Cut your advertising budget by 10% and invest in customer service

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What do you think would happen if you took 10% of your advertising budget and invested it in customer service?

Your immediate reaction might be to think that whilst it’s a nice idea, it’s too risky to cut an advertising budget that doesn’t quite go far enough already. No Marketer in their right mind would willingly give up some of their budget anyway, right?

I’ll be honest, I’d be a little nervous making that suggestion to my Finance Director too. But let’s just play out the thought process here:

  • It’s often cheaper to retain an existing customer than it is to acquire a new one. This makes sense, as you already have the customer, you’ve just got to keep them happy. Yet, so many companies focus more on finding new business and playing the tricky – and costly – game of trying to convert prospects
  • Look at your current promotions. They’re aimed at new customers right? Sign up and get 5000 free minutes of phone calls. Transfer your account and receive a £100 bonus. When you’ve been a customer of a business for several years, how do you feel when you see a better deal being offered to new – and sometimes brand-hopping – customers? Shouldn’t you be rewarding loyalty in your customers instead?
  • One way to ensure a happy customer is to give them a fanatastic product or service at a reasonable price. And to keep on giving it to them. How much time and effort do you put into improving your product – changes both  big and small? Do you listen to customers or just use your own ideas? Do you monitor conversion data to identify the problems in your products or rely on gut feeling?
  • Look at the output of your customer service team. What is the average response time to customers who contact you via email or a website form? How long does the average customer wait in the queue on the phone? Now put yourself in their shoes. When something goes wrong with your order on a website or you need to arrange an insurance quote, how do you feel having to wait so long for an answer?
  • Look at the average salary of employees in each department within your business. Where does your Customer Service Rep fall within that scale? If they’re not at the bottom, I’d guarantee they’re not outside the bottom quarter. Maybe that’s fine – I’m not trying to devalue the skills and contributions of those in other areas of the business – but what is the gap between those salaries?
  • If the average customer service rep salary is one of the lowest in the business, how does that reflect on the company’s opinion of customer service? Does that perception and the renumeration motivate those that do the role or those that are considering joining your organisation?
  • Whether your company structure diagram acknowledges it or not, your Customer Service department is an extension of your Marketing Dept. – these Reps are your Marketers. They are the face and voice of your brand at the coal face and experience more interaction with customers in a week than most of your ‘official’ Marketers and Executive Management do in a year (or more). You want these people to be motivated, to be enthusiastic about your brand and product.
  • Don’t think it stops there either. Whilst your customer service people have the most contact with your customers, EVERY employee who speaks to a customer is a representation of your brand, be they in Accounts, Sales, IT, Procurement, Legal or wherever else. The experience an individual has with these employees IS the brand.

So when you say your customers are important to you, that you’re a customer-centric business, what does that actually mean? That you care about their experience, or that you care about their wallet? Put your wallet where you marketing message is, by investing in your customer experience.

Scott Stratten (@unmarketing) said at Jobsite’s FreshThinking event recently “People don’t talk about average, they talk about awesome”.  Consider how you can you can apply this to your customer service. How you can get your customers talking about the awesome service they receive from you?

So that 10%, what could you do with it?

  • To riff on Scott’s quote, awesomeness starts at home. Do something special for your customer-facing staff (and others too). Give them a thank you gift to show how much you appreciate their work. Don’t make it a one-off.
  • Give them £1000 to leave. I take no credit for this idea, it is all Zappos. For Tony Hsieh, CEO of Zappos, great customer service is the cornerstone of a successful business. So following 4 weeks of training and immersion in Zappos culture he meets with each new staff member and offers them $1000 to resign. His thinking – if they take the cash they don’t have the commitment that it will take to do the job. What would be the equivalent in your company?
  • Give them the tools they need. Don’t make do with the tools and systems you provide your customer service team. Needs change, new products emerge – let your staff service your customers as quickly and efficiently as possible, using the right tools.
  • Look at your headcount. You’re in business to make a profit. That’s fine, but consider whether you’re scrimping on customer service headcount. Earlier when I mentioned the average response time, what was your answer? Happy with that? If you add extra headcount, what impact will that have your customers? Providing better service can lower costs by 1) retaining existing customers who were considering leaving due to an issue and 2) win new customers who were impressed with your business when they made enquires.
  • Consider time. Do your customers buy your products 24 hours a day? If you’re an internet business, then there is a good chance they do. So why do you only offer service between the hours of 9am and 5.30pm? Can you automate your product by providing a self-service option? What happens when a customer has a question at 1am – how will you deal with it? Can you earn new custom – and repeat business – by providing a product and support that reflects your customers’ buying behaviour?
  • Hire or assign a Marketing Manager to the Customer Service department. Or incorporate the team into the Marketing Dept. If your service reps are truly the ambassadors of your brand, shouldn’t they have a greater understanding of your business’ goals, marketing message and company ethos? It’d give them a greater voice in discussions about new product ideas, things to fix, and timings of launches – the opposite of the current situation in many businesses.
  • Continuing the thought on the awesomeness theme – what could you do for your more loyal customers? How can you say “thank you. I appreciate you sticking with us. I value your loyalty and custom. Here is _________ as a thank you”. The _________ is up to you. It could be a discount on their order or an additional product. Or it could be some other ‘value add’ or perk – like client activity days or free seminars. You’ll need to do the math. What is the activity cost versus the cost to acquire new business should you lose their custom?
  • Of course, you wouldn’t need to offer so much customer service if you had a great product. Or at least one with minimal flaws. Draw up a list of everything that is ‘broken’ and fix it. Listen to your customers and staff and ask them what needs to be done to make your offering better. Scott at FreshThinking put it best – “Think Stop. Start. Continue. Ask your customers: What should we stop doing? What should we start doing? What should we continue doing? If you can deliver on those answers then you’ll have happier, more loyal customers. Don’t use the excuse of lack of resource to make these changes. If you can’t divert your existing resources, invest in contractors to speed up the development and delivery.

