Articles for Retailers - Kizer & Bender



Customer Service Recovery

. . . and the Cost of One Lost Customer

 by Rich Kizer & Georganne Bender

November 2018

In this crazy age of social media and online consumer review sites, smart service providers have moved on from “customer service” and “customer care” to “customer advocacy”, following through to make sure every customer is satisfied to the best of their ability.

Today, people who are cheesed off about something that happened in your store have to potential to tell millions of others social media, and you know what that means. Saving the sale puts money in your cash register, but customer service recovery saves the sale and your reputation.

But losing just one customer isn’t such a big deal… or is it? Take our “Cost of One Lost Customer” test using figures from your own store and find out:

  1. What is your average customer sale? _________________________
  2. How many times a month does your average customer come into buy? _________________________
  3. Based on questions above, an average customer will spend this much in your store in one month: _________________________
  4. Now, multiply the number in question #3 times 12 to find what an average customer spends in your store in one year:  _________________________
  5. How many years is that customer potentially your customer? _________________________
  6. Multiply the number in question #4 by the number in question #5 to calculate the lost lifetime sales of this average customer:   _________________________
  7. Now, if this unhappy customer tells just 10 other people about her bad experience and they decide to no longer shop with you, what’s the cost of this one unhappy customer?  To find the answer, multiply the dollar amount in question #6 times 10 (that’s the 10 other customers), then add in the original customer’s lifetime sales (#6) to get the total answer. _________________________

It’s a lot of money, isn’t it?

If we use just $20.00 as an example of your average store sale, and follow the Cost of One Lost Customer exercise through all of the steps, that one unhappy customer would cost you $3,360.00 in lifetime sales. But that’s not all because when you add in the 10 people that customer is likely to tell that figure rises to $33,600.00.  Now, add in the original unhappy customer’s lifetime sales and the number grows to a whopping $36,960.00 – that’s a pretty tough number to make up.

Only one in ten customers will take the time to tell you when something is wrong; this means that the other nine leave angry and may never return to shop with you again. They may even tell their friends about their lousy experience, or worse, blast you online – if they use a hashtag their complaint can take on a life of its own. The good news is that the customer service recovery statistics are on your side: When a customer gives you the opportunity to attempt to fix the problem, studies show that over 80 percent of people will give you another chance.

You need to have a customer service recovery policy in place. If you don’t, here is a good one to follow:

  • If you don’t know the customer, offer your hand and introduce yourself. If you do, address them by name.
  • Always assume that people are honest and are telling the truth about what happened to them.  If you automatically discount every customer complaint – and we know too many retailers who do this – you are setting yourself up to lose customers.  Take every customer complaint seriously. No matter how small you think the complaint might be, it’s a big deal to the customer. If it wasn’t, the customer wouldn’t bother to bring it to your attention. Remember, the customer’s perception is her reality and that’s all that matters.
  • Listen carefully and ask questions until you are certain that you completely understand the customer’s complaint. Open-ended questions require the customer to respond with more than a simple “yes” or “no”, are the best way to quickly get the root of the problem.
  • Repeat what the customer tells you and then ask if you got it right. Asking the customer questions puts you in control of the conversation and it keeps the customer talking; talking helps calm the customer down. Using the customer’s name also helps to diffuse the situation.
  • Apologize, even when it’s not your fault. You are creating empathy and showing the customer that you are on their side. If you say, “This is a wonderful product, no one has ever complained about it before.” the customer hears, “What’s wrong with you? A kid could figure this out.” Instead say, “I am sorry that you are upset. Let’s see what we can do to solve this problem.” Or “I am really sorry that this happened to you, I can understand why you are frustrated.”
  • Ask the customer what he would like you to do. It’s easy to get defensive when someone criticizes your store, and it’s easy to think that the customer expects you to hand them the moon. No true! Most customers just want you to fix the problem so ask, “What would you like me to do for you today?”
  • Remember you are a customer advocate so the buck stops here. If the problem can be fixed on the spot, fix it. Empower your team by encouraging them to try and resolve the problem by themselves, but when they can’t to get help fast.  Either way, advocates stick with the customer until the complaint is resolved.

If you have to get in touch with a supplier for more information, explain to the customer what you need to do, and offer your plan to resolve the issue. This good faith gesture lets the customer know you are on her side and are personally working to fix the situation.

Do one more thing. Merchants in New Orleans offer a lagniappe (pronounced “lan-YAP”), a small gift you give to customers as a token of appreciation. In customer service recovery mode, a lagniappe might be a gift card or a free class.

Follow-up. Call or email the customer to ensure that the situation was handled to their satisfaction. Another plus to customer advocacy is the positive word of mouth you will build when the customer tells his friends what you did for him. Word of mouth is the number one thing that brings new customers to your store. A customer testimonial is 10 – 20 times more believable than what you say about yourself. And it’s free.

Keep an eye on your Facebook page and other social medias to see if the customer has posted her complaint. Check consumer review sites like Yelp as well. In fact, go to Yelp right now and put your store name in the search box. Chances are good that you are being reviewed on Yelp even if you have not set up your Yelp business page. Do it. It’s free, and it gives you control over the details posted about your business. If you find a negative comment respond immediately. Say something like, “I am sorry that this happened to you, it is not a normal occurrence in my store. Please call or send me a private message so we can work together to resolve this issue.” Your timely response is critical, particularly if the complaint is exaggerated because a lie left unchallenged becomes reality.

Keep a record of customer complaints, noting how each one was solved. Review your log each week to see where you need improvement. Go over the list at every store meeting, noting the common occurrences. Ask your team for their input: How would they have handled the situation? This will help your associates understand how to handle similar complaints in the future.

Customer service recovery lets customers know that they, and not just their money, matter to you. The late, great Maya Angelou said it best: “People will forget what you said, people will forget what you did, but people will never forget how you made them feel.”

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Rich Kizer & Georganne Bender are professional speakers, retail strategists, authors and consultants whose client list reads like a “Who’s Who” in business. Companies internationally depend upon them for timely advice on consumers and the changing retail market place. KIZER & BENDER’s observations are widely featured in national newspapers, national and international industry and consumer publications, and on radio and television programs across the U.S. You can learn more at www.KizerandBender.com.