How to Win Customer Loyalty Proven ways to polish your service and cut down on churn.
By Brian Caulfield

(Business 2.0) – Anytime a member of your staff interacts with a customer, whether the employee is a salesperson, a call-center operator, or a technician on a house call, you can win--or lose--a lifetime of loyalty. The average company loses a third of its customers every year, and replacing them is no small matter: Recruiting a new customer costs five times more than simply holding on to an existing one. Whatever business you're in, there are two ways to approach the lion's share of customer complaints: improve your systems (see below) and improve individual performance (next page). -- Brian Caulfield

Systemic Problems

It doesn't matter how good your people are. If employees don't have the power to actually help customers, if you don't have a system for responding to what your customers have to say, and--most important--if your company doesn't deliver on promises, customers will walk away.

THE GRIPE No One Will Take Responsibility

THE FIX Create a playbook

Even the friendliest people can't make up for inconsistent service. Standards provide measurable and enforceable ways of holding employees accountable.

...but know when to ignore it

Often employees are too afraid of breaking the rules to do what's right. Ritz-Carlton hotels ensure that won't happen by giving every employee--from maid to hotel manager--the freedom to spend as much as $2,000 to address a guest's complaint. The policy makes it plain that no one will be fired for taking initiative. One result: Ritz-Carlton grabbed top honors in the J.D. Power & Associates 2003 North American Hotel Guest Satisfaction Index.

Involve employees

Bringing your front-line workers into the process of finding and fixing customer-service problems will encourage them to take more responsibility.

Get feedback to the top

Institutionalize the process of listening to your customers. Dell CEO Michael Dell and his management team, for example, sit down twice yearly with major customers to get a better sense of their needs. Random surveys of regular customers are another good place to start.

THE GRIPE I'm a Person, Not a Number--Don't You Remember Me?

THE FIX Follow up

This isn't just a matter of courtesy. EarthLink's customer-service reps send e-mail follow-ups to customers after online help sessions to make sure everything has worked out. The result? EarthLink gets the highest possible customer-service rating among ISPs from J.D. Power & Associates.

Invest in tech, carefully

The right service software can be a godsend for organizing what you know about customers so you can better help them. The wrong software, however, can be an expensive headache for customers and employees alike. Françoise Tourniaire, a customer-service software consultant, offers a couple of tips:

--KNOW WHAT YOU NEED Think about what you do now--do you talk to customers on the phone? In person? Do you really need that fancy marketing software? Buy only the technology that helps you improve what you're doing now.

--DON'T OVERPAY Only the biggest businesses need enterprise-class software, which can cost tens of thousands of dollars. If you're a midsize business, go with a simpler and lower-cost hosted solution like Salesforce.com's. Smaller businesses should do fine with packaged software such as NetResults's ProblemTracker.

THE GRIPE But You Promised!

THE FIX Promise less

Yes, you can treat your customers like cattle and get away with it. Southwest Airlines doesn't offer assigned seats, meals, or in-flight movies. Instead, the budget carrier delivers what it promises: on-time departures. As a result, in the University of Michigan's quarterly American Customer Satisfaction Index (ACSI), Southwest routinely trounces full-service airlines that actually provide passengers with luxuries like, say, food.

Surprise more

Texas office supply company Great American Business Products tries never to keep a customer on hold longer than 20 seconds. But those who are inconvenienced receive a gift, such as a clock radio, as a token of appreciation.

People Problems

The major issues fall into two categories: unfriendliness and incompetence. Some people are just antisocial and should never deal with the public; others simply aren't motivated to do a good job. And even the most outgoing, motivated people need to be trained thoroughly before they serve your customers.

THE GRIPE Employees Are Rude

THE FIX Hire the right people

Anyone can convince you that he's a "people person" during a 30-minute interview. To find out what prospective sales reps are made of, Mike Faith, CEO at Headsets.com, a popular retailer of telephone headsets, puts everyone through a day of customer-service tryouts. His ideal candidate is outgoing, organized, patient, and level-headed; if an applicant doesn't have those qualities, Faith will know in a hurry. Only one in 30 makes the cut. As a result, Bizrate.com gives the company's sales reps lavish praise, and its revenues have grown from $3 million to $11 million during the past three years.

Make sure employees know what customers are saying

At big companies like BellSouth, technicians rarely interact with the same customer twice, so it's easy for them not to feel accountable. BellSouth fixed that problem by calling several of each technician's customers every month and asking for feedback. It posts the results to an internal website that technicians and their supervisors can check every day. If a customer complains, the webpage spits out an action plan for improving performance. The result: BellSouth was ranked No. 1 among local telephone service providers for the 10th consecutive year in the ACSI survey.

Set an example

It's hard for employees to dismiss talk about delivering great customer service if the boss jumps in and rolls up his sleeves. Amazon.com CEO Jeff Bezos occasionally picks up a headset to field customer-service calls. Former Southwest Airlines CEO Herb Kelleher worked in baggage during the holiday travel season. It's no coincidence that both companies score high marks in customer service.

THE GRIPE Employees Are Clueless

THE FIX Drill your reps

At FedEx's call center, new employees get five weeks of training, with all employees getting additional training every four months. Fewer screwups is one of the reasons FedEx gets top marks among package delivery services in the ACSI survey. Invest in training, and don't put inexperienced employees on the front line without close supervision. Big companies, like Target and Disney, have designed elaborate in-house training programs tailored to their needs. Consider hiring a consultant to create one for your company. Look for a consultant with at least five years of experience and seek references from other companies in your field. Be sure to get a detailed proposal outlining what the trainers can do for you. For most companies, classes in people skills, problem solving, and basic technology are essential. Consistent mastery of your phone system and software alone can go a long way toward reducing customer-service chaos.

Recover with style

No one's perfect. The real problem is that half the time, a company won't admit that it screwed up, causing the customer to feel betrayed. Chip Bell, coauthor of Knock Your Socks Off Service Recovery, suggests that employees remember four simple steps to turning annoyed customers into fans:

--APOLOGIZE Train employees to apologize sincerely if your company makes a mistake.

--EMPATHIZE Ask customers what they need to make the situation right--often an apology is enough--but let them know you understand their pain.

--FIX IT QUICKLY Deal with the problem as soon as possible, and don't get distracted by a customer's anger. And don't try to distract the customer with offers of free goods or services that don't address the complaint.

--FOLLOW UP Write or call to make sure the customer is now satisfied. This shows that the company really cares.