Customer Service - A Profit Center

Mistakes happen. Turn mistakes into profits.

The Story

In a previous article, I shared my experience of being a paper boy for the Arizona Republic in the late 80s. During that time, a state-wide competition was held to find and honor the best paper boy of the month. The decision would be made by measuring customer complaints per paper route over an extended period of time. The paper boy with the fewest complaints per paper delivered would win a breakfast with one of the VPs at the Arizona Republic. I wanted to win. 

My greatest challenge would be my "mystery misses". Invariably every week, at least one or two customers would call the paper to issue a complaint that they didn't receive their paper delivery. I knew with 100% certainty that I delivered the paper to that home, but the customer is always right. So the complaint would lower my overall score. It was a source of real frustration for me. Perhaps a dog took the paper, or maybe the paper was stolen by a neighbor or, even worse, I was certain that the paper boy in the route next to mine would sometimes take my papers to lower my score. (The paper boy world was competitive!) 

My father explained to me that I needed to communicate my goals with my customers and he helped me crate a plan to lower my complaint rate. We typed a short letter, made hundreds of copied and included that latter under the rubber band of each paper I folded for several weeks. The lead read something like this:

Dear Arizona Republic Subscriber,

My name is Paul Fulton. I'm your paper boy. I work hard to make sure you receive your paper every morning, seven days a week. 

I have a goal to become Arizona Republic's Paper Boy of the Month. To win, I have to have a perfect delivery record and I would like to ask for your help. 

If you ever have any problems with your delivery, can you call me instead of the Arizona Republic? My number is ...... I will make sure that you always get your paper. 

Thank you for your support,

Paul

My customers loved that letter and, of course, wanted to help. So, once or twice a week, my phone would ring at home and the complaints came directly to me. I would take the call and resolve the concern, which sometimes meant getting on my bike, going to the gas station, buying a paper (because I had delivered all of mine) and taking it to the customer's home, walking by the spot I was sure I left the paper in only an hour or two earlier. 

Not only did I win the paper boy of the month award, but I started building a relationship with my customers. They knew my name. They knew who I was. They would often be outside in the early morning hours when I was tossing papers from my bike and I would hear a friendly, "Good morning Paul. Thank you!" which made me feel like I was part of their community. Customers became people and, to them, the Arizona Republic paper boy became a nice kid named Paul. 

In addition to having low complaints, my subscriptions in my route also went up, as word spread about the nice paper boy in the area. 

The Lesson

Customer service is the most important community building effort you will embark on. It is arguably the most important division of your company. The attitude of the business owners, the business' culture and the business' commitment to continuing improvement is manifested clearly through customer service. 

Every customer wants a perfect experience. Who doesn't? But customers also understand that businesses are run by people that sometimes make mistakes and some of those mistakes aren't the fault of the business. But, at the same time, the customer paid for a product or service and they deserve to receive that product or service. 

When my Arizona Republic customers called with their complaint, the paper that always showed up on their front porch became more than a paper. It became the work of a young boy that was trying to do his best. The paper became Paul. And when I knocked on a customer's door to deliver the paper to them after they called with their "complaint" (and even though I often thought, "this is the 2nd paper I'm delivering to them today") the customer became Mr. Green or Mrs. Junes to me. They greeted me with a smile. They asked if I was going to win my award. And they felt like they were on the journey with me. 

After meeting them, I would often begin taking more care to make sure their paper was always right on the front door step, instead of just tossing it up on the porch. Mrs. Jones as nice to help me win my award, so I wanted to be an even better paperboy for her. 

That's what great customer service does to an organization. In a business where good customer service is part of the culture, business performance is measured and executed with customer feedback in mind. Customer service calls aren't issued as "tickets", customers are rexrrered to by name and stronger relationships are forged with each call or email that a customer initiates to resolve a problem. 

The Strategy

If you view customer service as a cost center, a necessary evil, something you have to do but not something yo want to do, then you have already lost. Customers will feel it and they won't return. 

If you view customer service as an opportunity to increase customer loyalty and the lifetime value of a customer, then you're on the right path. And you can track the profit generated through an effective customer service department that will allow you to build a financial model to turn customer service into a profit center, not just a cost center. 

There are a few primary metrics that can be tracked to help you measure the effectiveness of customer service: 

1. Return customer rate. What percentage of your daily sales come from customers that have purchased before? Is that percentage rising or declining over time. 
2. Customer lifetime value. Total revenue divided by total customers. Is that number rising or declining? 
3. If you are an e-commerce business, you can provide discount codes that are only used by your customer service team to give special discounts to customers that had a less-than-satisfactory experience. You can track the revenue generated by those discount codes the same way that the marketing team tracks promotional discount codes to show that they are doing their job. 
4. Customer satisfaction surveys. Customers are more likely to give positive reviews to a company if they have had a negative experience that was resolved quickly and professionally. After a positive interaction, they are more likely to leave positive reviews than a customer that simply received exactly what they thought. In many ways, marketing can't build loyalty to an equal extent as customer service can. 

Each of these metrics can be built into a customer service score card that measures revenue against cost and demonstrates how much profit a great customer service depart generates for your company. And when you align revenue generated against the cost of the department, a healthy customer service financial review is always in the black. If it's in the red, then you need to rethink your strategy and your culture of customer service.

There are other metrics that are often mistakenly assigned to customer service that should not be. For example:

1. Total customer service calls or emails. This is not a function of good or bad customer service. This is a function of good or bad marketing and/or operations. When orders deliver perfectly and marketing expectations are set, then customer service calls, emails and chats decline. That has very little to do with customer service itself. 
2. Total customer negative reviews. This is usually not a function of customer service, unless a poor customer service experience is part of the review. This is typically a reflection of poor marketing, sales and setting inaccurate customer expectations. 

When hiring your first customer service representative, your number 1 quality should be kindness. Patience should follow and a calm, steady and friendly voice over the phone or in person should all be qualities that are given your highest priority. Everything else can be trained. You need someone that enjoys talking to people. Someone that smiles more than they frown and someone that truly wants to make each customer's day a little brighter. 

Great customer service representatives build relationships, they don't just solve problems. Great customer service representatives keep their promises to customers. They worry about making sure that any promised delivery or deadline that they give to a customer to resolve is concern is alway met. 

In short, a customer service representative is the first person an owner hires with a love of their customers that equals theirs. And the first representative is likely the person that will build the customer service department in the future - the person that will be doing the hiring and the training of future representatives, so you want to ensure as the owner that this first person is someone that you fully trust and someone that has a perfect record or caring. (Perfect performance is impossible for all of us. But a perfect record of caring is always possible. Caring on good days and bad. Caring when you're energized and when you're tired. Caring when your personal life is at its best, but also when things are difficult.) All of these traits are inherent in the attitude of the person that becomes your first customer service representative. And, as one my early mentors taught me, "Hire for attitude. Train for skills."

Need help defining how to hire your customer service team, creating customer service standard operating procedures or creating a scorecard to measure profitability of the customer service department? We can help. Let's set up a discovery call and start today.