Advertising vs. Customer Service
Do You Know Where Your Sales Come From?
Answer these 3 questions correctly and you will have an incredible 2017:
- Where do your sales come from?
- What is your company's biggest expense?
- Which has a better ROI, advertising or customer service?
1) Where to your sales come from? Leaders love to talk about revenue streams by showing graphs and charts with the breakdown of sales categories. It is important to know the percentage of sales generated by products or services and to monitor trends, especially the growth and decline of your business revenue. However, there is one critical component that every business has in common, which is never discussed: 100 percent of your sales come from one place--your customers! When you look at it this way, it sheds a stronger light on why companies need to put more emphasis on building an incredible, consistent customer experience that becomes your number-one competitive advantage and helps make price irrelevant.
2) What is your company's biggest expense? Another major focus of executive leaders is analyzing the company's P&L to determine where the company is overspending, being wasteful, and how to reduce expenses to drive more profit to the bottom line. However, the company's biggest expense does not show on your P&L, at least not directly--it is hidden. There is no line item for poor customer service, but nothing may have a greater impact on your bottom line than dissatisfied customers. It can dramatically cause loss of sales, decline of company reputation, lack of new customers/referrals, increased returns and refunds, increased discounting, more service recovery, higher advertising expense, lower morale, higher turnover, increased hiring, and more training, which further perpetuates a poor customer experience. It is imperative that every person in your company understand that your biggest expense is dissatisfied customers.
3) Which has a better ROI, advertising or customer service? Now is the time to shatter the myth that advertising delivers a higher ROI than customer service. Each year, every department in every company fights for an increase in their budget, determining what they are allowed to spend in the coming year. In the advertising versus customer service budget debate, the only way to win the battle is to prove which budget will produce a better ROI for the company. In 2016, the fact that this is even still a debate is a sign of old-paradigm thinking by too many senior executives. The short-sighted obsession of constantly bringing new customers/traffic to your business is significantly more expensive than building an incredible customer experience.
In an article on Our Social Times ("Can online customer service deliver a higher ROI than marketing?"), Tom Eggemeier, president of Genesys, notes that annual global marketing and advertising spend within the communications industry in 2012 was $500 billion -- versus $9 billion on customer service. Compare that with the percentage you spend on marketing and advertising versus customer service.
Are you penalizing brand loyalty?
Are you constantly offering incentives for "New Customers Only"? What about rewarding the customers who have been loyal to your business for years, who do business with you regularly, no questions asked, and refer others? Some important facts to remember:
- Repeat customers spend more than new customers.
- Repeat customers give higher satisfaction scores.
- Repeat customers refer more than new customers do.
- You need five new customers to produce as much as one repeat customer.
Further, an Adobe report ("The ROI from Marketing to Existing Online Customers") stated the following:
- A 5% increase in customer satisfaction can increase a company's profitability by 75%.
- 80% of your company's future revenue will come from just 20% of your existing customer base.
What if we reversed the spending on advertising and customer service? Companies spend millions creating and advertising their brands, yet the customer's actual experience is what drives brand perception. If you take really good care of your existing clients, they will generate more new customers than any kind of advertising campaign ever could.
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