The reason why your customers are abandoning your business may not be what you think. Research shows that over 70% of customers who abandon your business do so because they have problems with your customer service. In theory, this means that it would be possible for you to retain 70% of your customers if you offer world class customer service.
Why focus on customer satisfaction?
Depending on your industry, it is actually 5x to 25x more expensive to acquire a new customer than to retain your current customer.
Also, your existing customer is 50% more likely to try new products that you are selling. And did you know that your existing customer will spend 30% more as compared to new customers?
It is true that customer acquisition is important for growth. But focusing on customer retention can help increase your sales at less cost.
However, we all know that providing world class customer service can be very expensive. And if you are a small business, you may not be able to make this kind of investment. So, what can you do?
Here are 5 ways to help you increase customer service at no cost.
1. Find out what problems your customers are facing
Why are your customers not satisfied? Why do they leave? For those that complain, what are the main issues they are complaining about?
Sometimes, when customers complain, the business owner is too focused on defending his or her product or service. They don’t actually listen to what the customer is saying. Sometimes, this is because they are afraid that they will be forced to refund the customer.
However, these business owners should consider the following:
- Customers that are not happy with your business will tell up to 7 other people
- If your customer is on social media, they may share their negative experience and reach thousands of potential customers
- All these customers will now think twice before they do business with you
- Your business reputation is damaged
You will need to decide for yourself whether the cost of the above is less expensive as compared to refunding a customer.
Note: it is not always necessary to refund a customer. Sometimes, listening carefully and then giving the customer a replacement product can solve the problem. Or even offering them a big discount for the next time they buy from you.
If you want to avoid these issues, take the time to identify the top 5 problems that your customers are facing. There are many ways to do this. You can ask them when you meet them in the street. But they may not give you a straight answer.
You can use your Facebook account to showcase your business and ask for advice to improve. You can ask customers that come into your store to fill out a short form (3 questions max). If you have your customers’ email address, you can also use free automated surveys like SurveyMonkey to ask for feedback.
Note: if you want to encourage customers to respond, you can create a contest. Everybody that fills out the form or leaves a useful response on Facebook will automatically participate in the contest or raffle. Make sure the prize is interesting. 😊
After you identify the top 5 problems, fix them. And don’t forget to tell your customers that you have fixed the problem. You can encourage those that left to come back by offering them a discount if they give you one more chance.
2. Prioritise certain customers to increase satisfaction
All customers are important, it is true. But some customers are more important than others. The customers that are most important to you will bring you higher profits today. However, if you can keep them, they will also boost your business growth. These are the people who will buy more and more from you as time goes on.
Use the Pareto Principle to determine your most important customers.
The Pareto Principle is a very powerful principle in business and in life. Consider this:
- 20% of customers are responsible for 80% of total profits
- 20% of the sales persons generate 80% of total sales
- 20% of the workers produce 80% of the result
- 20% of patients account for 80% of healthcare spending
- 20% of the apps on your phone are used 80% of the time
Note: it will not always be exactly 20% and 80%. The important thing to understand is that some things in life – like effort, reward and output – contribute more than others.
So, find out which 20% of your customers are responsible for 80% of your profits. Then focus on making sure that these customers are 100% satisfied. After that, start paying more attention to your other customers.
Pareto for other business aspects
You can use the Pareto Principle to supercharge your business in many areas. For example: find out which 20% of your expenses are resulting in 80% of your money outflow. Then look for ways to reduce those expenses.
Or, use it to determine which 20% of your marketing and advertising is bringing you 80% of the new customers. Then focus your marketing on that 20% because this is bringing the best results.
You can also use the Pareto Principle to understand which 20% of your products are responsible for 80% of your sales. Increase these products in your store and reduce the other products. This can help to reduce low turnover and high inventory.
3. Hire the right people
If the employees that deal with customers do not have the correct mindset, your business will suffer. What do I mean by the correct mindset? I mean that your employees:
- Show a respectful attitude towards customers
- Truly want to help solve problems
- Have good listening skills
- Can quickly understand and solve a customer’s problem
- Know how to politely handle angry customers
- Have a welcoming social behavior that makes the customer feel at ease
People like this will make you proud when they represent your business. How can you find them? Here is a tip. During the interview process, describe a problem you had with a customer. Ask them how they would deal with this problem. Listen carefully to their answer to find out if they are showcasing the above characteristics.
4. Train your staff well
Once you have selected the right people, make sure to train them well. You can send them to a local training facility, let them follow online training. You can even design your own customer service training by using training videos from YouTube.
In any training, focus on the following:
- How to handle a customer problem correctly during the first attempt
- How to deal with angry customers
- How to work together as a team
- How to handle challenging phone calls
If you are a solo entrepreneur, you can still use the above to improve your own dealings with customers. Remember: if you can succeed in improving your customer service, your business will retain more customers, start attracting new customers and get more sales. This will lead to higher profits.
5. Save costs by streamlining customer interaction
Do you keep getting the same questions from your customers? Consider creating FAQs – Frequently Asked Questions – of the top 10 questions. You can laminate it on a poster and hang it in your store so customers can see it when they walk in. You can pin it to the top of your Facebook (business) page or put it on your website. If you communicate through email, you can also send it to your customer the first time you have dealing with them.
Creating a list of FAQs is one way to streamline your business. It helps to reduce the amount of time you are wasting by answering the same questions over and over and over. Instead, use the time saved for things that will improve your business.
Streamlining can also be done when you are requesting feedback. Why not have a small box in the store where customers can leave their feedback? And maybe also participate in any contest or raffle (see point 1).
Finally, streamlining your business operations and communications can help to avoid unnecessary questions from customers. When what you are saying is clear and when the process customers have to follow is also clear, it becomes easier for customers to go to the next step. And that next step is to buy from your business instead of asking you questions.