What is Customer Service (and Why Is It Important)?

Jan 30, 2020

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  • Customer Support

There’s a good reason why the topics of customer service and customer experience have become so central to nearly every discussion on business success these days. The fact is that 96% of businesses fail to survive beyond ten years, meaning that only 4 out of every 100 current businesses will survive through the next decade. Those numbers may appear grim, but the reality is that those companies that find ways to differentiate themselves have an opportunity to thrive where others fail.

Recent survey results from Gartner indicate that 89% of companies believe that customer experience is emerging as the primary basis for competition. Retaining future business requires a company to address a broad spectrum of customer needs, not only the requirements of a product itself. Emerging trends such as customer portals, self-service options like knowledge bases, and customized offerings are helping to address these needs. As customer service continues to evolve as a primary form of competitive differentiation, it is important to understand what it is and why it remains so important.

A Definition of Customer Service

So, what exactly are we talking about when we say “customer service”? This official definition from Business Dictionary sums it up well: “All interactions between a customer and a product provider at the time of sale, and thereafter. Customer service adds value to a product and builds enduring relationship.” The keyword here is value. If your customer service efforts do not add value to relationships, they are unlikely to make a long-term impact on your brand’s ability to retain its customers. Customer service is more than merely offering answers to customer questions. It’s an essential component of your brand values.

Every business that is serious about long term growth desires to build trust and customer loyalty. Today’s world is so connected that consumers have unprecedented access to options for nearly any product or service they wish to buy. With this level of choice, it is as vital as ever for your business to provide tangible reasons for customers to do business with you.

The Good: Happy Customers Are Likely to Refer Others

Recommendations from trusted sources is an important factor in making purchasing decisions for most consumers. One of the great benefits of superior customer service is that a satisfied customer is very likely to share their experience with others. Recent data estimates up to 77% of customers regularly share such recommendations with friends. Positive customer service experiences not only help retain customers but can also improve your value proposition. Approximately 7 in 10 Americans say that they are willing to spend more money on companies that offer excellent service. This finding represents an incredible opportunity to invest in service capabilities, and the benefits are clear. By providing exceptional customer service, you’ll generate a positive return on investment, improve customer retention, and grow your business through referrals.

The Bad: Negative Reviews Are Certain to Impact your Business

Almost 72% of customers do not make purchasing decisions without consulting online reviews, and they often trust them as much as close family and friends. Positive reviews from your satisfied customers are a necessary part of growing a trusted business, and stellar reviews truly make a difference. While positive reviews make a difference, most consumers these days generally expect strong reviews for any company with which they choose to do business. It’s the negative reviews that often stand out.

While mistakes happen and product or service issues are inevitable, the result of negative customer reviews is often a failure to deliver a satisfactory customer service resolution. A company’s ability to resolve customer complaints remains an important factor in reducing negative reviews and lost customers. Another unfortunate consequence of poor customer service is that a dissatisfied customer is likely to share their experience with three times as many people, as compared to someone sharing a positive experience. Positive reviews are helpful, but negative ones can do significantly more damage.

The Ugly: Dissatisfied Customers Leave, Often without a Trace

Retaining customers over the long term not only benefits your business with repeat sales and potential new business through referrals but is also far more efficient than your efforts to find new customers. The cost of acquiring new customers is a staggering 5 to 25 times more expensive than retaining existing ones. The high costs of customer acquisition highlights the incredible value of repeat business.

When you lose customers, you will typically have no feedback or indication of it at all. A typical company will only hear from 5% of lost customers; they simply leave and never return. Without those points of feedback, it can be difficult to analyze where things went wrong. You must provide as many opportunities for feedback as possible at all points of your customer service process. It is impossible to follow up with every dissatisfied customer, but you can do your best to contact those that have reached out to you. Making the most of these interactions and having a robust follow-up mechanism in place can ensure you get better as you learn.  

To remain competitive, companies today must develop a comprehensive view of customer service and how to meet a wide range of customer expectations. By providing new customer service capabilities to your support team, you can help ensure that your staff and customers alike have access to tools that genuinely add value.  Differentiation for modern businesses will come from the experiences that their customers have with their brand, and those that get it right have a chance to thrive for many years to come.