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Customer satisfaction
and loyalty
- where product and service quality hit the bottom-line!
by Paul G Linnell
complain. Customers can be very demanding but, 35%. We have also assumed the typical 25% drop in
with an effective response, it is still possible to obtain a loyalty from those customers who experienced
more loyal customer afterwards than you had before problems.
they experienced the problem!
From these inputs, the model shows that for a
5. Unhappy customers spread the word! company with 500,000 customers, each providing, on
How often do we find ourselves taking part in one of average, an annual revenue of $200, there is nearly $9
those “…you'd never guess what happened to me the million revenue at risk from poor customer service.
other day…” type conversations? You know it's not
going to be a good-news story. Our research confirms Take the model one step further and it shows
that customers tend to tell twice as many people about the annual profit at risk through poor service. Simply
a bad experience with customer service than a good enter the average annual profit per customer on the
one. second line instead of the average annual revenue per
customer. Thus, for a company earning 25% profit
Revenue at risk from dissatisfaction from the $200 revenue per customer each year, the
The degree to which poor customer service can have a profit at risk would be more than $2 million dollars.
negative impact on both an organisation's revenue and
profit can be estimated using a combination of
company-specific survey data and company-specific
financial data.
The model (see Figure 1) uses the number of • Lower sales and marketing effectiveness.
active customers and the average annual revenue • Increased service costs.
derived from those customers. Survey data can reveal • Increased compliance costs and
precisely how many customers experience problems organisational wear and tear.
but for the model we have assumed a conservative
FEATURE STORY
Paul Linnell
Paul Linnell is managing director of
CTMA New Zealand Ltd - a service
quality improvement company that
specialises in helping organisations
implement customer-driven quality
programmes and turn satisfaction measurement into
actions for profit and growth.
Paul can be contacted at: paul.linnell@CTMAworld.com