November 26, 2014

Small Business Advice

Policies that work against great customer service

"Quality in a service or product is not what you put into it. It is what the client or customer gets out of it." ~ Peter Drucker

Jerry Osteryoung | 5/26/2014

FBMC Benefits Management

So many times, businesses establish policies that work for them but penalize their customers.

Recently, I needed a part that would allow me to transport two bicycles on the outside of my car. I called the store and said I wanted to order it over the phone. They responded that they did not take credit cards over the phone and that I would need to come in and let them swipe my credit card in person.

It was a 15-mile trip both ways, so I was just about to say I would find what I needed elsewhere when they said they could have the part installed within 24 hours of me stopping by. Since I wanted the part sooner rather than later, I went ahead and drove out there so they could swipe my card and get the order in and it cost me $7 in gas.

When I got there, I asked them why they did not take credit cards by phone. They said it was because the credit card processing company charged them $3 apiece for those transactions. They had the policy printed on a large sign over the counter, so I got the impression that they were kind of proud of the fact that they did not take credit cards over the phone.

As a customer, I would gladly have paid the $3 fee to avoid the 30-mile trip to and from the store.

For those who are saying you cannot charge a customer more when accepting a credit card via phone, you are absolutely right. However, there are two things you can do to solve this problem.

First, you can raise the price of all goods by $3. Alternatively, you can estimate the total amount you will pay in fees and increase your prices by the percentage that figure is of your total sales.

For example, suppose a firm estimates they will incur $3,000 of these fees in the year. If their total projected sales are $200,000, the firm can simply raise all their prices by 1.5% to cover the cost of the fee. This is a very small price increase -- one their customers will not likely feel -- but it allows them to provide better customer service.

If the part store had done this, it would be much more convenient to do business with them. A simple adjustment in their policy would save their customers that additional trip to the store just to process their credit cards.

A similar example is the business that refuses to take credit cards at all. Just like the part store, businesses that have these kinds of policies are trying to avoid paying credit card processing fees. What they are forgetting when they make these decisions is how they are impacting their customers. A policy like this may seem to serve the business, but it is really hurting the customer and greatly effecting sales.

Now go out and make sure you do not have any policies that seem like they are serving your business but are really reducing your sales and diminishing the quality of customer service you provide.

You can do this!


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.

Tags: Florida Small Business

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