The list could go on. You need to stop and look closely at your own business. Where can you make it better for your customers?

Find out the churn rate of your customers. Is the number acceptable? How much could you improve it with a greater investment in customer service? And would the value of that improvement be greater than the revenue generated by spending 10% of your budget on new customer attraction.

It’s a bold idea. Are you brave enough to try it?

Creative Commons License photo credit: Lemsipmatt

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Gary Robinson is a UK digital marketer, who fell into this tech world by accident and decided to stay and play. That was 1999. He's still here. His current loves are conversion optimisation, mobile and tinkering with new technology. He also has a fondness for coffee.

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Posted in Business Performance, Customer Experience
  • Russell Byrne

    great article Gary. But what if by cutting your marketing budget by 10% you saw a subsequent 10% drop in performance? Yes – the investment in better customer service would mitigate that, but would it be a case of potentially creating a problem for yourself? Is the solution to invest more in customer service AND marketing? That’s fine by me, but it’s the bean-counters that need convincing.

    • Thanks for the comment, Russ. In an ideal world, yes, more investment in customer service and advertising would be great. But then I’d also say invest more in your product development too. If your product is better you’ll need less investment in support and promotion, as you’ll get more repeat business and more word-of-mouth (social & offline) referrals. It’s keeping all those areas in balance.

      Unfortunately, upping your budgets across the business tends not to go down too well when you start tallying up the numbers! The point of my article is to perhaps question how and where you’re spending your budget. I like to use the analogy of pouring sand into your open hand. You’re catching some of it, but an awful lot is slipping between your fingers. Close your hand (a.k.a. fix your product, make it easier to use your site and provide better, more efficient support) and you’ll have a more successful business.

  • One of the interesting side-effects of today’s environment are that businesses are shifting to “as-a-service” business models (e.g., Software as a Service, etc. These types of businesses depend on MRR (monthly recurring revenue) and in this world customer service is getting newfound attention. Customer service increases loyalty, loyalty increases retention, retention increases MRR, and growing MRR increases customer lifetime value. These key metrics justify more investments in service. 

    At the same time the payoffs for great service are increasing, the costs of delivering truly awesome customer service are plummeting. This is due, in part, to cloud-based software systems like Assistly that help even small companies deliver world-class service on limited budgets by leveraging shared infrastructure and efficiency.

    We live in interesting times, as we watch marketing and customer service continue their overlap, particularly as people make buying decisions around “social proof” (i.e., what their friends say) as opposed to what they see in traditional ads.

    Matt Trifiro
    SVP Marketing
    http://assistly.com

    • Thanks for your comments, Matt, you make interesting points.

      Quote: Customer service increases loyalty, loyalty increases retention,
      retention increases MRR, and growing MRR increases customer lifetime
      value. These key metrics justify more investments in service.

      This is true. If you can you tie the journey together, you should be able to demonstrate a tangible, financial return for better customer service. The challenge comes when your business has customers who do not provide direct revenue. I’m thinking specifically about the Classifieds marketing (motors, jobs, homes, etc). The volume of your audience are those that do not pay you directly, but you need to provide service to them.

      The aim there is to identify how improved service led to positive activity on behalf of the individual, which in turn encouraged the paying client to increase their spend with the organisation.

      Thanks again

      • The classifieds example example is really interesting because you’ve got an extremely low-margin product with a comparatively high cost of support and a business model that depends on satisfaction from two classes of customers – the advertisers (who pay you) and the buyers (who are key to the advertisers).

        If your classifieds are online, you can try to measure things like pageviews and conversions and, ultimately, do surveys to determine customer satisfaction and try to gauge likelihood to buy, likelihood to return, and other metrics that can be related back to things advertisers care about.

        If you’re classifieds are offline, you can do outbound surveys to determine those same metrics and work to tie service touches back to metrics that benefit advertisers.

        If you think about it, eBay is merely an evolution of the Classifieds marketplace. People list products for purchase and buyers sift threw those listings to determine purchases they might make. I’ve watched eBay (and PayPal) evolve from customer-dismissive organizations into customer-focused organizations and I’d be willing to be those evolutions were economically driven. If I have a bad experience as a buyer, what does that do to my likelihood to repurchase (personal anecdote: I got ripped off on eBay once and I avoided eBay for the next 16 months based entirely on that experience)? If you can measure repurchase rate, even if the revenue to me is indirect (i get paid by the seller/advertiser) you can then use that as an input into your customer service investment.

        matt

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