20 reasons why is customer service important to drive business results in 2023
16 minute read
What is the most valuable asset for your business? You might think that it is your product or your marketing team. There's no wrong answer to this. However, when we put a little thought into this – everything boils down to customers.
And keeping them happy could almost guarantee you long-term success. So, the question becomes: how much is Customer Service important? 55% of customers will come to your business if you have a reputation for excellent service.
"Imagine your customer is your best friend—listen to their concerns, be a shoulder to lean on and then shift the focus from what went wrong to how you can help make it right."
- Rachel Hogue
Improve (customer satisfaction + customer retention) = Improve profits. 🤑
Taking good care of your customers means taking good care of your revenues too. Happy customers purchase 90% more frequently and pay 60% more for every purchase. They also generate three times more revenue annually.
Still not convinced? Hold on!
We can give you 20 reasons why customer service is important to drive your business results in 2023. If that interests you, continue reading to know more.
1. You earn more when your customers are happy
You might wonder how important is customer service to increase your revenues. Answer: 84% of businesses have recorded higher revenues by improving customer service.
When you improve your customer service, you increase customer satisfaction. The more satisfied your customer is, the more money you earn.
Happy customers also mean higher customer retention, which again leads to more revenue. It might be difficult to directly relate excellent customer service to an increase in revenues. To solve this, you can use customer service analytics and track the metrics regularly.
You can use Net Promoter Score (NPS), Customer Lifetime Value (CLTV), Customer Satisfaction Score (CSAT), etc. as your support metrics.
For instance, NPS can determine the loyalty of your customers towards your business by measuring their future intent to do business with you.
One of the simplest ways of assessing the loyalty of your customers is to ask them basic “yes” or “no” questions in feedback forms. You can then assess the NPS based on their responses.
At the end of the day, all of us would want high scores on various customer analytics metrics. But to achieve those scores, you need to get to the customer’s core! (The rhyming was totally unintentional.)
2. Customers are a walking advertisement
Customers are walking advertisements – sometimes, literally!
Data shows that at least 72% of customers are likely to refer your business to more than six people if they are satisfied and happy.
Poor customer service is very capable of decreasing the number of returning buyers and creating a bad reputation. But if you provide excellent customer service, your customers can be a source of building a good reputation.
Customers who are satisfied with your services become your source of positive feedback. 69% of customers will recommend your business to others if they have a positive experience.
Advertisement through word-of-mouth doesn’t cost you anything but gives you returns in the long term.
If you have a good experience with a brand, you may want to tell your friends, family, and colleagues about it. After all, who doesn’t want their loved ones to use the services or products of a trusted brand?
Our friends and family value our opinions more than what a brand’s website has to say. So focusing on creating a positive experience for one customer means you are attracting many more.
3. Improving customer service increases customer retention
Customer service is crucial for customer retention. We’ll let the data talk:
- 75% of your customers will become your returning buyers if you provide excellent service.
- 89% of your customers will go to your competitor if you provide poor service.
- 68% of your customers won’t come back to your business ever once you lose them.
That is quite a motivation to focus on providing excellent service!
Viral social media campaigns and ads make it easier for you to generate new customers. But only good customer service can almost guarantee that those customers become returning buyers. Customer service is important for long-term growth.
4. Customer retention is cheaper than customer acquisition
Harvard Business review also agrees with us as their data says that finding a new customer is five to 25 times more expensive than retaining your old customers.
When you focus on your existing customers and keep them happy, your operating costs reduce over time. Customers that stick with a business year after year increase your profits.
For instance, a 5% improvement in customer retention can result in a profit gain of more than 25%. Why?
That’s because, over the years, your returning buyers will spend at least 300% more on your products and service. When your existing customers spend more on your business, you can use that as an important data point in your marketing.
How, you ask?
Well, when you highlight that your returning buyers spend more on your business over time, potential customers will be curious to try your products. That’s because they will be interested to know what is it that you offer that makes your returning buyers so loyal to you.
And the more curiosity you create amongst your potential buyers, the higher the chances to increase your customer base.
5. Poor customer service reduces the customer lifetime value (CLV)
Customer Lifetime Value (CLV) is a prediction of the total amount that a customer will spend on you during the period of their relationship with your business. It is an important metric for your business growth. It gives you insights into the total revenue you expect to earn from a customer.
If you want to be the industry leader, focusing on CLV is a priority.
When your CLV increases, it means that a customer is spending more on your products and/or services.
Customers who engage with your business frequently, purchase 90 percent more regularly. They also pay 60 percent more per purchase. They also generate three times the revenue annually.
