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Is Customer Focus Training an Investment or an Expense?

By Ray Miller;

It’s time to set the record straight. Customer Focus Training is NOT an Expense. It is a strategic investment and here’s the proof.

Business leaders have plenty to worry about these days.  Controlling costs, concerns about the economy, stagnant sales, a disengaged workforce and the list goes on.  I’m sure that for some of you there are some days you would like to lock your door, turn off your telephone and just get away from it all.  While I can’t help you deal with all these issues, I can show you a way to come out the other side of this current dilemma with a strong, vibrant and profitable organization.

I know, you’ve heard it all before. But hear me out. Let me prove to you that using training to create a customer-focused organization is one of the best strategic investments you will ever make!

As an expert in this subject matter I spend a lot of time looking at research studies, customer feedback, customer commentary about various companies they deal with and customer trends.  From all of these data I have compiled a list of ten compelling reasons why customer focus training should be viewed as a strategic investment.

• While 80% of companies think they are delivering a superior customer experience, only 8% of their customers would agree .

This represents a significant difference in perception and since it is the customers’ perception that drives their buying behavior, this is pretty scary .

• Beyond price and product quality, your customers value how they are treated. Only 12 -14% of customers leave for product reasons while 68% leave because of poor treatment by employees .

Since the vast majority of customers do not complain about service because they don’t think it will make a difference, many of your customers are gone before you even know it .

• Only about 4% of unhappy customers ever complain when it comes to how they were served; 90% do not bother to complain and simply go elsewhere.

Your customers are looking for maximum value when spending their hard-earned cash, particularly in this economy. While they will likely complain about the product or price if it is not delivered as expected, when it comes to their service experience or lack thereof, they won’t bother complaining.

• Depending on the report you look at, from 85% to 95% of senior business leaders believe that the next competitive differentiator is Customer Experience .

Differentiating your business through service requires the active participation of everyone in your organization. It is not just the pervue of your customer contact staff. Everyone contributes to the quality of the customer experience. Everyone .

• In today’s economic environment, customers are looking for greater value and companies are losing at least 50% of their satisfied customers .

“Satisfy” means to provide nothing more or less than the customer expects. Customers want to deal with those who demonstrate that their business is valued. Creating a Customer-Focused Culture is a proven strategy for both short-term success and long-term growth.

• Several studies reveal that the average value of a customer is between 8 and 10 times their initial purchase.  The cost to attract a new customer is 5 to 6 times more than your cost to save an existing customer.

Creating a solid base of loyal customers is more profitable. While acquiring new business is essential, it should not be at the expense of doing things which reward new customers and penalize existing customers. Furthermore, your staff need to be trained in what they must do in order to deliver a customer experience which builds loyalty .

• The cost of poor service ranges between 25% to 35% of your operating expenses.

Aligning internal processes and ensuring every employee understands how he or she contributes to the customer experience will reduce the cost of poor service. Why not move the total of these expenses from your expense journal to your operating profit.

• Low customer focus companies average a 1% Return on Sales and lose 2% market share a year. High customer focus companies historically average a 10 -12% Return on Sales and grow, on average, 5 – 6% a year.

Customer Focus is a profit strategy.

• A 5% increase in customer loyalty will contribute between  25% and 125% directly to your bottom line.

The potential sources of revenue are substantially greater than what it would actually cost to ensure your Organization is truly customer-focused.

• If you wait, it will be too late !

The time to act is now . Even your best customers are looking for the greatest value for their hard earned cash . The current economic situation has resulted in even higher expectations of service and unless your employees do everything they can to exceed these expectations now, these customers will be gone by the time the economy has turned around.

Okay, so forget about the fact that :

• most top business leaders believe Customer Focus is the single greatest differentiator,
• most of the best performing companies right now rate extremely high in customer focus,
• the main reason why these company perform well is because the owners/managers/senior executive are passionate about customer focus and have enable all their employees to deliver extraordinary service from the inside out, and that
• most of your customers are demanding better service and they are willing to pay for it.

If this hasn’t convinced you, why not run a few numbers?. Do a couple of simple calculations based on the research findings above to determine what your return on investment could be if you got passionate about becoming truly customer-focused.

Here’s a simple fomula to help you. Answer the following questions and do the calculations :

A.   What are your customers worth?

Enter the average annual amount a customer spends for your products and services:

B.  What is your customer attrition rate?

Enter the number of customers you lose annually:

(if you don’t know how to calculate this, give us a call)

C.  Multiply A X B =

D.  What is your net margin as a percentage of Gross income?

E.   Multiply C X D =

F.   What is your current cost of poor service?

Enter your total operating expenses:

G.  Multiply X 5% (although research suggests 20 to 30%)

H.  Add E + G =

I.    What would it cost to train your employees?

(For third party training services this can typically range from $200 to $300 per person depending on the provider. If you don’t know, contact us and we will tell you.)

J.    Subtract I from H =

K.  How much will now be added to your bottom line? (insert result from J)

The majority of people who complete this calculation arrive at a surplus. In your first year if you simply break even you are still ahead of the game. The bonus is you will significantly reduce the number of customers leaving your company rather than replacing them with new customers who cost at least 5 times more to acquire.

While training is not a panacea and it is certainly not the only thing that needs  to be done to build a customer-focused organization , for many it seems to be one of the biggest challenges , in part because it is viewed as an expense.

There is an expression, “You have to speculate to accumulate”. Proven customer focus training which is customized to reflect your strategic service goals and objectives is not speculative. It is a sound investment which can yield an exceptional return.

Ray Miller is the Author of That’s Customer Focus! and The Customer Focus Companion and Managing Partner of The Training Bank

Related articles

• Why Customer Focus Training? (fitbiztools.com)
• Customer Service in Today’s Economy (bayviewhunterspoint.com)
• Do Companies Really Care About and Value Their Customers? (fitbiztools.com)
• Turn Customer who Complain into Loyal Customers (bayviewhunterspoint.com)

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