Power of customer service strategy is often neglected. Many business owners only use price as their marketing tool. Lower their prices means lower profit margin. There are proven facts showing price is not first concern for customers. Learn how to stop lowering price with customer service strategy to make more profit.
Information is shared at high speeds and customers have access to a
wide selection of products and services from different stores. With the
global economic downturn, make businesses have seen their profits go
down. These turbulent times have caused many businesses to lower their
prices in order to acquire customers. However, there's overwhelming
evidence that a good customer experience leads to more profitability
than price cuts.
The Problem with Price Cuts
The problem
with competing on price is that companies will have to continuously
lower their prices in order to compete. When companies compete on price,
their business model, unintentionally conditions customers to expect
the lowest price, because that is their unique selling proposition
(USP). The reality is that you can only lower production costs to a
certain threshold, and continuously lowering prices will only move away
your profits.
You Have To Change Your Customer Service Strategy
In
order to serve customers better there has to be a fundamental change in
a company's philosophy as it pertains to customer service. Customers
are critical to any business and it is important to realize that just
because you "lose" a customer, doesn't necessarily mean that the
customer is "lost". Most customers don't leave the marketplace
altogether as they still need goods and services, they simply move their
business from one company to the next. Therefore in order to stay
profitable, companies must ensure that they are lowering their customer
attrition rate and retaining as many customers as possible. The Harvard
Business Review reported that companies, who retain as little as 5% of
their current customer base, generally increase their profits by
25%-95%!
You Can't Retain Customers, If You Don't Know Why They Are Leaving
A
US News and World Report stated that the average business in the US
loses about 15% of their customers on an annual basis. Out of that 15%,
roughly 68% of them chose to stop doing business with a company due to
"poor or indifferent customer services." An additional 14% chose to stop
doing business with a company because of "unsatisfactorily resolved
disputes or complaints." That means that 82% of a company's customer
attrition is a direct result of a negative customer experience. This
same report stated that only 9% of customers stop doing business with
the company due to price, so one can make a credible claim that customer
experience is drastically more important than price. People want to
feel as though they are valued and any company that goes above and
beyond to provide customers with an excellent customer experience will certainly be rewarded with customer satisfaction and increase profits.
Overall,
competing on price is rarely a good strategy. This is confirmed by the
fact that price is not the most important factor to most consumers to
leave your website. If companies commit themselves to becoming a
customer service oriented business, the evidence is overwhelming that
they will retain more customers, increase their customer base, and
consequently increase their profitability.
