Research from the Association for Consumer Research on “Market Orientation and Customer Service” found a very strong connection between five links in the chain of events that connect service to profit, as illustrated above.
However, other studies have found no significant connection between service and profit!
The answer to this might be found in another research study from the University of Maryland, entitled, “Linkages between customer service, customer satisfaction and performance in the airline industry”
This research found that the connection between service and profit is ‘non-linear’, in other words, it’s not a direct connection, where more customer service = more profit.
Better service leads to increased profits up to a certain point, and then it doesn’t matter how much better your service is, your profits decline because the customer doesn’t care and that extra service costs money.
Can you think of instances where a supplier did something that they thought was good for customer service, but which made absolutely no difference to you? Perhaps you were offered a discount when you didn’t ask for one? Or you were given free drinks in a restaurant because of a delay in serving you, when you were actually glad of not being rushed? Of course, you’re happy to take the discounts and free drinks, but they didn’t make you a more loyal customer.
Research in 2013 from the Miller Heiman Research Institute found that companies that measured customer-focused behaviours had an average increase in profitability of 13% compared with other companies.
This performance gap increased to 25% when combined with measurements of best practices in selling and sales management.
Examples of the customer-focused behaviours measured include:
- We consistently use a formal process for measuring customer satisfaction and loyalty
- Our salespeople have a solid understanding of our customers' business needs
- We clearly understand our customers' issues before we propose a solution
- We have relationships at the highest levels with all our most important accounts
- In an average week, our sales force definitely spends sufficient time with customers
It’s very important to note that this is relative to the customer’s expectations of service. The ‘optimum service level’ depends on the company’s brand image which in turn creates those customer expectations. Clearly, Harrods’ customers expect something different than Lidl’s customers, but the same trade-off applies to both; once that optimum level is achieved, doing more for your customers adds no value at all, and may even be counter-productive on top of being a waste of time and money.
This connection between expectation and delivery could perhaps be summed up with:
Your customers are happiest when you do what you say you’re going to do