Increase profit through customer experience
A 10 percent profit margin is often considered average.
Every business has a strong desire to make profit. Being profitable means the revenues cover all the expenses and there is excess.
At the break-even point, the profit is zero. We use profits to assess the financial well-being of our businesses. A 10 percent profit margin is often considered average. Sometimes, making a low profit or not making a profit at all is inevitable. When revenues go down, profits are likely to go down. When costs go up, profits go down.
To increase profits, organisations seek to increase revenues and/or manage costs.
Improving customer experience is one of the surest ways to increase revenues. Happier customers spend more, come back and bring others to the business. What strategies do you have to encourage your customers to spend more? Do they, for example, buy different products or services from you? Are your customers staying and coming back for more, or are they one-offs? How can you encourage your customers to refer others to you?
Unless customers feel that their experiences are worthwhile, they may simply leave. When a customer leaves, revenues go down. When a major customer leaves, it can destabilise a business. There are, of course, times when customers do not come back despite having had great experiences.
There are many costs associated with poor customer experiences. The costs include those of handling customer complaints; costs of repeat jobs; marketing costs; and costs of staff demotivation. Bringing down these costs can help improve our profits.
One of the costs that is easiest to reduce is that of handling customer complaints. The cost is brought down by decreasing the number of complaints received and the number of escalation levels. The longer a complaint takes to handle, the more expensive it is.
The hardest challenge to overcome in driving any business initiative is often funding. These customer experience improvements need funds. In the past, it was easy to get funding without a business case. Today, there are many competing priorities and a wide range of initiatives to choose from.
To justify customer experience improvements, let us quantify this return in monetary terms.
Dr Lucy Kiruthu is a management consultant and trainer.
@KiruthuLucy
