Should You Invest $1 Into Customer Service Or Marketing?

Virgin America staff - keep reading, it will make sense shortly...

Customer service (or client success as we call it) is an area of business that has always fascinated me. Back when Eddie and I started Bigcommerce, I would run client success with our small team of 10 in Austin and just by being honest, genuine and empathetic towards clients, you can very quickly turn a 2 minute phone call into the highlight of their day.

It seems I’m in the minority of founders when I continue to tell clients, partners, the press and our people that I truly see customer service as a profit center not a cost center. And in this brief article I’d like to explain my view.

You see, technically customer service is a cost center on the books, but the absolute best (and most profitable) companies in their respective industries always invest and even over invest in customer service. All of them.

Here are some of the companies that come to mind to demonstrate what I’ve mentioned above. If you’ve used their products or services I’m sure you’ll nod your head as you read the list:

  • Apple
  • Southwest Airlines
  • Virgin Australia
  • Virgin America
  • American Express

It’s no coincidence that these are also some of the most profitable companies in the world. One particular example of stellar customer service comes to mind that really cemented in my head that investing in customer service can be unbelievably profitable and can be sustained over the medium and long term.

Back in 2011 I signed up for an American Express credit card. Everything went fine, I filled in the form, got approved and received my card in the mail. A few weeks later I decided to cancel the card because I found a better deal, but had already paid the $395 annual fee.

So I called the American Express customer service line, got put through to someone in billing and asked to cancel. After being asked if there was anything they could do to make me reconsider (I politely said no), the woman on the other end of the phone proceeded to cancel my card. Things went smoothly and I was ready to end the call, when she said:

“I noticed you’ve paid our $395 annual fee. Let me go ahead and make sure that gets refunded to you in the next few days.”

I hadn’t expected a refund on the annual fee nor did I ask for it, but she went ahead and asked me if I wanted it refunded (of course I said yes) and it was deposited into my account 48 hours later.

Now, I cancelled my Amex card but how many people do you think I’ve told about this positive experience? So far I can count about 8. Amex could of course attribute part of their marketing spend directly to me signing up for a card, but what did it cost them to have me “sneeze” (as Seth Godin likes to call it) about their amazing customer service to eight people?

Absolutely nothing. Zero. Zilcho.

Like their competitors, they could’ve outsourced all of their customer service to a remote location with a primary focus on reducing call time and increasing calls taken per rep per hour, but they didn’t. Instead, each of their customer service reps are trained extremely well and put the customer experience above everything else, including revenue.

Is this true about your business?

Do you take every opportunity to go over and above to meet the needs of your customers or do you fight tooth and nail to stop every refund request? Are your customers likely to tell 8 people that you’re an amazing company, or that you stink?

These days it’s easy to outsource absolutely everything with the false belief that saving money will allow you to grow your business faster and increase your margins, but the intangible element here is word of mouth. What do your customers say to their friends, colleagues and family not just about your products but about your customer service and support?

If you’re not sure, then why not ask them by sending a free survey via email to your customers using a tool like SurveyMonkey? A CSAT (Customer SATisfaction) indicator like NPS (Net Promoter Score) can give you an idea of how you’re performing so far. And guess what the great news is? You can always improve if the survey response isn’t what you’d hoped.

A little example speaking from personal experience if you don’t mind…

In 2010 our CSAT was 82%, which meant that 82 out of every 100 clients rated our support Good, Very Good or Excellent. This was OK, but I always believed we could improve to get well above 90% consistently.

Fast forward to today and our CSAT is at 96% and climbing. I tell you this not to brag, but to show proof that if you’re dedicated to improving it, you’ll find a way.

