The latest management theories all support one basic conclusion: Happy customers come back.
By Chris Freeburn

It's a truism that keeping customers happy keeps customers coming back. But what are the best ways to maintain customer satisfaction, beyond providing the best product or service you can? How can small businesses maximize customer satisfaction and translate that into repeat business and good word of mouth?

According to John Tschohl, president of the Service Quality Institute, "Ninety-five percent of all business owners believe that their companies are exceeding customer expectations in terms of service." That, Tschohl says, is far from the truth. Indeed, lousy service and poor communication ranks as one of the top consumer complaints, he adds. In a competitive economy, becoming a customer service leader is one of the least expensive ways of improving performance. In fact, in today's highly competitive business environment, Tschohl calls good customer service "a matter of survival."

For Abacus Plumbing, based in Houston, Texas, customer service has become a driving focus. According to company vice president Alan O'Neill, Abacus incorporates customer service into every aspect of its business, focusing heavily on training and customer feedback. "Our motto is: do what you say you are going to do, when you say that you're going to do it," O'Neill says. In addition to training all new employees to be responsive to customer needs, Abacus maintains constant communication with the customer during every stage of the sales process. This includes calling the customer before and after sales and servicing calls to gather the customer's feeling about the experience. This attention to customer service resulted in Abacus receiving a Houston Better Business Bureau's 2006 excellence award.


The First Step
Tschohl emphasizes that the first step in improving customer service is understanding how critical it is to your business. "Small business owners are much worse than large business when it comes to addressing customer concerns," Tschohl says. "Too many operate under the idea that there are an infinite number of customers and if someone doesn't like how they run their business, too bad." This is a serious error, he says. "If you want to take your small business and become a big, profitable company, you need customers to be satisfied. You need them to keep coming back, and you need them to tell their friends about your business."

Coupled with this is the problem that few small business owners understand how customers actually experience doing business with their company. "Most business owners have no idea how their customers see them. They don't know what it's like to do business with their own company, because that's not a situation they've ever observed first hand."

This lack of understanding can lead business owners to misjudge the efficacy of their own sales and customer care practices. Tschohl recommends asking your customers directly about their experience with your business. "Sit down and ask them about their experience," Tschohl advises. "Don't wait for a complaint. Ask them for suggestions on how you could do things better. Or what they don't like. Talking directly to your customers is the fastest and cheapest way to gauge how your company is doing customer service-wise. Customer surveys are effective. He also advises providing a means for customers to give feedback at the time of purchase. "A little card at the sales desk, or a postage paid postcard that arrives with a delivery," he suggests. "Anything that lets your customers let you know how they feel right away."

Handling Complaints
Dealing with dissatisfied customers is one of the most important and delicate interactions a business faces. "Ninety-one percent of unhappy customers who made a big purchase will never come back," Tschohl warns, citing a study by the Technical Assistance Research Programs Institute. But even among small-item purchasers, 63 percent will go elsewhere if they feel dissatisfied with their experience, Tschohl adds. This can have a dramatic impact on a business's bottom line. Tschohl cites research indicating that reducing non-returning, dissatisfied customers by just five percent can double a company's profits.

"The most important thing in handling a customer complaint," Tschohl says, "is making sure that the customer feels that he or she is being heard." Nothing increases customer anger more than the impression that the company doesn't care. "Whether it's the business owner himself or a salesman or representative talking with the customer, it's important to make sure the customer knows that someone is listening." Tschohl advises empathizing with the customer and reassuring him or her about the importance of their complaint and their continued business with the company.

"Suggest alternatives," Tschohl says. "Provide a variety of options for resolving the complaint." He also suggests apologizing to the customer in a way that doesn't blame anyone for the problem. "Say your sorry that they've had a bad experience and that you want to make things right. Just saying you're sorry-even if you admit no blame-goes a long way toward cooling off someone who's upset." Shifting the blame elsewhere won't work and may only further antagonize the customer.

Finally, come to some resolution. "It's better to lose some money settling a customer complaint than to lose additional business," Tschohl says, "because 87 percent of angry customers will tell their friends about what happened, and that could cost you a lot more in potential business."

Recovering From Mistakes
No company gets it right all the time. Mistakes happen. A customer gets sent the wrong order. Errors occur in billing. Two clients are accidentally booked for the same time slot. Preventing errors is an important task for any company, but dealing with mistakes is equally critical, says customer service consultant Peggy Morrow, principal at Peggy Morrow & Associates.

"How you handle a mistake will directly determine whether you ever see that customer again," Morrow says. "Most customers are perfectly willing to overlook a mistake on your part so long as they feel you've truly apologized for the error and offered them something in return." Compensating the customer for a perceived loss-their time or convenience, for example-goes a long way to smoothing ruffled feathers, Morrow says.

"Always offer the customer choices," Morrow says. Depending on the context of the mistake, that can be anything from a discount on future purchases, a full refund, a service upgrade, or a preferred change in scheduling. "Angry customers usually feel a loss of control. By giving them a range of options to make up for the error, you are putting them back in control of the situation," she advises. That will mitigate any annoyance the customer feels over the mistake and leave the impression that your company greatly values its customers.

Customer Relationship Management
Business experts have transformed the basic art of customer service into a management strategy in the form of Customer Relationship Management (CRM). In the 1990's CRM became a buzzword in business management, spawning a legion of CRM experts and software applications meant to automate the CRM process for companies. CRM specialists have defined the entire sales process as critical to maintaining customer loyalty and satisfaction. "Implementing a CRM strategy begins with planning your business operations based on customer desires rather than on predetermined business goals," says Bob Thompson, president of "The idea is that for your business to succeed, it must be customer-centric. That means that every aspect of your business should be concerned with ensuring the satisfaction of your customers all the way through their interaction with your company."

