November 24, 2014

Small Business Advice:

Examine Your Customer Satisfaction Policy

"Choose to deliver amazing service to your customers. You'll stand out because they don't get it anywhere else." ~Kevin Stirtz

Jerry Osteryoung | 1/13/2013

Clearly, customer service is so important for every business. Repeat business just does not happen if customers do not want to return to your business, and the experience you create for your customers goes a long way to setting your business apart and building loyalty.

Business owners should never underestimate the importance of their existing customer base. It costs roughly 20 times more to get a new customer than to retain an existing one, and best practices dictate that 90 percent of sales should come from existing customers, leaving only 10 percent for new. These things considered, it is clear how important it is to provide your customers the kind of service that makes them want to come back. Every customer who comes in your door should leave feeling that they have had a more than satisfactory experience in your business.

Part of achieving great customer satisfaction is establishing a policy that specifies how customers should be treated when interacting with your business. This is not an easy policy to draw up, and there are no short cuts as customer satisfaction policies can differ among businesses in the same industry. However, there are some tips we can take from companies who do customer service especially well.

Costco is one of my favorite stores, and what I appreciate most about their customer satisfaction policy is their return policy. They make returns so convenient. I do not even have to keep my receipts as they store records of all of my purchases in their system.

 Not having any receipts and no time limits on returns is so great, but clearly, not every small business can afford this. However, clearly Costco recognizes the importance of their return policy on sales and customer service.

Recently, Costco has tweaked their policy with regard to electronics. Returns on electronics now must have been purchased within the last 90 days. 

Hammacher Schlemmer is another example of a business with a great customer satisfaction policy. They have a lifetime product guaranty on everything they sell and their return policy reads:

Should any product fail to meet your expectations, for any reason, simply return it with proof of purchase. We will replace it, refund the cost of the item less shipping and service fees, or credit your credit card, depending on your original payment method.

I am a technology enthusiast, and I bought a Roomba robotic vacuum cleaner from Hammacher Schlemmer thinking it would make it easier to keep up with my dog’s constant shedding. Unfortunately, I just could not seem to get the darn thing to do the job I was hoping it would.

The Roomba has evolved a number of times over the years, so I returned my Roomba four times hoping maybe a newer model would do the trick. In all these returns, Hammacher Schlemmer never once questioned me, but simply offered to refund the money or send a new product.

Some might argue that I crossed the line with these returns. Maybe they are right, but my purpose here is to highlight businesses with policies that make shopping with them a great experience. In both examples, I ended up with products that disappointed, but I walked away satisfied with the business.

In effect, customer-friendly policies like these remove doubt and risk from the equation so the customer feels confident about their purchases. Yes, you may have some customers that take advantage of them, but I feel that entrepreneurs get too caught up worrying about this. More and more customers are demanding better return policies and they will go wherever they can find one. There are plenty of customers who will shop with you because of your policy but never return the items, so a policy that makes it easy for your customers will have a big impact on sales.

There is no question in my mind that your customer satisfaction policy significantly affects your revenue and profitability, so go out and make sure that yours sends your customers away happy every time.

You can do this.

Other small business advice columns from Dr. Osteryoung are here. Note: Articles older than 30 days require registration (it's quick and free).

Jerry Osteryoung is a consultant to businesses - he has directly assisted over 3,000 firms. He is the Jim Moran Professor of Entrepreneurship (Emeritus) and Professor of Finance (Emeritus) at Florida State University. He was the founding Executive Director of The Jim Moran Institute and served in that position from 1995 through 2008. His newest book co-authored with Tim O'Brien, "If You Have Employees, You Really Need This Book," is an Amazon.com bestseller. He can be reached by e-mail at jerry.osteryoung@gmail.com.

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