Want to keep your customer in this economy?

Maybe listen to the people that are actually on the front lines. Gather round, children, Aunty Iradney is going to tell a story:

 Once upon a time, there was a company that sold a useful, but common product. Let's call the company Waddle, because I like that word.

At the time, Waddle had experienced a large increase in the number of customers who were buying their product. As a result, there were more and more support calls coming in.

However, the support desk personnel was under a lot of stress, as they were each doing the work of 3 - 4 people, even with their manager pitching in. In fact, the manager didn't get a chance to do anything managerial as there was just too much support grunt work to do.

In the weekly meetings, the manager (let us call him Isaac) requested, then begged and pleaded, for more support staff. Unfortunately, Waddle was more interested in getting more installation and sales staff so that they could hit their goal of XX installations a month.

Isaac pointed out many many times that there's no point in installing dozens of new clients a week if there is inadequate after-sales support for them. Yes, they'll have about 200 new clients a month, but they'll lose at least half of them within 3 - 6 months because they're not getting any support.

It costs far more to replace a customer than to keep one. (Some people say 6 to 7 times more, others say 5 to 10 times more). So while it's great that you're getting 200 new customers a month, you're going to lose 100 a month. You then have to go out and replace those 100 customers to make up the deficit, which means your sales people now have more pressure on them.

If you're selling a physical product, you also need to take into account the cost of collecting the product, the storage of the product and the decreased ROI (Return On Investment) in that product. It's not going to make you money by sitting in a storage unit.

Last, but certainly not least, take into account the stress that the support personnel are put under. Not only are they facing mountains and mountains of work, but they also have to deal with irate customers who are demanding the level of service and support that they pay for. It's not upper management that's getting sworn and shouted at, it's poor Bob on the phones. Trust me, if Bob could clone himself to decrease the amount of work he has and improve his working conditions, he would.

Eventually, Bob and his co-workers will resign. Upper management will then have to hire new people, but that will eat into their profits too. Bob and his coworkers have years of experience on the job, and it will take New Bob and New Co-workers at least 6 months to get relatively competent on the system. Which will result in lowered standards for support, and more irate customers and more cancellations and and and.

Meanwhile, upper management sit in their ivory tower, wondering why they're getting so many cancellations. They choose to blame support, when in actual fact, they are the ones to  blame. If they had listened to Isaac, and hired people when he originally requested it, they would not have such a high customer attrition rate. Instead of losing 50% of their new clients, they would lose maybe 5%.

So pretend each customer pays Waddle R 5 000. That means each month, they're expecting an extra million, but only getting R 500 000, because half the clients cancel. By hiring 5 new support personnel at roughly R15 000 each, they will lay out an additional R75 000 a month for support. If they lose only 5% of new customers instead of 50%, they will make R 950 000 a month, instead of R 500 000. Right there, the new support personnel have provided the first 6 months of their salary.

I'm not even any kind of economist, and I know that you have to spend money on proper support and training for your employees if you want to keep your customers' money with you. It's not rocket science, it's simple logic.