April 16th , 2018

Fight to Delight: Why Customer Service is Essential for Customer Retention

The customer is always right, or so we’ve been told. It’s been the number one rule for consumer-facing businesses for over a half a century. Deceitful or difficult customers can sometimes make this approach all the more challenging. Yet, the significance of offering outstanding customer service cannot be overstated. The concept is tried and tested when it comes to customer retention. In the competitive retail market that exists today, customer service is a key differentiator as we see consumers increasingly shop with the brands they feel ‘understand’ them.

Technology has revolutionised the performance of customer service. It has been a developing priority for businesses since the dawn of the industrialised age, with more time being spent on the customer and less time in the production process. A lot has changed since then, but perhaps the most striking change is our expectations. Most customers assume they deserve and even need a good service. The growing strength of e-commerce business led to an existential crisis for traditional brick and mortar retailers - how do they compete with the low costs and the efficiency of online browsing. Traditional retailers have realised the true advantage they have over e-commerce; the in-store experience. Customer service is now a fierce brand touch-point as retailers compete in going further to delight the consumer. However, the impact of customer satisfaction goes further than merely a battle between the in-store and the e-commerce experience. Customer service is the foundation of customer retention. Research has shown that individuals shop in response to two psychological motives; utilitarian or hedonistic. Consumers purchasing utility items will always make a logical choice based largely on cost and the practicality of the product. Hedonistic consumers shop for pleasure, and they are the target audience for outstanding customer service. They offer brand loyalty in return for the pleasurable shopping experience. Customer satisfaction is seen as a key indicator of how likely that a business’s customers will make further purchases. Studies show that the ramifications of customer service and satisfaction are most strongly realised at extremes. The satisfaction-profit circle is an established concept in business. Significant research from Buchanan and Gilles outlined the increased profitability associated with customer retention as a result of the factors listed in the table below:


Concept   Why?
 Satisfaction - Profit

The cost of acquisition occurs only at the beginning of a relationship: the longer the relationship, the lower the amortised cost.

Long-term customers tend to be less inclined to switch brands and also tend to be less price sensitive. This can result in stable sales volume and increased sales volume.

Long-term customers may initiate free word of mouth promotions and referrals

Long-term customers are more likely to purchase high-margin supplemental products

Long-term customers tend to be satisfied with their relationship with a company and be less likely to switch to a competitor, making market entry or competitors market share gains difficult

Regular customers tend to be less expensive to service because they are familiar with the process involved, require less ‘education’ and are consistent in their order placement.

Increased customer retention and loyalty makes the employees' jobs easier and more satisfaction in a virtuous circle.

Innovative technologies are revolutionising the retail space and improving the quality of customer service that is being provided. An array of technologies such as smart mirrors and beacon technologies are increasing the levels of personalisation that retailers can offer in-store. The technological advances in warehousing, inventory management and delivery also mean that staff have more time to cater to the needs of each individual customer. The value that exceptional customer service can add to your business is well established. To succeed in the competitive market of today’s retail world, it is essential that retailers structure their business strategies to incorporate such technologies and combine this with extraordinary customer services to ensure that every shopper is a long-term customer.