CLV increases only when you actively interact with the customers who are highly engaged.
For instance, when you reach out to those customers who follow you on all social media platforms and read your emails, they feel valued. And when your customers feel valued, they will be more engaged in your business.
Reacting to your customer’s emails, especially, when they don’t expect will make you stand out and can also give you a lot of traction online.
A classic example of this would be the supermarket chain, Sainsbury’s. They changed the name of their Tiger bread to Giraffe bread when a three-and-a-half-year-old Lily wrote a letter to their customer service team asking for the change of name.
This incident had gone viral and customers applauded the gesture made by the supermarket chain. You can read more about this interesting story here.
6. Employee satisfaction shows us why is customer service important
It is no surprise that we give more effort when we are appreciated. The same applies to your employees.
It has been found that 69% of employees put in more hard work when they get the appreciation they deserve.
Your support team will put in more effort to fulfil customer expectations if they are satisfied at the workplace. This will motivate them to provide consumers with excellent service. These customers will then be pleased with your brand and recommend it to others.
Let us take the example of Chick-fil-A, a chain of fast-food restaurants. They have successfully cracked the code to employee loyalty. They can afford to pay store operators double or triple the industry average salaries. And they still make enough money to expand the chain! They also donate about 10% of profits to charity.
These incentives motivate the agents to build and maintain loyal customers.
Our key takeaways from the example of Chick-fil-a:
- Reward your employees if you want a loyal customer base.
- Create marketing and feedback mechanisms keeping in mind both your employees and customers.
- Prepare annual performance reports on both customers and employees with as much importance as you prepare your annual sales reports.
- Make sure that your customer support process is simple, easy to understand, and user-friendly for both your employees and customers.
7. Excellent customer service improves your brand image and value
To make your business go from good to great, it must add value in some form.
And one of the most effective ways to do so is to bridge the gap between you and your customers. Enter: Your customer support team.
Evidently, your employees and customers both are the ones representing your brand.
55% of your customers choose to buy from you because of your excellent customer service. Providing excellent service and improving customer satisfaction can go a long way in increasing your brand value.
When your employees take care of your customers like their own family, your customers feel that their concerns have been heard. And once your customers feel seen and heard, they will go out there and tell their friends and family. They will also write positive reviews and feedback if your service exceeds their expectations.
Taking good care of your customers is like a commitment. By putting your attention on growing your tribe, you are showing that you are not restricted to making profits only.
An example that immediately comes to mind is Tesla. They take pride in providing automotive services effortlessly. In fact, they are willing to fix your car at your house.
To maintain its reputation, Tesla is always willing to go above and beyond for its customers. Providing car maintenance services outside the workshop cannot be cheap. But Tesla shows that it will pay off in the long run.
8. Customers are willing to pay more for excellent customer service
86% of the customers are willing to pay extra if they have a positive experience.
Even a single positive or negative experience can change a customer’s outlook towards your business.
Three out of four customers have increased their spending on a business because of past experiences of excellent customer service.
Amazon would be an interesting case study in this scenario. The majority of us would agree that Amazon is trustworthy. It has excellent service and active communication channels (email confirmations on every step of the order right from the start to the end).
The buyer is sure that Amazon will address any issues that might arise. Amazon no longer actively pursues the lowest price, as it once did. And even if they don’t offer the cheapest price always, they complement it with discounts and other offers.
Amazon now informs buyers that certain products can be purchased on the Amazon marketplace from independent merchants for less money. Their products are similar to those that Amazon sells. But these independent retailers are just marketing and selling their goods using the Amazon website.
However, customers still prefer to make purchases through Amazon even if they have the option to do so outside of the Amazon Prime membership. This is because of the excellent service that they offer.
9. Customer service is important to create a loyal customer base
We have already seen that retaining an existing customer is better than getting a new one. 60 to 70% of your loyal customers are more likely to buy your products as compared to only 5 to 20% of new customers.
But these loyal customers aren’t created magically. Only happy and satisfied customers will create a loyal customer base. Listed below are a few reasons to believe that loyal customers are an asset for you and you should focus on them.
- According to 93% of the businesses surveyed by CSC Peat Marwick, customer loyalty gives them a competitive edge.
- These same loyal customers account for 80% of overall sales even if they only make up 20% of their whole customer base on average.
- Customers are extremely volatile. But when you provide them with excellent services, they tend to become less volatile and invest more in your business.
- 96% of the customers say that customer service is important for them to be loyal to a brand.
