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  1. Technology
March 30, 2012

Poor customer service costing FTSE hundreds of millions in profits

A new financial modeling tool called the ‘value of service calculator’, allows companies to estimate the cost poor customer service has on their business. Low quality customer service costs typical FTSE 100 over £100m annually in company profits.

By Vinod

The service, from workforce management specialist, Cognito, estimates impact on revenue and profits to UK organisations.

The tool allows organisations to analyse revenue increase, cost reductions, and overall augmentation in profits that customer service excellence can drive.

The calculator bases its findings on reductions in revenue from losing customers, the cost of replacing lost customers, customer on-sell value, market opportunity cost, and the opportunity to charge premium prices.

calc

"These calculations are particularly poignant given the recent YouGov survey which showed 60% of UK consumers believe customer service has either stayed the same or deteriorated over the past three years," said Jonathan Chevallier, Strategic Development Director at Cognito. "I’d urge organisations to test this approach to prove that customer service doesn’t just cost companies in complaints, it costs them in hard revenue and profit if not delivered properly."

When using the calculator companies are prompted to enter key business data, which includes current company revenues, profits, cost of new business, and levels of customer dissatisfaction. Companies can then apply their wanted percentage improvement ratios for excellent service and the service then calculates the benefits.

The service results show that even small improvements in customer service can translate into a significant increase in profits for businesses with some companies having potential increases of 25% in revenue and over 100% in profits.

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