True story: Five professionals, including two business owners and the general manager of a large media company, were sharing a ride to a Boston Red Sox game. The talk turned to outsourcing, India and customer service horror stories. Someone mentioned the computer giant Dell and soon all five people were sharing their tales of woe: days spent on hold, shoddy products, overbillings, and simple returns made nightmarish. One passenger said he paid out of pocket to have his computer serviced rather than wade through Dell’s interminable phone tree and hold time. Given such consumer angst, it’s no surprise the company’s ranking on the University of Michigan’s American Customer Satisfaction Index hit a seven-year low in 2005.

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A better product or a more competitive price may spur customers to take their business elsewhere, but most depart over customer service issues. In a recent consumer study conducted by UCLA, 68 percent of respondents said they jumped ship because of an interaction with an indifferent employee, while only 14 percent cited price as a reason. Wooing back the disgruntled can come at a hefty cost: Dell, for example, is pouring more than $100 million into revitalizing customer service, including hiring more full-time staff and cutting part-timers and contract workers.

“Without a doubt, the top reason companies lose customers is because of a poor customer service experience,” confirms Scott Bush, chief marketing office for Maritz Inc., a marketing firm based in Fenton, Mo. “Every customer experience will succeed or fail at the hands of employees who deal directly with customers.”

Building Brand Loyalty
Because getting new customers is more expensive than retaining existing ones, many companies are investing in loyalty-building programs, says Diana LaSalle, author of Priceless: Turning Ordinary Products into Extraordinary Experiences.
Customer loyalty-building tactics are most effective when they give customers something they really value, LaSalle notes. She cites Publix, the fastest-growing grocery in the U.S., as an example of a company that understands the needs of its customers and tailors its loyalty programs accordingly. The chain offers in-store cooking demonstrations, holding them next to the ingredients needed to make a featured dish. It also sells prepackaged bags filled with food and personal hygiene/housekeeping products — customers can purchase the bags at checkout and the store delivers them to needy families. “Like their competitors, [Publix] offers a good product selection and pleasing environment — that’s expected” LaSalle says. “Their success, however, comes from [delivering] what isn’t expected of a grocery store.”

Bush says many companies talk about the importance of customer service but few actually deliver on the promise. He points to one of his clients, Cadillac, as a company that needed help walking the customer service walk. Eleven years ago, Cadillac found itself near the bottom of the J.D. Power and Associates Customer Service Index Study. To better understand what drives customer satisfaction, Cadillac implemented a program at its dealerships throughout the U.S called Standards in Excellence that focuses on improving customer interactions with the sales and service departments. As each dealership achieved higher standards, employees were awarded with performance bonuses. Cadillac’s sales — as well as its ranking in the J.D. Power and Associates Customer Service Index — have risen dramatically as a result of the initiative.

Another secret for building brand loyalty, experts say, is to address customers’ concerns before they fester. Toyota, for example, regularly monitors customer gripes on the online forums at Edmunds.com, a deep resource for all things automotive. “When there is an issue, Toyota is up front. They address the situation and provide resources for resolution,” says Jeannine Fallon, executive director of corporate communications for Edmunds.com. And because Toyota is committed to an ongoing relationship with its customers, Fallon notes, loyalty to the brand is steadfast.

Prove Your Worth
Winning back a lost customer, of course, can be a tall task. Jaynie Smith, author of Creating Competitive Advantage, says a company in this position must first “get the ugly facts” — that is, interview both past and current customers to determine what’s causing them to flee. According to Smith, companies often discover a “dangerous disparity” — a difference between what a company thinks is important to customers and what customers actually think is paramount. She warns against trying to win back customers on price: “Show them you’re worth it because you deliver value.”

Once a company has committed or recommitted to serving its customers well, it’s critical to quantify customer service standards, says Karen Leland, author of Customer Service for Dummies (Wiley). These standards should always be specific and measurable, Leland adds — for example, answering incoming calls within three rings, returning e-mails within 24 hours or expressing regret if a customer presents a problem.

Leland also believes a customer-centric company should refrain from arguing with its customers over small stuff. “If a customer spends $500 a year and wants to return a $25 item without a receipt, take it back and smile,” she urges.

Once a company makes a commitment to a customer retention strategy, says Maritz’ Bush, they will repay the favor through positive word-of-mouth marketing. “Nothing is better [for] winning customers back than having them hear firsthand about a neighbor, friend or family member’s positive experience with a brand.”

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