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When to say when Featured

6:49am EDT July 19, 2002

When business travelers or leaders need an icebreaker, a surefire subject is war stories of inferior customer service.

No topic builds rapport faster than the inept waiter, the inaccurate reservation or the incompetent returns department. Recently, while participating in such a discussion, I wondered, if customer service is so bad during boom years, what do we have to look forward to in tighter times?

With cutbacks and spending freezes, how does a business leader determine the appropriate investment in customer service? If service is great, should it be scaled back to save money? If it is deficient, will further investment create a competitive advantage?

There's no easy answer. But before thinking about how to spend more or less money serving customers, remember the reasons for customer service.

Assess the objectives

Customer service has taken on a life and importance well beyond its mission or purpose. Thanks to commercials, gurus and lawyers, when you make mundane, everyday purchases, you are told to expect a near-religious experience.

With such high expectations, it's no wonder that disappointment follows. One critical misstep by a vendor, and his or her otherwise excellent performance is ruined. Conversely, when you get a product repaired or upgraded, you may become an overnight advocate for a company and its products.

Given the consumer's irrational expectations, what is a business leader to do? How can an intelligent investment in customer service be made? To start, every firm should individually define customer service for its business by customizing this generic statement: The goal of our customer service is to enable customers to effectively purchase and consume more products or services.

Simply stated, if you can create a relationship between better service and increased sales, it is possible to measure investments and expectations for the delivery of customer service.

Set benchmarks

While there are countless ways to measure customer satisfaction and service, consider this: If a customer demonstrates satisfaction by spending more, referring you to another customer or serving as a reference for your firm, then your customer service is effective.

While this definition may be trite for many customer service experts, the value of this approach is the financial connection it creates. Take your total investment in customer service and divide it by the value of incremental referrals, references and sales traceable to your investment in customer service.

That will allow you to derive the cost and value of your customer service.

Invest wisely

You can expand the equation to accommodate the reactive nature of the times. During tough times, business owners are more concerned with saving sales and customers than growing sales and finding new customers.

Compare this cost and value to other investments and cost-cutting initiatives under consideration. To fine-tune the analysis to your individual circumstances, here are examples of measurements of customer service in tough times. Which one best fits your business's challenges to justify investments in people, money, resources and time?

* Number of orders saved

* Number of referrals made

* Number of references sought

* Number of reorders secured

* Number of cross-sales/up-sales made

* Number of lost customers saved

Today, when sacred cows are suddenly suspect and scapegoats are many, customer service is often sacrosanct or too poor to cut further. Rather than make an arbitrary decision, examine what you expect of your firm and develop clear measurements of value.

You may be surprised. Not only will you feel you have a better handle on this area, but it is one that should stay relatively constant in good times and bad.

If all else fails, do not despair. Remember how poor customer service is throughout this country. What would it take for your firm to stand out? If added customer service could create measurable results, consider doing what it takes.

Your customers will thank you, as will your bottom line. Andy Birol (abirol@pacerassociates.com) is president of PACER Associates Inc., a Solon-based firm that provides expert advice to owners and leaders who need to grow their businesses. He can be reached at (440) 349-1970 or at www.pacerassociates.com.