How Your Customer Service Impacts Your Customer Retention

Customer Service

More than ever before, customers have a wide range of options to choose from when it comes to the products and services they purchase. This increase in choice means that companies must work hard to differentiate themselves from the competition and provide an exceptional customer experience if they want to retain their customers.

The continued popularity of online shopping has only made this more challenging, as customers can easily take their business elsewhere with just a few clicks. Trying to undercut the competition on price is often not sustainable in the long term—there will always be someone willing to sell the same product or service for less.

In this article, we’ll take a deep dive into why customer service is so important for customer retention, and explore some specific strategies to improve customer service and keep your customers coming back.

Why is Customer Retention So Important?

Simply put, the longer a customer stays with a company, the more valuable they become. This is because it costs far less to retain an existing customer than it does to acquire a new one.

Customer lifetime value (CLV) is a metric businesses use to calculate the net profit that a customer will bring over the course of their relationship with the company. This includes not only the revenue from initial purchases but also any repeat business and referral business that the customer generates.

As you can expect, CLV is directly impacted by customer retention. The longer a customer remains with a company, the more revenue they will generate—which is why customer retention should be a key focus for any business.

How Customer Service Drives Retention

In decades past, offering the cheapest prices was often the primary driver of customer retention. But as we’ve already mentioned, this is no longer the case. With so many choices available, customer experience has become the new differentiator.

To stay ahead, businesses must provide the best customer service they can manage at every touchpoint, from the initial purchase all the way to post-sales support.

But how exactly does customer service impact retention?

It sets the tone

How a business treats its customers from the very beginning sets the tone for the entire relationship.

When a customer feels like they “know” a business and are treated as an individual, rather than just a number, they’re much more likely to stick around.

On the other hand, if a customer feels like they’re being treated poorly or like their business is unvalued, they’ll be quick to take their money elsewhere.

It builds trust

Having your customers’ trust makes it easier to make improvements and changes to your offerings, as they’ll be more likely to give you the benefit of the doubt. It also makes it less likely that they’ll switch to a competitor, even if there’s a problem with your product or service—they’ll trust that you’ll make it right.

For instance, let’s say you want to start implementing a data-driven approach to your business. If your customers don’t trust you, they might be less likely to give you access to their data. But if they trust that you’ll be securing customer data and using it only to improve the customer experience, they’ll be more likely to opt-in.

It creates referrals

Happy customers are usually willing to sing your praises to their friends and family members—but only if they’ve had a positive experience with your company.

If you provide excellent customer service, you can turn your customers into your marketing team and earn referral business from them.

4 Easy Tips to Turn Around a Bad Customer Service Experience

While it’s important to prevent poor customer service experiences from happening in the first place, there will always be times when things go wrong. But it’s how you handle these situations that count. Here are three easy tips to turn around a bad customer service experience:

1. Being within reach

Make it easy for customers to contact you—a slightly annoyed customer can quickly become a very angry one if they can’t reach anyone to voice their concerns.

You want to have a robust system in place for handling customer inquiries, whether that’s live chat, phone support, or email. You should also make sure that your team is responsive and available to address customer issues as they arise.

2. Empathy goes a long way

Some customers just need to be heard—and that’s where empathy comes in.

Your customer service team should be trained to empathize with customers and understand their feelings. Teach your staff to see things from the customers’ perspectives and to always be respectful, even when a customer is angry or upset.

Apologizing can also go a long way in diffusing a tense situation. A simple “I’m sorry” can show the customer that you’re taking their problem seriously and that you’re willing to make things right.

3. Make it right

All businesses make mistakes. What separates good businesses from great ones is how they handle those mistakes.

This might mean giving the customer a refund, waiving a fee, or giving them a voucher for a future purchase. Discretion is key here—you don’t want to set a precedent of always giving away freebies, but you also don’t want to leave the customer feeling like they’ve been taken advantage of.

4. Follow up

Once you’ve addressed the issue, make sure to follow up with the customer to ensure that they’re satisfied with the resolution. This extra step will show them that you really care about their experience and that you’re not just trying to sweep the problem under the rug.

Customer service is a crucial part of any business, but it’s especially important for small businesses. That’s because small businesses don’t have the same resources as larger ones, so they need to work extra hard to build customer trust and loyalty.

Whether you’re just starting out or you’ve been in business for years, these tips will help you build a strong customer service foundation that will benefit your company for years to come.

To move your company forward, please contact Red Beach Advisors to conduct a Customer Service Audit to review your current service practices and improve your customer service.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.