How much is bad customer service really costing your business?

How much is bad customer service really costing your business?

When customers look for a product or service, they look for an offer with the greatest value to them.

The value of an offer is determined by the Quality of the product, the Service provided, and the Price.

Here is an example, what value does this offer have?

  • Product: Medicine for diabetes
  • Quality: Medical grade
  • Price: 50% OFF than any competitor
  • Service: No confirmation email, No Shipping Tracking. No follow ups, and a phone clerk that seems way to busy

Contrast that with the following offer for the same product:

  • Price: 10% more expensive than competitors
  • Service: Confirmation by email. Text alerts. Shipping Tracking. Follow up if there is an issue with shipping. Clerk that calls you by your name and orders from another pharmacy covering all costs to make sure you get your medicine on time.

The first offer has little value compared to the second offer, despite the second offer being more expensive than the first one.

The difference? Customer service.

But why do so many small businesses continue to neglect the quality of their customer service?

They don’t see how much it costs them.

They may think, I paid Google $XX to get that lead. I’ll just get another lead.

When in reality, the cost is much higher.

How much higher? It depends on the Lifetime Value of the Customer (LTV).

The LTV is how much revenue a customer generates for the business during the lifetime of the person as a customer of the business.

For the example we are discussing, let’s say on average customers pay $300/month for their diabetes medicine and stay with the clinic for 15 years.

That means that the LTV is $300 x 15 x 12 = $54,000.

So that call just cost you a minimum of $54,000.

And the story does not end there.

That customer may tell their family and friends about the poor customer service your clinic provides. Maybe this lead’s comments are enough to dissuade another 3 to 5 leads from doing business with you.

This means that bad word-of-mouth would cost another $162,000 to $270,000 in lost revenue over 15 years.

Keep that up, and your competitors are going to have an easy time taking business from you.

About the author

Michael Diez is the passionate owner and operator of M10DIGITAL, a digital marketing agency based in vibrant Miami, Florida.

With a deep-rooted commitment to problem-solving, Michael thrives on helping small businesses add significant value to their ventures by enhancing their brand, differentiating their product, and effectively communicating their unique value to their customers.