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Client Retention is the Key ROI of Great Customer Service

The question is this, “Can a company be too friendly?“

Mark MacLeod puts on his CFO-hat when asking the question, because he’s trying to figure out if there’s an optimal mix between great service and keeping costs down (by not having to hire tons of people to provide the support.)

Mike McDerment throws his hat in the ring as the well-known CEO of Freshbooks, stating simply, “Service is an opportunity, not a cost centre.“

I’ve written about customer service a few times myself. I’ve said in the past that I’m “obsessed with it.”

The Twitter discussion that ensued was also interesting. It’s too bad it’s not easy to capture a simple discussion (unless hashtags are used, I guess…) But Hugh McGuire said, “key metric is referrals & new business gen. aka consolidated cost of new customer acquisition + service @freshbooks vs other cos..”

Jeff Tala disagreed with Hugh, saying, “New biz, referral biz, as a result of customer service (like w/@freshbooks) is gravy. Keeping existing biz is job one.”

And I completely agree.

Client retention is the #1 metric and measurement of ROI when it comes to great customer service. That’s especially true for SaaS businesses that rely on monthly or yearly subscription revenue. But in almost any business, repeat customers are critical; and one way to improve the rate of repeat business is through great customer service.

You can easily measure the lifetime value of a customer. After a few years in business you can start to see what your churn looks like, and figure out how to improve it. I can almost guarantee that improving your level of customer support will reduce churn. It will also increase testimonials, referrals, up-sells and other wonderful things — but client retention remains the #1 value of great customer service.

At the end of the day it’s cheaper to retain an existing customer than acquire a new one. Retention is key. Customer service ROI is obvious.

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June 2, 2009 Posted in Business by

  • http://freshbooks.com/team/mike Mike McDerment

    Nice post Ben, and so true.

  • http://marketplace4us.co.uk/ Marketplace

    The message you gave is quite clear. Returning customers indicate that the service you provide is great. And this in turn should pull new customers as well as increase in sales in the long term. Hence better ROI.

  • http://www.planetc1.com/ chiropractic

    Excellent words Ben and I have to agree with you on customer service and client retention. It's amazing when you study other industries and learn what they do in the way of customer service and retention improvement. We've discovered that when knowing client retention is number one, . Even the littlest things related to customer service add up. A thank you to your client for a referral, a phone call to check up on how your client is doing, a postcard to congratulate their kid on graduating high school, all these things add up. I love repeat customers. :)

  • http://www.jasonkiesau.com/ Jason Kiesau

    Yep, the most important prospects are the clients you have! It's amazing that so many companies still have crappy customer services.

  • http://www.improvetheweb.com/about Yura

    Thanks for answering a question I wondered a lot recently.

    Of course, I knew that focusing on providing value to the people would work better, than spending money on advertising, but you gave me the facts I needed.

    Thanks.

  • http://www.linkedin.com/in/riadhzellagui Riadh

    I agree totally with you Ben. A satisfied customer is a happy customer who will refer you to other customers. From there you will have to be constant and provide the same level of satisfaction… (especially when your growth is exponential). And this can open another discussion: how to be constant and how to give 100% satisfaction every time?
    People forget that behind the client there is person having expectations. If we listen carefully to them and if we answer them correctly (on time, within the cost, with the quality expected…) we will have happy client (emotions) and trustful client that will bring us more business. I think that emotion is a key point for every relation that we try to build. If the client is happy, emotionally he will open you his doors; if not… (you can imagine). Thanks Ben for this post.

  • Peter Barszczewski

    I agree, but “client retention” is too businessey a term. I much prefer Kathy Sierra's way of saying it: you have to make your customers kick ass. It is not about you and your company, it is about them. “Happy” and “Kick Ass” are not just feel good, kumbia, terms. They should be measured, discussed with clear goals set.

    Clients do not want “to be retained” by business XYZ. They will use XYZs product/service if it helps them kick ass … and if they kick ass, then product XYZ is “remarkable”, meaning they will remark on it, i.e. spread word of mouth. The corollary of this line of thinking, is it is better to spend money on training your existing or potential clients, than marketing to attract new ones.

    Zappos regularly does “remarkable” things. Smarthippo recently did something remarkable, by sending a cake to a client.

  • http://electronicfiend.com/hid-kits/?osCsid=39ec636d85e769dd508cb9c8fc2a37d4 HID Kits

    Very very true, Great post.

  • http://coolproducts.com/ Cool Gifts

    Your final statement is so true. Your number one priority should be customer retention. Getting new customers is a major factor, but you have to make sure you're keeping your existing clients happy.

  • Pingback: Client Retention is the Key ROI of Great Customer Service « Customer Service

  • http://www.jeffreytalajic.com/ Jeff Talajic

    Cool, I got quoted :)

    I like to opportunity vs cost-centre comparison. I remember working at a major telco call centre not too long ago and being reprimanded for staying after my shift to call customers back to make sure their issues were resolved. The customers were thrilled to hear I actually cared, but my boss was furious because he thought I was going to demand to be paid overtime.

    Needless to say, I left shortly thereafter ;)

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  • http://www.pathmakermarketing.com pathmakermarketing

    As they have said that customers are always right even if they are wrong, it's just a matter of good customer service.

  • Jamie Ruben

    Thanks Ben,

    If you don't mind this conversation makes me think of another pressing issue in customer service that I have been strugglin with in my career. A couple of years ago I worked doing support for a webserver. I would help people with their web issues via email and web chat. I had worked in customer service berfore and always felt that personality, friendliness, demeanor were core values for customer satisfaction and quality service. Now, I struggle finding the best way to bring these values to the service when communicating via email and webchat.

    I just started working at a website travelhqr.com I am happy with product, really smart site, well run, but they make us right emails to clients and users that are really friendly, personable and sometimes you should add a compliment and greetings etc etc. To me via email I wonder if this comes across as insincere. I like their concept and it's a great site, but is this really the best way to execute good customer service Via email??? or,
    does it come across as insincere?

  • http://www.invoicera.com/ Naveen Gupta

    Hi

    These are words the words of wisdom from Mike Mcderment and wisdom comes from experience. I believe retaining your existing customers is the first rule of marketing. It is said that the cost of acquiring a new customer is six times more than retaining your existing customer. It also suggests brand loyalty and ultimately leads to word of mouth publicity.

    Cheers
    Naveen Gupta
    http://www.invoicera.com

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  • alantollemache

    Companies can be “too friendly”. There is no point in hanging on to customers if they are not profitable or if you run a loss by servicing them. Customer service is important, but organisations are in business to make money.

  • alantollemache

    Companies can be “too friendly”. There is no point in hanging on to customers if they are not profitable or if you run a loss by servicing them. Customer service is important, but organisations are in business to make money.

About Ben Yoskovitz
I recently joined GoInstant as VP Product. GoInstant changes how we use the web, making it shareable like never before.

I'm also a Founding Partner at Year One Labs, an early stage accelerator in Montreal. Previously I founded Standout Jobs (and sold it). I'm a hands-on startup guy, helping companies grow successfully from the idea forward. You can reach me at byosko at gmail dot com.

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