How Improving Customer Service Reduces Business Risk
Posted by Jennifer on Thursday, January 29th, 2015
It’s easy to understand why companies would want to improve customer experiences. It helps to preserve the company’s reputation, increase customer loyalty, and boost word-of-mouth sales. But you may not realize how vital a role customer service plays in your risk management strategy. It’s time to bring your risk professionals in on customer service policies. They can have a strong impact on your liability exposure and, as a result, the premiums you pay for liability insurance.
A Customer-Focused Approach to Risk Management
According to Forrester Research, risk managers who understand the importance of customer service tend to follow more mature risk management models, viewing strategic risk alongside insurable ones. This helps them do a better job of evaluating risk in several areas. They pay closer attention to reputational risk, corporate responsibility initiatives, regulatory and compliance concerns, information security, privacy, talent acquisition, and human capital risks.
This mature approach to risk management has many advantages for businesses. They enjoy a 25 percent higher valuation than other businesses. And those that make risk management a top priority that starts with the executive level gain the most advantages. When we look at what it takes to control customer-centric risk, we can see why. Implementing a strong customer service program requires a top-down approach.
Dealing with customers is in itself a risky business. In acquiring sales, regulatory and ethical risks can play a large role. Because good customer service is transparent customer service, we immediately see reduced compliance risk. That’s because transparent customer service outlines the laws there to protect them and the ways in which the company is following those laws.
But, when the fulfillment of the transaction fails, all that good will goes out the window. A customer with a stellar buying experience will quickly turn into an enemy should you fail to deliver. Research shows that 42 percent of customers with a good experience will purchase from the same company again. And if the experience is bad, a whopping 95 percent will tell others about the bad experience, many of them doing so online, where the world can see it.
You can salvage the situation, but only if you have steps in place designed to intercept and manage customer problems before they blossom into public complaints, or worse – lawsuits. Try these strategies to minimize the risk:
- Recognize an Unhappy Customer – You can follow up with every customer or, at the very least, a random sampling of customers and ask them if all is well.
- Take Action – Empower employees to take steps necessary to make problems right. Have a clear line of communication they can follow when they need help from a manager.
- Keep Customers in the Loop – Make sure customers understand the steps you’re taking to fix a situation. Update customers often, even if the status remains unchanged. They just need to know you’re still working on the problem, and they shouldn’t have to call you to find that out. If you can resolve a customer problem without the customer ever needing to pick up the phone to call you, there’s a very good chance you’ll have a positive result.
- Use Customer Feedback to Your Advantage – Seek out customer feedback through surveys and via online searches. Respond to complaints made online so others can see that you care about the problems your customers might face and want to resolve them.
- Empower Employees to Make Nice Gestures – Throwing in a little extra every now and then is a strong builder of good will. You might waive a late fee or throw in a free month of service. There need not necessarily be a complaint first. A pleasantly surprised customer who gets something extra for no reason at all is likely to evangelize on your behalf. Little gestures can have a big impact.
- Grease the Squeaky Wheels – The loudest complainers are probably complaining loudly to others, as well. These customers need a little extra care to show them that you hear them and care about their problems. Thank you notes and an extra follow-up down the road are smart approaches for making sure these individuals have a good experience to share.
Customer service isn’t just about sales or reputation. It’s about using the customer’s experience to optimize your products in a way that reduces risk and enhances sales.
Owen-Dunn Can Help You Implement a Mature Risk Management Approach
As experienced risk managers focused on supporting the profitability of our clients, Owen-Dunn can help you broaden your view of risk to include both operational and strategic risks. We’ll help you evaluate your risk management program for areas of improvement in both company policies and the insurance products you choose. Call us to find out more.
Owen-Dunn is a trusted advisor on risk, benefits and insurance to clients of all sizes and across all industries. Our passion is creating intelligent, flexible coverage solutions for both captive and traditional insurance clients. Contact us today or join us at one of our events!