Inadequate Processes/Systems

Another example would be on the impact of customer service as shown by satisfaction, loyalty and advocacy (see Customer Management in Volume 5). Remember: some facts which could be considered

- a 5% increase in customer loyalty can increase profits from 25% to 85%.

- it has been found that the top 20% of customers not only provide all the profit but also cover the losses incurred in dealing with other customers, and the top 10% of customers are worth 5 to 10 times as much in potential lifetime profits as the bottom 10%

- by reducing customer defections by 5% and increasing products sold by 2% per customer, gross profit increased by 300%

- firms that achieve both customer and staff engagement outpace their competitors by 26% in gross margins and 85% in sales growth

- It is up to 6 times harder to get a new customer than to keep one

- take care of your customers and they will come back, ie

i) over 65% of sales come from repeat customers

ii) around 70% of customers who are satisfied with products and/or services purchased, purchase the same produce and/or service again

iii) a totally satisfied customer is 6 times more likely to repurchase over the next 18 months than a satisfied customer

iv) extending customer life cycles by 3 years can treble profits per customer

- a customer whose complaint is resolved satisfactorily tells 5 other people; a customer who initially received good treatment tells 3 others

- for every 1 customer who complains, there are 26 more who are unhappy. The majority will never again buy from your organisation. Furthermore, they will share their bad experiences with up to 15 other people

- 90% of dissatisfied customers will never return. On the other hand, a happy customer will tell, on average, 6 other people

- the advantages of being the perceived service leader

i) can charge around 10% more for the same products and/or services (as a general rule, a 1% change in margins is equivalent to a 10% change in sales)

ii) grow twice as fast as competitors

iii) improve the market share by up to 6% per year while those poorly perceived lose as much as 2% per year

iv) have a return on sales 12% higher than other providers

- a 5% increase in customer turnover can boost profits by up to 80%

To determine a customer's lifetime value (CLV), use the following formula

organisational development change management

 

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