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Why Lousy Customer Service Costs Millions Every Year

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Technological advances in retailing—the systems, software, data collection—are changing at such an exponential rate and peoples’ senses are forced to adapt to so much at once, that the only one thing that remains constant is customer service.

In a 2011 report done by Right Now Technologies, 89% (or nine out of every 10 customers) stopped doing business with companies with which they had bad experiences, and sought out the competition.

The cost of losing customers is pretty staggering. You have to replace that lost customer, which is five to 10 times greater than keeping an existing one. Also, a negative experience results in bad word-of-mouth. The average unhappy customer typically tells 10 others of his or her bad experience. Translating this into the layers of social media can compound someone’s bad experience and create nightmares for a store, as 34% of unhappy consumers admit they would post a negative review. Among 25- to 34-year-olds, this figure rose to nearly 60%.

Top frustrations causing consumers to switch are a lack of appreciation from a business (53%), unhelpful/rude contact from staff (42%), being passed around to multiple staff (32%), agents/staff lacking the knowledge required to answer a query (29%) and being kept waiting or on hold (25%).

“Many retailers see labor as a cost driver rather than a sales driver and therefore focus on minimizing costs,” Zeynep Ton wrote in Harvard Business Review. The article is titled “Why ‘Good Jobs’ Are Good for Retailers.” Ton indicates it’s silly and wrong to think that customers don’t notice or care about lousy service.

Robert Nardelli at Home Depot cut jobs and began relying more on part-time workers, while substantially increasing his salary. That did little to motivate staff and prevented quality employees from staying there. Home Depot’s stock price dipped drastically, along with its reputation for excellent service.

Retailers who thrive make sure their customer service and cross-channel shopping experiences are first-rate.

Providing enough in-store staff, online staff and seamless website interfaces for customers to research on their own (FAQ’s—Frequently Asked Questions) is key in customer satisfaction. Arming sales associates with the right information and training so customers aren’t shuffled from one uninformed agent to another is extremely important. Timeliness and consistency of information across the board demonstrates that everyone is on the same page.

Extending your FAQ knowledge-base onto your mobile or social media sites is vital to your store and brand. Then, monitoring and analyzing customer feedback can help determine proper courses of action.

As consumers become more savvy and demanding, the quality of customer service presents opportunities and pitfalls. Stores that “get it” can really boost sales and maintain a solid customer base. New Voice Media’s research has found that 70% of respondents said good service had a great influence on their loyalty and 69% would recommend the company or store to others. Half would use the business more frequently and 42 percent are prepared to spend more money with them.

Bottom line? It’s alarmingly easy and very expensive to lose customers to poor service. So stores need to take steps to find out where they’re losing them and why, and plug the gaps.

Services requiring in-store staff, are best delivered by well-trained, well-paid and empowered workers. In a study of one large retailer, every $1 increase in payroll delivered up to $28 more in sales.

Retail staffing firms provide training solutions, strategies and can match appropriate staff to the right job. Their talent pool is experienced, well-trained and motivated.

Increasing sales and credibility is the goal. And if that job is done well, your store could be the place customers turn to when they have a poor experience elsewhere. 

TAGS: retail, retail trends, management, retailers, work in retail, customer service,
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Posted by: Staci
Staci pic

Would love to read more on the study linking increased compensation to increased sales.  Where can I get a copy of the study?


Posted by: Laura
Laura pic

I have over 20 years retail experience, and I would agree with having the right associates on the sales floor can lift sales and ensure a great customer experience.  With retail jobs considered first jobs for most young people, it is hard to ensure we are consistently having the right talent in stores.  In the age of smart phones and computers most young people have not or do not know how to have a face to face conversation, thus making hiring managers at most retailers very much a training manager and a mentor. I would recommend to High Schools, Colleges and trade schools that there be a program that trains a young person on dress code for an interview, how to fill out an application and possibly customer service skills.  Retail is a career that I believe is very over looked and under rated.  You can make a living to provide for yourself and your family if you are a smart business minded individual and good communication skills.  Something I saw first hand this holiday with the quality of the applicants I received.