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Customer Service Tests

Customer service is critical to agency profitability and growth. Outstanding customer service leads to customer satisfaction. Customer satisfaction leads to customer loyalty. Customer loyalty leads to retention and referrals...retention is the key to profitability and referrals are the key to cost-effective growth. We all know that, don't we?

Of course, we all know that. But how many of us know, from the standpoint of customer satisfaction, loyalty and retention, how well we actually focus on customer service? Without the usual pontificating, below are some customer service facts and statistics that should demonstrate how valuable your CSR's are to your success. At the end of this article, there are a couple of downloadable tests you can give your staff to see how you measure up.

The Importance of Customer Retention

Depending on the nature of the account, it takes 2-7 years for a new insured to be profitable for the agency, according to a composite of several agency management studies. And, an agency must spend, on average, $2.60 for each $1.00 of commission to place the account on the books.

For each 5% increase in your retention rate, you will increase your agency profits by at least 10%. The U.S. Consumer Affairs Department estimates the profitability increase to be 25-85% and, according to a Harvard Business Review article, this figure could be as high as 100%.

According to the International Customer Service Association and the U.S. Consumer Affairs Department, it costs FIVE times as much to acquire a new client as is does to retain and service an existing one. Service guru Tom Peters estimates that it takes $10 in new business to replace $1 of existing business, given normal attrition rates in the retail/service sector.

According to Technical Assistance Research Programs, Inc., if a customer has a bad service experience, they will tell at least 8-10 people...20% of them will tell as many as 20 people. One estimate is that it takes 12 positive experiences to make up for 1 negative experience. The average satisfied customer will tell 5 people about their experience.

According to Audits & Surveys, Inc., only 4% of people with real or perceived problems or complaints will bring them to the attention of the business. Therefore, for every complaint you receive, you probably have 26 customers who have also had a bad experience but never told you.

In an often cited study by the American Productivity & Quality Center, 68% of customers that take their business elsewhere do so because they perceive the business to be indifferent to them. If a customer leaves because of an unresolved problem, 91% of them will never come back. However, if a problem is resolved, 54-70% of these customers will come back...if the problem is resolved on the spot, 95% will come back.

According to the Strategic Planning Institute of Cambridge, PA:

Businesses with low service quality average 1% return on sales.
Businesses with low service quality lose 2% of their market share annually.
Businesses with high service quality average 12% return on sales.
Businesses with high service quality gain 6% market share annually.

How do you measure up? Take the following two tests to find out:

Customer Service Self-Test

Customer Retention Awareness Test