Two facts that most marketing executives know about there businesses are the cost to acquire a customer (CAC) and Annual Revenue Per Account (ARPA). These metrics validate your business model and can guide decisions on where to invest in order to accelerate growth. However, there is one key factor underlying both CAC and ARPA that rarely enjoys the same focus—service.
Customer service is not a cost center to be automated, ignored and squirreled away—it’s a central part of marketing and growing any business. Building a sustainable, long-term business requires taking care of customers so that they feel like your first priority. Excellent customer service provides the “Wow” that results in customers buying more, championing your product and promoting your business.
One reason some marketing executives don’t track service as closely as they do other parts of their business is that it doesn’t always seem like something that can be measured objectively. It can. And it should be. Key areas where service directly impacts business with REAL numbers include churn and word of mouth (WOM).
Good Service Reduces Churn. Churn is the drag on the long-term growth of any business and a significant contributor to CAC. In the early years of a company, many businesses ignore churn at their peril. One way that some companies, particularly in the tech space, deal with churn is to trap customers with opaque and confusing contracts. Not a very customer friendly approach. Or they make cancelling difficult. Or they keep apologizing for their lackluster product and promise future improvements.
Using contracts and empty promises as your primary driver to reduce churn shows that your priority is locking customers down, not engaging them to meet to their evolving needs. Happy customers will stay with you and grow with you.
There are simple ways to build engagement into your business in order to reduce churn. Over the past year, we’ve focused intensely on engaging customers using quarterly executive business reviews (EBRs). These help us to make sure that our customers are meeting their goals with our software and encourage deeper engagement with key features.
As a result, we’ve decreased account churn by 31% and increased ARPA by 61%. Happy customers not only stay around, but they’re willing to pay more for a product that responds to their needs. We’ve increased annual sales and upgrades dramatically just by making customers feel how important they are to us.
Word of Mouth. In every business word of mouth (WOM) impacts you at all points of your sales cycle and has significant impact on ARPA as your customers grow with you. Word of mouth impacts you at the beginning of a customer’s journey when they’re not even on your radar screen and are trying to narrow their options. Positive word of mouth comes from having insanely loyal customers. (Also see discussion of WOM on Pages 6 and 7.)
Tony Hseih, the CEO of Zappos, understands this. Zappos has long considered customer service a marketing expense. It’s by far the cheapest customer acquisition model. Bain Consulting, creators of the New Promoter Score, have found that promoters are 2.8 times more likely to refer you. Why not inspire your customers to become your champions.
People are far more willing to buy from businesses when people they trust recommend them. You see this also on review websites like G2 Crowd, GetApp and TrustRadius. As savvy buyers gain more control in the buying process, the old tricks of confusing contracts and poor service are going to end.
Whatever your business, you can’t go wrong by putting customers first. It turns out, doing the right thing also happens to be the best thing you can do for your bottom line.
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JP Werlin is the founder and CEO of PipelineDeals, a leading “service as software” company based in Seattle and Philadelphia. For more information visit www.pipelinedeals.com.