Outsourcing the Customer Experience

call centre made of chickens

Last week I told the story of David and Nathan over 5 days where Nathan tells him there is a thief in the business having an affair in the office and stealing David’s money – including from his daughter’s future.

The Series concluded with Nathan telling David to his face that he is the thief because he’s stealing huge amount of value from the business for questionable short term gains or misplaced loyalties.

David spoke about acquiring new customers as fast as old ones leave.  He was resigned to that situation and felt it was because his competitors were cheaper.

In reality, David had shaved some cents off his costs to outsource customer service which brought the quality way down and drove customer churn.

And it cost him much more than he saved.

Now here some facts to consider..

9% of customers will leave because of cheaper price elsewhere.

14% of customers will leave because of poor service

64% of customers will leave because they feel the company does not care about them.

For simplicity sake, Let’s say David has 100 customers who if service was good would stay a year and spend $100 a month so total annual spend of $1,200.

Let’s say it costs him $100 to acquire each new customer and because of poor service customers are leaving in the 3rd month.  Lets say he picks up 50 customers each month and loses 50 each month and we have a fixed cost of 75k.

David would earn about 21k pnl each month and assuming a 4x multiple would have a million dollar business.

But here’s the thing..

Those customers leaving 9 months early represent $45k in pure profit he is leaving at the table.. or nearly $2.2 million.

So instead of a business worth $3.2 million.. he might only get $1 million and that is if he is lucky and his churn doesn’t lead to further discounts.

This simple example also does not reflect satisfied customers referring others. If I add htat we could be talking $5 million, $8 million or even more left on the table.        

Is Customer Experience a woo woo hippy factor or hard dollars and cents?

Well if you take an index of the highest customer service rated American Companies (ACSI Index) and compare it to the S&P 500 from 2006- April 2023 the difference is shocking.  The ACSI has outperformed the S&P 500 1,497.95%. vs 374.80%. 

That is nearly 4x more wealth creation just by customer service.

So is David robbing from his daughter by neglecting his customer experience.

You bet he is!

Are you doing the same?

To your Succes and Sanity,

 

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