Industry News | February 20, 2009

A Lesson from Retail: Customer Service Is Important

As Americans debate the potential success of the Obama stimulus package, what should be done with the failing bank CEOs, and how to save the auto industry, the one thing they seem to agree on is retailers are delivering better goods and services.

Retail customer satisfaction improved in the fourth quarter of 2008, according to the American Customer Satisfaction Index (ACSI). The 100-point index reached 75.2, up 1.3 percent from the previous quarter.

Although an uptick in the ACSI at the end of the 2001 recession signaled a rebound in the economy, today’s continuing economic crisis suggests that at least for the short term there will be less revenue for sellers and more pressure on profit margins and for cost reductions.

“The good news from ASCI is that the first condition has been met: customer satisfaction is looking up. But it remains to be seen to what extent the government stimulus plan will help translate stronger satisfaction into increased consumer demand,” says Professor Claes Fornell, head of the ACSI and author of The Satisfied Customer.

Although the study focused on retail outlets like department stores, supermarkets, and gas stations, the suffering economy is forcing all retail industries to emphasize value, a trait customer service can effect.

Customer service guru Eric Fraterman, who has consulted companies such as IBM, John Deere, and Lipton, says that while location is important in quick-service, customer service also contributes to a company’s success. “Given the fact that there’s a high degree of competition sometimes in close proximity to each other customer service does contribute to what people see as good value,” he says.

And today a good value means repeat business.

“It costs five times as much to get a new customer as to maintain an existing one,” Fraterman says. “It’s simply good business because the cost of customer acquisition, especially consumer business, is high.”

In addition, Fraterman says a focus on service can help streamline operations and reduce waste.

“In the end you better have good customer service or you’re going to bite the dust,” he says.

--Blair Chancey

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