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The High Cost of Losing a Customer

Would you save $20 today to lose $10,000 over the next 10 years?? No small business owner in their right mind would go for this.  No small business owner in their right mind would empower their employees to make a decision like this.  It doesn’t make sense but small business owners do it every single day!

For the last 5 years I have been averaging about $1000 a year for ink cartridge refills for my office and home from Cartridge World in Bloomington, Mn.  I frequent small businesses in my area as, like most of you, I want to do business locally and help small business to grow and be profitable.  The problem with some, is they tend to be the biggest offenders of  customer service.

I was recently getting ink cartridges that were not working.  The owner told me that if over 90 days old they would not replace or refund.  They have evidently not heard of Service Recovery.  Their bad customer service (driven by the owner) has resulted in a lack of cash and is resulting in a desperate attempt to survive. I told the owner this week she will never see me again.

All of us have problems. What this owner should have done is use the 4 skills we teach in my book and training program called, Loyal for Life

  1. Take Responsibility. She should have said: “Mr. Tschohl you are correct. For some reason the cartridges ink did not work”.
  2. Act Quickly. She should have said: “Mr. Tschohl let me handle this problem   now”.
  3. Be Empowered. She should have said: “Mr. Tschohl I will handle this problem to your satisfaction”.
  4. Compensate.   She should have said: “Mr. Tschohl we will replace at no charge the defective cartridges and in addition let me give you an additional complimentary   cartridge for each one you brought in”.

This is simply ink. More than likely a total out of pocket cost of $20. Kelly the owner made a bad decision. She said goodbye to $10,000 over the next 10 years to save $20. Do not make the same mistake.  $1000 a year for a small firm is a lot. To just kiss off the business does not make good business sense. NEVER GIVE MONEY TO FIRMS THAT HATE CUSTOMERS.  Bad customer service is the downfall of most small businesses.

Use Service Recovery and differentiate your company

Every employee needs to master Service Recovery. Outback Steak and Amazon are the best. In the US and across the world less than 2% of companies have the faintest grasp of how and why to use Service Recovery. Dell, HP, Federal Express are extremely weak on Service Recovery. Don’t make the same mistake.

Visit our web site, for the book Loyal for Life. Only $15.00  If you want to educate your staff on an instructionally designed training program Loyal For Life click here. An introductory start Up special package is only $999 for 25 participants.

The Financial Death of Dell…  NO Service Strategy

In May 2003 I invested $1,000 each in 9 service leaders. I wanted to track the money trail to see what really happened. In 2003 Dell was a service leader. It had great customer service, price, speed and innovation. When Michael Dell stepped down as CEO on March 5, 2004 he selected Kevin Rollins to become the new CEO, a numbers and financial guy. Dell originally build it’s business on great service. The first thing the new CEO cut was customer service. Customer service was outsourced to India. They sent their customers to Hell. Any firm with a call center in India in my opinion is on a suicide watch. As a result, customers defected.

When Michael Dell, a very wealthy billionaire retired at age 38 the stock of Dell was $32.26. When he returned on January 31, 2007 to try and save the company the stock was at $24.29 per share.  A few months ago Michael Dell took the company private. Dell purchased my 33 shares for $13.75 each for a total of $454.41 My $1000 investment turned into a $545.59 loss.  That’s a whopping 54% loss after 10 years.

The $9,000 I invested in the 9 service leaders is now worth $27,222.05 as of November 6, 2013

Dell $464.41
Amazon $11,397.76
Costco $4,264.66
Home Depot $3,268.87
TD Bank   $3,106.03  (Formerly Commerce Bank. Sold to TD Bank in 2007)
Walmart  $1,699.90
General Electric $1,339.59
Southwest Airlines $1,129.53
JetBlue  $550.08

Dell and JetBlue lost their focus and did not walk the talk. On February 15, 2007 passengers were stuck on a JetBlue plane for 10 hours in an ice storm. David Neeleman the CEO did not understand Service Recovery. He lost his job.The stock lost 2/3rds of its value immediately. Lufthansa Airlines made a $300 million investment  January 2008 for 19% share They got 42 million shares at $7.21 a share. The stock today is worth $7.64 a share. Once you lose your brand built around the customer experience it is very difficult to recover. A Company that builds a brand built around great service has at least a 25% premium on the value of the company. To the firms that walk the talk above it is worth billions of dollars.

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