Here are a few things we did to get our CSAT rating higher than all of the companies I mentioned previously in this article:

  1. Listen more than you talk. You can do this with surveys, by getting a group of customers together in person or by including a way for them to give you feedback with every order you ship. The best companies listen more than they talk. We have two ears and only one mouth for a reason.
  2. Set 3/6/12 and 24 month CSAT goals. Let’s say your CSAT is currently 63% and you want to get it to 85%. It might sound like a huge jump, but what if you set achievable goals for the next 24 months and work diligently towards them? You might aim for 65% within 3 months, 70% within 6 months, etc and work your way up, constantly improving as you go.
  3. Be the face of customer service in your business. Whether it’s you or someone else in your business, have a “the buck stops with me” attitude about customer service. When a customer isn’t happy, go out of your way to personally contact them and right your wrong. This is something that you should continue to do even as your business grows. Zappos built a $1BN business using just this simple concept.
  4. Model other successful businesses. Think of the businesses you buy from regularly. Which of them impress you consistently with their customer service? What do they do differently to others? Copy them and take their ideas into your business. There’s no point reinventing the wheel if you can avoid it. Tony Robbins calls this modelling.
  5. Surprise every customer. What would happen if, for every order you shipped, you included a handwritten note that thanked the customer for their order and included your name, photo and phone number? You know what would happen, so why not do it? Your word of mouth will go through the roof because no one else does it. And it’s so simple.
  6. Care. It sounds so basic (duh?), but why do so few business owners care about customer service? If you have a deep respect for your customers and are sincere in your approach, you will build an amazingly loyal group of customers who will not only buy everything you sell and tell everyone they know about you, but they will also come to your defence publicly when you do stuff up (which you will, it’s inevitable).

So in the end, investing $1 in customer service is the same as investing $1 in marketing. The goal of marketing is to drive targeted leads to your business who then turn into customers and give you money in exchange for your product. By investing in customer service, you can turn a one-time purchaser into a life long customer who brings 7 others with her.

Now that’s the best approach to marketing I can think of, bar none.









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Mitchell Harper

Mitch is the co-founder of Bigcommerce. He loves helping small businesses succeed through the use of simple software and regularly keynotes on topics including e-commerce, entrepreneurship, Saas and mostly importantly, how to build a great company culture. Today he runs the company alongside co-founder Eddie and our 300+ person team with offices in Sydney, San Francisco and Austin. He can be emailed at mitch@bigcommerce.com

  • Very Good Service

    This is a great question to ask. Unfortunately the metrics used rarely tip the balance in favour of customer service (often seen as a cost only) versus marketing (often seen as a revenue generator). If the full costs mentioned in the other comments were factored in the case in favour of customer service would become more compelling.

  • http://www.silencekillsdesign.com CJ

    I think that CS dollars may be more important than marketing in this day and age. CS, to me, is potentially doubling or quadrupling return customers while marketing is only responsible for getting the customer through the door, or to the “cart”. Considering the fact that a first time buy is merely a fraction of what a return customer will buy, CS may be even creating up to 8x more sales than marketing. I think Marketing needs to think more in terms of CS and drive brand loyalty, rather than lead generation…. In most industries.

  • http://www.abc-of-ecommerce.com Ecommerce ABC

    Customer service is the “hidden” force that drives more customers and increases sales of companies. I have read somewhere on the web that to repair the damage made by an unsatisfied buyer costs 10 times more than to bring a new customer, so providing good customer support is also a marketing strategy, part of the overall marketing plan of a company.

  • http://bit.ly/Z1XJDn David Loia

    Bravo! As a sales and marketing exec… Client Success is one of the most important functions to promote profitable growth, ESPECIALLY if your business is dependent on digital channels. Innumerable reputable studies (and years of personal experience) link client success with high levels of Corporate performance within your industry peer group. For that very important reason alone, it deserves its place on the exec team mantle– along with the cultural commitment, strategic focus, investment and metrics that fire the team up to achieve. It may not be the ONLY thing, but it’s certainly among the top four in my book (Product, Marketing, and Sales being the other three, not necessarily in that order).

  • http://investexglobal.com Investex Global

    Customer Service is an integral part of our job and should not be seen as an extension of it. A company’s most vital asset is its customers. Without them, we would not and could not exist in business. When you Satisfy our customers, they not only help us grow by continuing to do business with you, but recommend you to friends and associates.

  • http://www.hotsaucegalaxy.com Jason

    Mitch,

    You nailed it on this one. Customer service is dead in many industries. The fact that you can still receive the quality customer service from large corporations is a testament to their beliefs and values. Far too many times I believes companies do not find the true value in providing great service, especially if it comes at a time when your cancelling or returning a service or product.

    Thanks for sharing your experiences.