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Putting a Price on Customer Service

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Businesses that are looking to grow often consider tried and true strategies: doing more business with existing customers, finding new ones and investing in product development. But one area many don't consider nearly enough is customer service. And the evidence shows they could be leaving real money on the table as a result.

The 2011 American Express Global Customer Service Barometer found that 70% of American consumers are willing to spend an average of 13% more with companies they believe provide excellent customer service. This is up nearly 50% from even from just a year ago -- when six in ten (58%) said they'd spend an average of 9% more with companies that deliver great service.

In spite of the growth opportunity good service affords, many companies don't appear to be getting the message. Four in ten (42%) said companies are helpful but don't do anything extra to keep their business, and one in five (22%) think companies take their business for granted.

And when a company's service isn't up to par, consumers are more than willing to take action. In fact, our research found that consumers would tell nearly twice as many people after they've had a negative customer experience, compared to when they have a positive one (16 vs. 9). In addition to taking bad service "viral," 60% of consumers also say they'd be willing to shift their business to a brand or company for a better service experience.

It all adds up to the fact that in today's environment, getting service right is increasingly becoming more than a nice to do; it's a must do for the bottom-line. Relegating service to a back-office role seen more as a cost than investment can curb incremental business from existing customers and increase the risk that they jump ship to a competitor.

For example, each year Forrester Research recognizes organizations that are committed to service through their Voice of the Customer Awards. Unsurprisingly, they noted in a recent report that each of the 2011 winners attributed impressive business results to their VoC efforts, ranging from increases in customer retention to increases in revenue per customer. These companies were able to directly tie a focus on quality service and truly listening to their customers to tangible business metrics -- proving that a customer-centric strategy benefits not only their customers, but their shareholders as well.

We have seen at American Express that it's not even necessarily about spending more on service. It's about giving it the focus it deserves and spending smarter. We undertook a global effort to reinvent our approach to service about five years ago, and have seen increases in every major metric we use to measure service quality since. Meanwhile, our absolute servicing investment in 2011 is below the servicing investment that we made in 2006. We made it a priority, eliminated inefficient practices, and have seen our business benefit hugely as a result.

What does all of this mean? Organizations that dismiss investing in service are missing out on a unique opportunity to drive growth. But those that focus on service will reap the benefits of increased customer loyalty, more positive word of mouth and ultimately, greater customer spending over time.

And the numbers are there to prove it.