Screwing Up Can INCREASE Customer Loyalty?
Posted by Charlie Recksieck
Handling A Problem Well
What if I told you that if you screw up, but handle things in an exemplary fashion, you actually INCREASE customer loyalty?
Customer Service Can Change Everything
Several years ago, I was the CTO of a startup involved with email delivery and customer service (I still think our concept was a great one, we just couldn't quite get the startup over the hump ... a story for another blog post another time).
In our background research of the customer service industry, we found something which I still consider to be amazing. I don't have the exact citation handy, but basically if a company delivers a great product with no errors, customer retention was 88%. Yet companies that actually had errors or goofs but handled the problem in such a way that their clients described as "great", then customer retention actually was higher: 92%.
Take a moment to reflect on that. Customer service is not actually always about "playing defense", you can actually positively increase sales after errors or problems.
Another Example Of Problems Being Good
In a great real-world example, John Larson of a loyalty consultant company (Capturing Loyalty) did a study of an e-Commerce company's 1000 transactions, dividing them into three groups: 1) Those reporting no problems with their purchase, 2) Those with a problem which was not initially resolved to their satisfaction, and 3) Those who reported a problem and was resolved to their satisfaction when first reported.
Group #1 customers (no errors) spent an average of $100 with the retailer over the next 3 months. Group #2 (not solved to their initial satisfaction) spent an average of $20 over the next 3 months. The most amazing result was that customers in Group #3 (had well-handled problems) spent $106 with the company over the next 3 months.
This supports the original thesis here. Actually having a problem and handling it well resulted in 6% better customer loyalty than even the flawless transactions.
You can read more about this here: https://blog.hubspot.com/service/customer-complaints-loyalty
Think About Your Most Loyal Customers
Consider your most loyal clients (or even your biggest advocates/supporters within your own company). Odds are that your work in the past has not been 100% perfect, but you have a relationship with that client or person - and you have probably gone above and beyond in the past.
How To Achieve Good Customer Service
This blog post isn't going to try to define how to give great customer service in general or your particular industry. (Here are a couple links I really think do a great job though: Article 1 and Article 2.
But the main thing I've learned in a couple of decades about customer satisfaction (at least in software development) seems to be simple and intuitive, but here it is anyway: "Communicate!"
I can't tell you how many inquiries and ultimately satisfied clients we've had that came to us mainly because their previous developer had gone AWOL or not returned phone calls fast enough.
Setting understandable deadlines and doing what you say - or even if you're gonna be missing a deadline, a mea culpa phone call and new deadline - it really does keep customers happy.
Friends with their own law firms, day camps, motorcycle repair shops, real estate businesses, social media consultancies ... we've talked about it together and sometimes are amazed how simple it can be.
2 Stats In Pictures
These may be slightly off-topic but I found a couple interesting "infographics" you might find topic-adjacent and interesting.
Here's one about if you hear from a customer that's about to leave or not. Only 1 in 26 will complain on their way out the door; the rest just leave without a word:
The other image below shows how much more generally satisfied customers will give you the benefit of the doubt than ones who already have their doubts:
Should you screw up intentionally to handle a problem well and build loyalty? Probably not. But it's an interesting idea.
Don't worry - you'll certainly mess up in the future. It's how you respond to that first complaint or notice that can lose sales or increase them.