Customer service, even technical support, can no longer be considered simply a cost center like maintenance and payroll, to be tightly managed and trimmed wherever possible. To the contrary, Tony Hsieh, CEO of the highly successful Zappos, suggests that companies should look at their customer service team as a form of marketing investment. Each customer contact is an opportunity to retain a customer, create positive word of mouth and build the brand, according to Hsieh.

Three years ago, Jackie P. ordered a pair or shoes from a well-known online company. Three days later a box arrived with two left shoes. How could that have happened! Calling in distress—she was leaving shortly on an overseas trip—the agent assured her there would be no cost for the return. Additionally, she would be elevated to a VIP customer, meaning that all future purchases would arrive in one day at no additional charge. The process was simple and her needs were met. She felt valued by the company. Three years later, Jackie P. continues to order from that company and tell people about her great experience. What did it cost the business? Absolutely nothing, compared to the value of a loyal customer.

A number of reputable business research firms are talking to customers and crunching the numbers. Their statistics tell a different story.

Customer Loyalty Key to Profitability

1. McKinsey and Company reports that 70 percent of buying experiences are based on how consumers feel they are being treated, while a poor customer service experience is the primary reason why consumers move their business to a competitor.
2. Even in a negative economy, 60 percent say they are often or always willing to pay more for a better customer experience.

In the long run, whether it’s a small business owner or Fortune 500 company, success is dependent on loyal customers. According to the White House Office of Consumer Affairs, it costs over six times more to bring a new customer onboard than it does to keep a current one.

Power of the Customer Experience

So what happens when your customers have a negative service experience?

• Bain and Company suggests that consumers are four times more likely to do business with a competitor if the problem is service-related, as opposed to price-or product-related.
• The White House Office of Consumer Affairs estimates 78 percent of consumers have ended a transaction due to bad service, while a study by 1st Financial Training Services finds 96 percent of those never complain. Most will just disappear.
• To make matters worse, bad news about your business spreads to twice as many people as good news.

On the other hand, satisfied customers are your biggest advocates and best source of referrals:

• The probability of selling to a new customer is 5-20 percent, rising to 60–70 percent for a returning customer.
• McKinsey findings show that eCommerce spending by repeat customers is almost double that of new customers.
• A 5 percent reduction in customer defection can increase profits anywhere from 5 to 95 percent, according to Bain and Company.

The Fight for Customers

Some predict that customer experience will be the next corporate battleground—where companies win or lose. While 73 percent of large business marketing managers surveyed by Forbes Magazine admitted that “repeat purchase behavior” was integral to successful customer engagement, change appears slow. In 2014, a McKinsey survey found that 55 percent of marketing budgets was spent on new customer acquisition, whereas only 12 percent focused on customer retention.

However, according to Bain and Company, just a 10 percent increase in customer retention levels can result in 30 percent increase in the value of the company. Where else can you get that kind of return on investment?

Joanna Jones is the product marketing manager at MHI Global.