Customer service is critical to agency profitability and growth. Outstanding customer service leads to customer satisfaction. Customer satisfaction leads to customer loyalty. Customer loyalty leads to retention and referrals. Bill Wilson provides customer service facts and statistics that should demonstrate the value of CSRs to your success.
Retention is the key to profitability and referrals are the key to cost-effective growth. We all know that — don’t we? How many of us know, from the standpoint of customer satisfaction, loyalty and retention, how well we actually focus on customer service?
THE IMPORTANCE OF CUSTOMER RETENTION
Depending on the nature of the account, it takes two to seven years for a new insured to become profitable for the agency, according to a composite of several agency management studies. And, an agency must spend, on average, $2.60 for each $1.00 of commission to place the account on the books.
For each 5% increase in your retention rate, you’ll increase your agency profits by at least 10%. The U.S. Consumer Affairs Department estimates the profitability increase to be 25%-85% and, according to a Harvard Business Review article, the figure could be as high as 100%.
A study by the International Customer Service Association and the U.S. Consumer Affairs Department found that it costs five times as much to acquire a new client than to retain and service an existing one. Service guru Tom Peters estimates that it takes $10 in new business to replace $1 of existing business, given normal attrition rates in the retail/service sector.
According to Technical Assistance Research Programs, Inc., a customer who has a bad service experience will tell at least 8-10 people. One in five (20%) will tell as many as 20 people. One estimate is that it takes 12 positive experiences to make up for a single negative experience. The average satisfied customer will tell five people about their experience.
An Audits & Surveys, Inc. study found that only 4% of people with real or perceived problems or complaints will bring them to the attention of the business. So, for every complaint you receive, you probably have 26 customers who’ve also had a bad experience, but never told you.
In an often-cited study by the American Productivity & Quality Center, 68% of customers who take their business elsewhere do so because they perceive the business to be indifferent to them. If customers leave because of an unresolved problem, 91% of them will never come back. However, if the problem is resolved, 54%-70% of these customers will return — and if the problem is resolved on the spot, 95% will come back.
According to the Strategic Planning Institute:
- Businesses with low service quality average 1% return on sales.
- Businesses with low service quality lose 2% of their market share annually.
- Businesses with high service quality average 12% return on sales.
- Businesses with high service quality gain 6% market share annually.