Customer Service Strategy is much important than price

Information is shared at high speeds and customers have access to a wide selection of products and services from different stores. With the global economic downturn, make businesses have seen their profits go down. These turbulent times have caused many businesses to lower their prices in order to acquire customers. However, there's overwhelming evidence that a good customer experience leads to more profitability than price cuts.

The Problem with Price Cuts

The problem with competing on price is that companies will have to continuously lower their prices in order to compete. When companies compete on price, their business model, unintentionally conditions customers to expect the lowest price, because that is their unique selling proposition (USP). The reality is that you can only lower production costs to a certain threshold, and continuously lowering prices will only move away your profits.

You Have To Change Your Customer Service Strategy

In order to serve customers better there has to be a fundamental change in a company's philosophy as it pertains to customer service. Customers are critical to any business and it is important to realize that just because you "lose" a customer, doesn't necessarily mean that the customer is "lost". Most customers don't leave the marketplace altogether as they still need goods and services, they simply move their business from one company to the next. Therefore in order to stay profitable, companies must ensure that they are lowering their customer attrition rate and retaining as many customers as possible. The Harvard Business Review reported that companies, who retain as little as 5% of their current customer base, generally increase their profits by 25%-95%!

You Can't Retain Customers, If You Don't Know Why They Are Leaving

A US News and World Report stated that the average business in the US loses about 15% of their customers on an annual basis. Out of that 15%, roughly 68% of them chose to stop doing business with a company due to "poor or indifferent customer services." An additional 14% chose to stop doing business with a company because of "unsatisfactorily resolved disputes or complaints." That means that 82% of a company's customer attrition is a direct result of a negative customer experience. This same report stated that only 9% of customers stop doing business with the company due to price, so one can make a credible claim that customer experience is drastically more important than price. People want to feel as though they are valued and any company that goes above and beyond to provide customers with an excellent customer experience will certainly be rewarded with customer satisfaction and increase profits.

Overall, competing on price is rarely a good strategy. This is confirmed by the fact that price is not the most important factor to most consumers to leave your website. If companies commit themselves to becoming a customer service oriented business, the evidence is overwhelming that they will retain more customers, increase their customer base, and consequently increase their profitability.