October 1998

Now That You've Sold Them, What Are You Doing To Retain Them As Loyal Customers?

BY RON ABEL, TELERX

You have an aggressive salesforce that pounds the pavement and the phones to generate sales. The retailers that carry your line provide a positive impact on your bottom line. But once consumers buy your products, what are you doing to make sure they are satisfied? What are you doing to retain them as loyal customers who buy from you time and time again?

Existing customers are your most valuable resource, and just as much effort should go into servicing them after they purchase your product or service as went into the initial sale. After all, it costs less to keep an old customer happy than to acquire a new one. Actually, it costs anywherefrom five to ten times more to attract a new customer than retain an old one.

Yet, many companies fail to realize the importance of linking direct marketing efforts to post-sales service. They ignore the influence consumer affairs can have over repurchase intent and its ability to significantly increase sales numbers. According to a recent Fortune Magazine article, "...there's an apparent correlation between the customer-satisfaction scores of individual companies and their stock performance. The three companies that rated in the top quartile in customer satisfaction were the stock performance stars. Companies in the bottom quartile of customer satisfaction tended to be losers in stock performance."

The Role Of 800 Numbers Has Changed
It used to be that an inbound 800-number call center was considered a necessary evil - a drain on a company's bottom line. Consumers would get the toll-free number from the product packaging or the instructions inside. They would call the number, which would put them in touch with a customer service or consumer affairs representative - and they would simply ask for help or voice their grievances. This complaint/support department, viewed as a cost center, was a vehicle for corporations to reach out and communicate directly with the ultimate user - instead of corresponding only with the retailer.

In a complete reversal, call centers today offer an abundance of opportunities for enhancing a company's earnings potential. Today, 800-number support is the norm for post-purchase customer contact - an avenue for all callers to learn more about the company, its products and policies. Toll-free numbers also play an integral part in creating and enhancing a company's image. A recent poll of the U.S. population found that 86 percent of consumers associate toll-free numbers with high-quality products. Their perception was that a company without an 800 number probably has some reason to make communication more difficult for customers [Source: Research Analysis (1987), Telephone Shoppers Behavior & Attitude Survey]. Through 800 numbers, telephone service representatives can help consumers obtain information about a particular product or service, find places to purchase it, answer questions, and provide a forum for their comments and concerns. While they are delivering quality service, these representatives have the perfect opportunity to become critical participants in a company's sales and marketing effort.

If consumers feel satisfied with the way their questions are answered or their problems are resolved, they will most likely continue purchasing the product. Studies show that 80 percent of consumers who call with a complaint will purchase from that company again if their complaints are handled properly [Source: TARP 800-Number Usage Study, 1995]. Of those who don't repurchase, 68 percent credit an attitude of indifference to their decision. Seven out of ten complaining customers will do business again if their complaints are resolved in their favor. That number increases to 95 percent if their problems are resolved on the spot.

A study published by the Society of Consumer Affairs Professionals in Business (SOCAP) - A Landmark "Consumer Loyalty Study" published in April 1996 and featuring research conducted by The Center for Client Retention - indicates a significant percentage of the consumers surveyed said they would purchase more products than they had in the past - based on the information provided and/or how their inquiry or complaint was answered or resolved.

That study also quantifies the loyalty dollars being generated by consumer affairs departments which have the potential to affect the buying patterns and habits of nearly 50 percent of the consumers who contact them. The average customer service representative contributes more than $1.3 million per year of lifetime consumer loyalty dollars and an average equivalent of almost $100 per contact. In a department of 50 consumer affairs representatives, this totals more than $67 million per year.

Another way consumer affairs benefits companies is through the management of "word of mouth," the comments customers hear from their friends and relatives. Research by General Electric found that twice as many people cited "opinions of friends" as the most important source of pre-purchase information - over other sources of marketing information. Consumers whose requests for assistance are satisfactorily handled become an important source of low-cost advertising. On the other hand, those whose problems are not handled sufficiently tend to tell eight to ten people about their negative experiences - twice more than they would tell if the experience had been positive. This can create serious market damage for any company. Customer service programs generally satisfy most customers, spreading positive word of mouth and decreasing the negative [Source: General Electric (1982) The Information Challenge, Louisville, Kentucky: General Electric Company. Survey conducted by Cambridge Reports, Inc., 12pp].

Cross-Selling And Developing A Database
A phone conversation with a satisfied caller opens the door to cross-selling other items manufactured by the same company. Take, for example, a national food manufacturer. Pasta is one of the company's main products. When a consumer who adores pasta contacts this company's consumer affairs department, it is logical for the telephone representative to inform him that the company also produces a gourmet sauce that can enhance any pasta dish. The rep can discuss a special recipe that uses the sauce and follow with an offer to send the recipe - and a coupon - to the caller. This proactive measure further educates the consumer about the company's product line. In many cases, a customer who is devoted to the pasta will become a new loyal buyer of the sauce.

In addition to helping companies satisfy and retain their customers - and increase their buying power - telephone representatives can also gain key market information and build databases that are valuable for marketing use. Customer service reps who have meaningful discussions with consumers are in the perfect position to collect critical information about each client. Usually, when a representative is successful in resolving a customer issue, that customer is very willing to relinquish personal information such as product preferences, buying patterns, product usage and the like. When compiled into a database, this information provides key data for future marketing endeavors such as new product launches.

Consumers can also be very helpful in suggesting product improvements. If many call with similar questions about the use of a particular item, the customer service representative - supported by information compiled in the database - may recommend the packing instructions be rewritten. The rep can provide the appropriate in-house department with valuable input to effect this change. Suggestions like this can have long-term benefits. If the instructions are clarified to answer those frequently asked questions, the number of calls into the consumer affairs department will be reduced - and, consumers will be more satisfied with the product.

Consumer Affairs Moves Into The Future
Telephone interactions are quickly being supplemented by more technological means of communicating with consumers. The world of consumer affairs now integrates interactive voice response with a live operator - so a caller who needs a quick response to a standard, routine question can simply self-serve by using the telephone keypad - and one who requires more assistance can speak to a telephone representative. Internet Web sites present self-serve opportunities where consumers can click on an icon and retrieve the information they need or send an e-mail to converse electronically with a customer service representative.

Increasingly complex technology is required for all of these applications. Combined with the highly intricate nature of serving consumers, the need for post-sales marketing and building consumer databases, more and more national corporations are recognizing the benefit of outsourcing this critical business component to third-party teleservices providers. Companies realize teleservices agency professionals add value and expertise to the process while freeing corporate executives to do what they do best - focus on their primary business functions and core competencies.

In this changing world of telemarketing and consumer affairs, outsourcing presents a viable opportunity for enhancing a corporation's bottom line. A study published by DGY Associates - Trends, Issues and Opportunities Driving the Teleservices Market - links financial performance to outsourcing. The results of the study "were startling in the uniformity of financial performance between companies who have decided to outsource (customer service) versus those who have decided not to outsource... Companies who fully outsource had the most favorable results. This is reflected in a greater 10-year average return to investors, a higher average 10-year annual growth rate and a larger average percentage change in annual earnings per share.... As demonstrated through this study's findings, companies who outsource call center functions, either partially or fully, outperform those who do not."

As times change - and more companies realize the impact consumer affairs and customer service operations can have on their direct marketing efforts - companies are bound to retain more satisfied customers, and in turn, experience an increase in profits.

Ron Abel is executive vice president at Telerx, a specialty teleservices agency that is focused on customer care.