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The £28bn bill for bad customer service

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How much can bad service impact a business? And can good service levels actually make your company more profitable?

We were visited this week by Jo Causon, CEO of the Institute of Customer Service (The Institute), who gave an inspirational presentation to the teams here at BCMS, as part of our regular lunchtime lectures. The Institute is a not-for-profit organisation, and has 450 organisational members, drawn from the public and private sector, including names like John Lewis, BT, First Direct, Sainsbury’s and United Utilities. 

Top-level management at these businesses rely on The Institute’s insights. Why? Because these organisations are acutely aware that bad service – complaints, refunds, and all the stress and faff around that - costs the UK economy around £28bn a year. In Jo’s words, customer service is not a ‘pink and fluffy’ topic. It has hard economic value.

In its bi-annual report, the UK Customer Satisfaction Index, some astonishing findings were uncovered – and there are lessons for every business owner here. Some are common sense. There is, for example, a clear correlation between employee engagement and customer engagement. Simply put, the better your staff feel about your business, the better your customers will react to you. The Institute estimates that for every 1% increase in staff engagement, there is an associated 0.4% increase in customer satisfaction. Look after your staff, and they will look after your clients! 

Other findings are, I think, revelatory. Jo explained how customer service is a “predictive indicator” of a business’ performance. Sour relationships with your clients today will mean falling profits tomorrow. The evidence? Over a 5-8 year period, The Institute tracked customer service satisfaction levels against Gross Margin and EBITDA. Whatever the sector, those posting higher customer satisfaction levels enjoyed as much as 37% higher relative profit margins over the period. 

That’s a lot of extra bottom line – equivalent to a game-changing new contract win, perhaps.

Jo explained that to understand the value of customer service, you need to be measuring impact, and that can be a long-term exercise. We all know how damaging complaints can be, in terms of time, resource and, maybe even PR damage. 
Instead, Jo encouraged us to think about the many positive ways good service can influence clients – from your competence as a business, to how easy your staff are to work with, how consistent you are in dealing with clients, and how reactive and responsive you are to their needs.

People say you can’t put a value on that. I reckon you can. It’s at least £28bn a year.

Whatever your plans are then for the future, as a business owner you will certainly be looking to increase the value of your business. Surely this means that delivering outcomes for your customers should be at the heart of your business.

To find out more about how to add value to your business, why not watch one of our webinars.

Find out more about The Institute at www.instituteofcustomerservice.com
 

Liz Jackson's picture
Posted May 2018
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