It is accepted that keeping existing customers is generally easier and less expensive than trying to acquire new ones, which makes customer service a vital asset for improving consumer loyalty and sales. An ineffective or unsatisfying customer service experience can drive clients away from a company and give it a negative reputation, ultimately hurting the bottom line. On the other hand, implementing a successful customer service policy and reacting to client feedback can preserve a purchasing base and may even help a company expand through positive word-of-mouth referrals.

According to a 2006 customer satisfaction study, companies with high customer-satisfaction ratings had higher stock returns along with less erratic stock prices and cash flows.

In many cases, the quality of customer service even outweighs the product or service sold.

"Since service calls involve direct interaction between companies and their customers — and customers do the work of initiating contact, expressing a strong desire to solve their problems — such calls elicit more immediate and vocal reactions than do the product problems that stimulated them," Harvard Business Review says.

However, the connection between good customer service and overall financial performance may not be readily apparent, as customer perceptions and satisfaction ratings operate through a complex chain of values with a resulting effect on share prices and quarterly profits. Nonetheless, many companies have embraced customer service strategies for both the fiscal and abstract benefits they offer.

"I think any company that takes a customers' money and is in the business to provide whatever service or product that person paid for, part of that contract now includes customer service," Emily Yellin, author of the book Your Call Is (not that) Important to Us, explained in a recent interview with U.S. News and World Report. "The idea that once you've made a sale, you're done, is old."

Developing a sound approach to customer service involves a combination of practices and principles designed to build a relationship of trust with clients. In an About.com: Marketing article titled The Ten Commandments of Great Customer Service, tradeshow expert Susan Friedmann offers the following guidelines to help provide high-quality customer service:

• Keep the customers' needs at the forefront, as they are who you are ultimately working for.
• Ask questions and concentrate on what the customer is telling you without making undue assumptions.
• Identify and anticipate needs by communicating regularly with clients to help foresee any upcoming problems or needs.
• Treat each customer as an individual by using his or her name, and be attentive and sincere.
• Help customers understand your systems by taking time to explain how your company's methods work.
• Always promise to fulfill any reasonable requests that make doing business with you easy.
• If something is wrong and the customer is dissatisfied, apologize. Apologies are easy, free and appreciated by customers.
• Try to provide an extra level of care that other companies don't, even if it's a small gesture.
• Get feedback regularly by welcoming any customer suggestions for how to improve the quality of your service.
• Treat employees well. Showing appreciation to your employees can improve their disposition toward customers, making customer service more effective.

Although these considerations can help strengthen a business-client relationship, it is also important to evaluate the effectiveness of customer service initiatives and understand what is working and what is not. While a successful approach can sometimes be measured in increased sales or a decline in customer loss, direct feedback is still the best way to gauge the quality of your service.

Customer satisfaction data can be acquired through a number of means, such as phone queries, mail or e-mail questionnaires, online surveys and face-to-face interaction. When surveying customers, About.com: Management guide F. John Reh recommends asking the basic questions regarding the customer's level of satisfaction with the purchase made, the service received and with the company as a whole. Additional complex loyalty questions include these:

• How likely are you to buy from us again?
• How likely are you to recommend our product/service to others?
• How likely are you to recommend our company to others?

This second set of enquiries can be invaluable for assessing the overall quality of customer service and client satisfaction, but it is important to avoid irritating the customer with a too-aggressive approach.

"When the economy is down, businesses tend to get desperate, and the knee-jerk reaction is to increase the frequency and volume of their customer communications. It seems like a simple solution to e-mail customers more often, but that's the opposite of what you should do," Entrepreneur.com suggests.

Instead, a more targeted approach can increase the likelihood of accurate responses. For example, if a customer typically makes one major purchase a year, a single annual survey shortly following that purchase can provide a more precise indication of customer satisfaction because the experience is still recent. However, requesting data after every purchase risks annoying the customer and skewing the results.

Once customer feedback has been compiled, it's time to look for response trends and differences according to region and product or service sold. The most common complaints should be identified and investigated, while customer suggestions for improving business practices are taken into account.

As Inc.com states, "Each interface with a customer, whether current or potential, is a great opportunity. Make the most of it."

Resources

Beating the Market with Customer Satisfaction
by Christopher W. Hart
Harvard Business Review, March 2007

Why Customer Service Has Gotten So Bad
by Kimberly Palmer
U.S. News and World Report, April 6, 2009

The Ten Commandments of Great Customer Service
by Susan A. Friedmann
About.com: Marketing

Customer Satisfaction Survey
by F. Jon Reh
About.com: Management

Cultivate Stronger Customer Bonds
by Gail Goodman
Entrepreneur.com, Dec. 11, 2008

Delivering Effective Customer Service
by Rebecca A. Morgan
Inc.com, January 2005