As Warren Buffet rightly said,
“It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently.”
10. Your customer service team can reduce your marketing expenses and improve marketing
A proactive customer service team can be one of your most viable investments. It can be useful for your customers and also reduce your marketing spend.
Making the effort to assist your customers before they feel the need to contact you for assistance is known as proactive customer service. This can involve introducing new products or services launched even before they find them.
It can also mean alerting them to bugs and technical faults as they happen, or just going above and beyond to improve customer experience. A common example of proactive customer service is the suggestions that appear when looking at a company’s app or website.
OTT platforms like Netflix, Amazon Prime, etc. show us why is customer service important for you. They have a feature that gives you suggestions on what you would like to watch. This engages the customers more to consume their content. Netflix also allows you to shuffle your shows when you don’t know what to watch.
Another example of proactive customer support is Urban Company. When you schedule any service on their app but fail to avail of it, they call you immediately to help you reschedule. They don’t wait for you to raise a query. They also give unconditional rescheduling options, no questions asked.
Simple yet effective features like these are good examples of proactive service.
11. Your customer service tools and the team can give you important information on customer satisfaction
You need to look at your brand from your customer’s point of view.
Look at it this way: If you are running a clothing brand, you might look at your clothes as trendy, and fashionable. But your customers might associate your brand with comfort. Thus, it is necessary to improve customer experience depending on what they think about your brand.
Businesses that make investments in the customer experience also enjoy an average 20% rise in employee engagement.
You can train your customer service team to simply ask for feedback while dealing with consumers. This will save you the time and money needed to constantly survey your customers. Their responses might help you learn a lot about how to improve company goals and employee training.
A perfect example, in this case, would be a meditation and wellness app, Headspace. It asks users a few straightforward questions about their preferences at signup, such as their expertise level, the primary reason for using the app, or the best time to meditate.
Such responses can help you improve your services or tailor your products according to their needs. It can also increase your online conversion rates which you will read later in this article.
12. Your customers expect excellent service
It is 2023 and customer expectations regarding your services are extremely high. They expect you to have better customer service than your competitors. If you cannot fulfil those expectations, you might be in for some bad news.
The pandemic has increased the demand for excellent service much more than before. The pandemic has taught us why is customer service important to drive your business. 58% of the customers demand better customer service than they did before the pandemic.
Customers demand fast and easy customer support that should be available at their fingertips. Your customers want to be treated as humans and not just another data for your company. 66% of your customers will leave your brand if they don’t feel valued as individuals.
Focusing on increasing the speed and the number of calls your team can attend won’t add much value. Focus more on providing excellent service and taking meaningful customer feedback.
It is now on us to provide world-class customer service.
13. Providing high-quality customer service can make you an industry leader
60% of your customers won’t return to your business after a single negative experience.
When you provide customers with omnichannel support, you automatically stand out.
For instance, the banking sector is one of the classic examples of constant omnichannel support. They provide customer support through mobile apps and their websites 24X7. Most banks provide SMS services too. Opening a new savings account is now just a click away. You don’t even need to visit banks physically to create new accounts or investments.
The well-known international bank, Bank of America, provides its clients with consistent omnichannel service. The bank permits the use of its desktop and mobile apps for tasks like cheque deposits and making appointments.
Companies with the best omnichannel customer service retain an average of 89% of their customers. Companies with poor omnichannel support retain only 33%.
For your brand to be at its best, your customer service team needs to be efficient and trained. Their communication skills and empathy can not only retain existing customers but also generate new ones.
14. Positive customer experience increases online conversion rate
Better customer service is an expectation and not an add-on. When you provide excellent service, it not only increases your customer satisfaction but also your online conversion rate.
Making customer satisfaction your priority can improve your online conversion rate at least by 8%. One of the best ways to increase your online conversion rate is by providing personalised services.
Post-purchase, your customer service team can ask them how their experience is with the product. They can also collect feedback and refer to new products related to their last purchase.
Data confirms that 75% of online buyers prefer firms that tailor their products and services to suit their needs. 74% of the customers are irritated by content that isn't relatable for them.
15. Improving customer satisfaction reduces churn
Churn is used to measure the number of customers leaving a business after purchase. If your customers have a poor experience, they will run away to your competitors. This means that when you provide a good customer experience, you not only retain your existing ones but also gain those of your rivals.
Research has proven that 67% of churn is avoidable if customers’ issues are addressed immediately.
You can reduce your customer churn by making customers feel like your policies are only meant for their welfare.
