The costs to business in this country resulting from poor service could amount to $75 billion per year, according to a 2018 article in Forbes. The article states that just two years prior, in 2016, the cost was only $62 billion – about a 22% increase.
Poor service can result in devastating results for the customer, but also for the provider. Receiving or offering substandard service may drive customers to the competition, resulting in defections, reduced revenue, higher costs, damage to the brand identity, and higher stress for employees.
The Implications of Poor Quality Control
Poor quality control (QC) in the delivery business inflicts supply chain pain upon customers and, ultimately, upon the consumers. When poor quality control is instilled, consumer expectations for finding a favorite brand on the store shelves, or receiving a home delivery on time become disappointments. Critical parts for a manufacturing line are delayed, resulting in slowdown or even shutdown of production, and wasted payroll dollars are to idle workers. A vital medicine is not available for the patient. Or an expected delivery of beautiful flowers for a special occasion misses the mark. These experiences hurt the company on the receiving end in both brand image and the bottom line.
We’ve compiled five of worst consequences of poor service:
- Defections: Poor service can cause customer defections, with the resultant loss of revenue. Expending resources to repair the ill will generated is costly. Additionally, a small business will find it challenging and costly to replace lost customers. Retaining a customer is much cheaper than acquiring a new customer. Various studies conclude that depending on the industry, closing a deal on a new customer can cost 5 to 7 times more than keeping customers.
- Revenue loss: Businesses that rely on customer satisfaction ratings may be quickly hurt by poor service that causes their ratings to drop. This can lead to declining revenue as customers switch away from the business, as both the recipient of the poor service and the provider spend less money. In many cases negative ratings can result in the ultimate cost – closure of the business.
- Increased costs: Poor service disrupts normal business processes, as the company on the receiving end diverts resources to repair the damage. The result is increased costs to keep the business running.
- Loss of brand reputation: Being on the receiving end of poor service can damage a business’s reputation and make it difficult to retain their customers and/or attract new customers. Providing poor service can ultimately damage brand loyalty for the provider. “Your brand is only as good as your reputation,” said Sir Richard Branson, entrepreneur, and founder of the Virgin Group.
- Increased stress levels for employees: A less obvious but potential cost may result from stressed employees becoming demoralized resulting in longer times than necessary to complete tasks or poor execution of normal processes. Employees who experience constant frustration may leave the company causing unnecessary costs for recruitment and training.
Sensitivity to price begins when the service or product is associated with poor service. A price point that is eroded because of unsatisfactory service is a cost. “Always keep in mind the old retail adage: customers remember the service a lot longer than they remember the price,” said Laura Freedman, former president of E-tailing Group.
Customer Lifetime Value
We are reminded of the story about the new employee in a grocery store who does not satisfactorily settle a customer’s complaint. When the manager of the store questioned the employee about why the complaint wasn’t handled, the employee replied, “What’s the big deal, it was only a $30 sale we lost.” The manager replied, “No, that customer will spend over $100,000 on groceries over the next twenty years, plus the bad reputation we get if the customer doesn’t recommend us.” A simple but impactful story about a customer’s lifetime value.
“What do we live for if not to make life less difficult for each other?”
– George Eliot, Novelist
Mary Ann Evans, known by her pen name George Eliot, was an English novelist and poet in the Victorian era. Her novel Middlemarch was published in eight installments between 1871 and 1872. A service provider’s reason for existence is to make life easier for their customers. Courier services who are consistently focused on great quality control play a vital role in saving their customers the high costs of poor service. As the novelist George Eliot insists, the true meaning of service is to make life less difficult for each other. An important concept to ponder indeed, whether in business or in life itself.
At Crossroads Courier, we are dedicated to ensuring high quality service throughout your journey with us. If you would like to share your customer service experiences with our team, please contact us at 314-222-4000.