Opening an informed dialogue with your customers is a critical element in constructing a functional CRM strategy, Thompson says. "Listening to what your customers have to say about their experience and about what they want to see your company do is the bedrock on which you begin to mold a CRM plan for your business."

Once you have determined what your customers want from your company, you must evaluate every aspect of your organization to determine how each department works toward satisfying those goals, Thompson says. And you must be prepared to reshape operations to fit the CRM strategy. "This can mean retraining employees or altering major parts of the business structure," Thompson says, "but it is crucial if the CRM strategy is to succeed. Thompson strongly recommends retaining a CRM consultant to assist with designing and implementing a CRM strategy for your business. "Experience in implementing CRM concepts is essential to effectively reorganizing a business," he says.

A wide variety of CRM software applications exist to help companies collect, analyze, and manage data about their customers and the effectiveness of their CRM strategy. But Thompson warns that too many companies simply purchase the software without implementing a company wide CRM strategy first. "Much of the disappointment with CRM software comes from company's that didn't do the organizational preparation first," he explains.

But choosing the right CRM software for your business is also critical. The variety of CRM software applications, designed to work with virtually any sized business, can bewilder the small business owner. Thompson suggests working with a CRM consultant to select the software that best fits your business's structure and needs. "The key is not to make the mistake a lot of companies did early on," Thompson adds, "which was to see the software as the heart of CRM. It's not. Software can give you valuable information on your company's performance with customers, but the key to successful CRM is developing a strategy based on input from your customers and then tailoring your business to meet those needs. Buying software is secondary to having the right strategy to begin with."

CRM meets CEM
According to Thompson, if CRM was the buzzword of the '90s, a new term, "customer experience management" (CEM), is the favored catchphrase among business management professionals in the 21st century. Whereas CRM focuses on maintaining the relationship between businesses and their customers, CEM focuses solely on mapping, analyzing, and improving the customer's experience with the business. "The ideal of CEM's proponents," Thompson explains, "is to turn a company's products into desirable experiences." He cites Apple's iPod and Starbucks coffee as examples of products that have been effectively transformed into something more than a mere MP3 player or overpriced cup of coffee. "People buy these products-at a premium-not just for the item itself, but for the experience of having it."

According to Thompson, CEM should be part of CRM, but often isn't. The critical difference is that CRM focuses on a customer's value to the business, while CEM identifies the business's value to the customer. CRM is functional, while CEM is emotional, Thompson says. They are closely related, but subtly different, he adds, noting that 80 percent of CEM practices mirror CRM strategies. Still, Thompson cites a recent study conducted by his group that found that only 22 percent of customers thought that companies provide a "an excellent customer experience," and another study revealed that companies that scored higher in implementation of CEM strategies had markedly higher profit growth.

Training Employees to Aid Customer Happiness
Whether you decide to implement a comprehensive CRM or CEM strategy, or simply take steps to improve your company's interaction with customers, customer service experts agree that the most effective thing you can do is to make sure your employees reflect this goal.

Keith Kirk, owner of St. Paul, Minnesota-based Greener Pastures and Seasonal Lighting, discovered the financial benefits of training his 22 employees in customer service. Facing slowing sales and high office costs he instituted a customer service training program for all employees at his company. When his first group of salespeople didn't respond as well as he hoped, he fired them and recruited a new team. "You have to find people who are willing to go the extra mile to take care of customers," Kirk says, adding, "not everyone's cut out for that." Kirk says that the better trained staff handle much more work and keep many more customers coming back.

"Creating a customer service-oriented culture within your business is extremely important," Peggy Morrow advises. "Share the results of customer feedback and surveys with your employees so that they can see how customers are responding," she suggests, "and cultivate a sense of group responsibility for performance."

Morrow also suggests rewarding employees who "go the extra mile" to make customers happy. Such rewards can take the form of a bonus, or an extra vacation day, or even a plaque or mention in a company newsletter. "It's also important to be very clear about the way employees are to treat and interact with customers," she says, "but employees need to have enough flexibility when dealing with a customer-especially a dissatisfied customer-that they can handle a customer complaint without frustrating the customer any more."

Finally, Morrow notes that there are some people who are simply not suited to interacting with customers. "No amount of training or company culture will overcome this," she says. "If you have an employee who does not show any desire or motivation to please customers, it is better to remove that employee," she adds, noting that a surprising number of companies tolerate customer service representatives who show disinterest toward customers. "It certainly doesn't win them any new business," she says.


Make customer service a focus from the top down. Don't just rely on your sales people or customer representatives. Senior managers and company owners must be just as focused. Lead by example.

Hire carefully. Not everyone is temperamentally suited for dealing with customers. Make sure the people you hire are capable of dealing with upset customers without losing their cool. Remove any employees who are inattentive to customer needs.

Train your employees. Make sure your employees know your customer service goals and have been fully trained in how to handle dissatisfied customers. All company policies for dealing with customer issues should be clearly stated and understood by employees. Your employees must understand how important customer service is to the company's success.

Know your customers. Talk directly with your customers about their experience dealing with your firm. Find out who they are and what you can do to improve their experience with your company. Provide methods for them to leave feedback.

Communicate feedback to your employees. Customer responses should be distributed among your employees, so that they can understand the customers' experience. Deal with complaints quickly. Customer dissatisfaction will only grow the longer it takes you to respond to a complaint. A fast response, and a willingness to work with the customer, can turn an upset customer into a repeat customer.

Chris Freeburn is an associate editor/writer for Business 24/7 magazine.