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18 June 2012

The cost of poor customer service – Cognito spells it out

Cognito, which specialises in workforce connectivity, has developed a tool aimed at modelling the cost implications of poor customer service. It draws on five key measures, of which one is the added value of offering good customer service. It says customers will pay up to 20 per cent for this, adding that for company earning a 10 per cent profit margin, this can increase profits by up to 200 per cent.

It reckons that good service also increases the "on-sell" potential, which it says can typically convert into a 5 per cent increase in sales.

"Churn" can also be reduced from typically 15 to 20 per cent to about 5 per cent, Cognito says. The cost of replacing lost customers is then reduced (in this case by 1 per cent of revenues).

Finally, Cognito argues that bad service increases word-of-mouth negative comment, which it says can easily amount to 4 per cent of revenues.

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All figures are based on hypothetical cases. If you want to know how the full story applies to you, you need Cognito’s tool.

 

 

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