Poor Service: Key Factor in Customer Churn

The Challenge: Even for the world's fastest-growing companies, neglecting service can lead to significant customer churn.

Microsoft Advertising

We wrote last week that "major Internet and social media sites, including Google, Facebook and LinkedIn, have done away with call centers." Viewing customer service as an operational cost rather than a marketing investment, they have shifted exclusively to online engagement. That is a mistake.

As Dwayne Flinchum of IridiumGroup put it, “customer service operators are decidedly not standing by.”

By neglecting customer service, these companies risk extraordinarily high rates of customer churn.

According to a study by CRMGuru, less than a third of customers listed "Poor Quality," "Price" or "Functionality" as reasons that they ended their relationship with a vendor. In contrast, more than 70% cited "Bad Customer Service." Average defection rates for Web-based companies - the ones reducing their service investments - are often as high as 50%.

As easy as it is to lose a customer, winning new customers is incredibly difficult. Across nearly all verticals, single-digit conversion rates are the norm. There is one exception to the rule: winning back former customers can lead to conversion rates as high as 70% ― as long as you treat them well.

The numbers tell a very clear story: the cost of neglecting customer service is increased customer churn, decreased revenue―and failure. The value of excelling at service is increased loyalty, revenue―and shareholder value.

Facebook, Twitter, LinkedIn and others like them are claiming that the cost of scaling call centers is too high. But while they remain some of the fastest-growing companies in the world today, their neglect of customer service could lead to just as precipitous a decline. Remember MySpace? Facebook ― or a customer-oriented competitor ― should.


» Give customers the opportunity to engage on all channels.
Many Web-based companies equate "engagement" with "social media engagement." This is too narrow: give customers the ability to engage on all channels ― including the phone.

» Make service a key component of your customer retention effort.
Bad customer service is the number one reason customers defect. Turn that sobering fact upside-down, and it becomes an opportunity: nothing drives retention and loyalty like quality service.