Likewise, online pet supplies retailer Chewy is known for remarkable customer service that keeps customers coming back for more. Many costumers have reported receiving flowers after a pet’s passing, and one customer received a refund without asking after leaving a negative product review. The accompanying email also included suggestions for replacement products, and an offer to add a photo of the customer’s dog (whom the company knew by name) onto their “furry wall of fame.”

When employees are empowered to provide remarkable service, customers take notice and their loyalty to the company is re-confirmed.

Why Customer Service is a Crucial Part of Customer Retention

Customers want positive experiences with brands, especially when they need customer service. And while providing that positive experience can lead to increased retention and reduced churn rates, it has other benefits as well. 

BrightLocal found that 67% of consumers will consider leaving a review for a positive experience, while only 40% will do so for a negative experience. And among customers who said they were “likely” or “highly likely” to leave a review, the two biggest reasons were: (1) The business went above and beyond to ensure they had an exceptional experience; and (2) They initially had a negative experience that was turned into a very positive experience.

Be there for your customers when they need you most, and they will continue to be there for your company.