In the third blog of this Q&A series, I talked about how organisations can build a great culture from the beginning. I also discussed why NPS leaders enjoy so many key benefits. With these points in mind, this blog post will examine why a customer service orientation can often take a back seat in day-to-day business activities.

Question: What is the main reason that a focus on customer service is not paramount in many organisations?

The primary reason is that most organisations people don’t understand the full economics of a customer. If they did, then customer focus would be paramount.

The other day I was at a supermarket and observed a very unhappy customer. The service person did not make any real attempt to make the customer feel good again and just let them go. The customer walked away in a huff and said he was never going to shop there again. I heard the service person say to her colleague “Don’t worry; he is just a $50 customer.”

From the service person’s point of view, that customer was worth only one transaction and won’t really make a difference. However, the dynamics immediately change when you bring the customer’s lifetime value into the picture.

The lifetime value of that customer is not just that sale. Their real value is the fact that this customer might spend $50 a week. Over five years, this customer is worth around $13,000 in sales. Some organisations do recognise this fact and treat the customer accordingly.

The other economic factor that is rarely considered is word-of-mouth (WOM). A disgruntled customer could tell at least five others about their experience, and those five others could tell another five. So, in effect, you could have 31 people who are aware of this bad experience.

According to our research, WOM is the most powerful marketing channel, and is at least four times more powerful than that next best – namely, TV advertising. When you combine this with the fact that WOM is a major source of sales, you have the true value of a disgruntled customer.

If organisations understood both the lifetime economics and the WOM economics, which are in some instances more damaging, then most organisations would be more customer focused.

How do purpose and values factor into the modern organisation? Stay tuned for our next part in this Q&A series!