A good example of excellent customer service, in this case, would be Zappos. Zappos doesn't set time limits for addressing customers' issues. It chooses to provide the best possible resolutions to customer queries.
In an era where many e-commerce companies are restricting their policies due to "frequent returns," Zappos offers a no-risk, 365-day return policy. Such ambitious steps have made Zappos one of the most successful businesses.
Related: 15 examples of companies that took customer service experience to next level [+ bonus tips]
16. Long-term growth of a business depends on customer satisfaction
Some of the major reasons are failure to understand the market, wrong perceptions of customers, not being able to sustain, etc.
Within the first year, at least 20% of the small enterprises go out of business. 50% of them go out of business by the fifth year.
Small businesses, especially, need to take care of each and every customer like they care for their loved ones. As we have already seen before, most customer-related issues arise because of dissatisfied employees and poor customer service.
For instance, a small but meaningful gesture by a Polish coffee brand, CoffeeDesk, has created a positive impression amongst its customers. This example shows us why customer service is important and what magic can it create for you. They attach comical drawings with their parcels, usually a distinct cat.
This unique move set CoffeeDesk apart from its rivals. The store has a good reputation because of quick delivery and excellent service. Despite its competitors offering similar products (sometimes at lower prices too), it still holds a dominant position in the Polish coffee market.
17. Excellent customer service solves other existing issues in your business
Consumers who complained about bad customer service online were neglected in 79% of cases!
Issues like low conversion rates, low sales, falling brand value, ineffective marketing techniques, etc. can be solved when customer service is improved. Often, these issues arise when your customers are not happy with your business. This means that in most cases, poor customer service is the root cause of poor business.
Inconsistent service irritates customers because there is improper coordination between customer service and the customer journey. Eventually, they change the brand, which destroys all of the consumer relationships that were built. Negative customer reviews online can reduce your sales. It will also bring the CLV of your business down.
Businesses should concentrate on providing omnichannel customer service that is consistent across all channels, including websites, social media, phones, in-apps, storefronts, etc. There are 11 types of customer service you could choose from.
We have already seen how happy customers mean higher revenues and higher customer retention. It also means greater loyalty to your brand.
When you work on improving your customer service, other issues like low revenues, poor brand image, etc. will improve too.
18. Increased customer satisfaction creates new opportunities for your business
When anyone is looking to do business with you, one of the first things they notice is how you treat your existing customers. Reviews by your customers and your replies to those comments are usually visible to everyone who visits your website.
Excellent customer service can greatly help when you are trying to expand your customer base.
The quality of your customer service is a deciding factor for 90% of your clients when they think of doing business with you. This suggests that a significant portion of potential customers will be driven by the perception of your customer service.
19. Satisfied and happy customers are far less likely to leave when you make a mistake
When your customers are happy, they will cut you some slack when you make a mistake. If you have state-of-the-art customer service, 80% of your customers will let go of a bad experience with your business.
An example, in this case, is how Target managed a crisis situation. In 2019, when Target had a register breakdown, they handled it in the most efficient way possible. Target informed its customers through social media even before they could complain. The on-ground employees in the store too tried their best to explain the situation and handled the customer grievances with a lot of patience and care.
They immediately took to social media to inform their customers about the breakdown through their official handle of customer support. The CEO also went on air to apologise to customers about the issue. The on-air apology was an important move for the recovery of their brand image and to prevent customers from leaving. And this is exactly why Target is what it is.
Customers want to feel that the brands they bring into their homes are genuine and personalised, especially when things go wrong. By taking this crucial action, Target showed that they are all about their customers.
20. Improving the CSAT score is a sign of business growth
Our last point of focus is the CSAT score which sums up all of our previous points on why is customer service important.
The key metric used to measure how your target market feels about the service or product you offer is the Customer Satisfaction Score (CSAT). CSAT score matters because a higher CSAT score means that your company is providing excellent service.
An improvement in the CSAT score is seen as a sign of progress. That’s because increasing the CSAT score helps us improve some major aspects such as
- Brand loyalty of customers
- Customer churn rate
- Customer retention
- Promotion through word-of-mouth advertising
- Better communication with customers
American Customer Satisfaction Index states that a CSAT score above 80% is a sign of excellent customer service and business growth. But anything around 60% and below is a sign of poor customer service.
Companies with poor CSAT scores will face much more difficulties in driving business than those with excellent CSAT scores. Here is a way to track CSAT scores.
Jeff Bezos once said, “We’re not competitor obsessed, we’re customer obsessed. We start with the customer and work backwards.”
So, could we convince you why is customer service important for your business? We hope so.
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