Customer-Focus is a Profit Strategy

Companies that distinguish themselves in their customers’ eye on the basis of service and quality charge more for their products and services (up to 10% more), grow market share faster (6% vs. 2%), and have a better return on sales than competitors (12% vs 4%)

- Ron Zemke, Employment Relations Today

In research covering over 30 industries, TARP Worldwide (customer experience research consultancy) learned it costs 3 – 5 times more to attract a new customer rather than keep an existing one. Let’s be very conservative. Assuming it costs $100 to keep a customer, your new customer acquisition cost would be $300 to acquire a replacement.

If even 100 customers defected in 1 year due to poor customer service, it would cost $30,000 to replace these customers versus $10,000 to keep them. Can you think of something better to spend that $20,000 on?

Plus each of these customer defections represents an additional lost opportunity cost since every dissatisfied customer grumbles to an average of 6 people. Rather than being a dissatisfied customer who told 6 friends, they could have become an Enthusiast who recommends your company and generates new customers.

Harvard Business Review conducted research which indicates that a 5% increase in customer loyalty can result in a return of 25% to 125% directly to the bottom line (depending on your industry).

• Enthusiasts buy more
• Enthusiasts cost less to service
• Enthusiasts tell you when things go wrong
• Enthusiasts forgive you when things go wrong
• Enthusiasts tell friends and family about your products

Long term profit equals revenue from continuously happy customer relationship minus costs.

– Tom Peters, Thriving on Chaos

If you aren’t taking care of your customers, someone else will.

It is not enough to simply say that focusing on your customers is important to your organization. Here are 8 questions for consideration to determine whether your business is truly customer-focused.

1. Is Customer-Focus clearly enshrined in your organization’s vision, mission, structure and culture?
2. Have you clearly defined what products or services your customers value most?
3. Are you proactively listening to both your customers and your employees?
4. Have you defined and published your service expectations both internally and externally?
5. Do you measure your performance against customer expectations?
6. Is the experience consistent and measured across all customer touch points?
7. Are employees knowledgeable about your brand promise and empowered to use their judgement to take quick action to make things right for the customer?
8. Are there processes in place to acknowledge and recognize outstanding performance?

How many are you doing well? Making customer service central to your brand identity is not a one-time or simple task but a strategic decision. Ensuring your company is truly customer-focused is not easy – but one that reaps bountiful rewards.

For a more comprehensive evaluation that will help you understand where your company needs to work and where your strengths lie, take our CAT Scan (Customer-focused Audit Tool).