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What Does It Cost?

You may not think of customer service as a cost, but it can have a significant impact on the cost of your product or service.  Increasing costs are a fact of life for all businesses.  The price of oil has had a significant impact on costs; add to this the cost of credit, the cost of insurance, labor, shipping, travel, and now the cost of customer service, wow! 

If you can pass all of these costs along to your customer and remain competitive, great.  If not, then your profit margin takes a hit.  My experience is that someone has to pay every cost.  The choice is either you or your customer.  If it is you, are your pockets that deep?  Or is there a way to take charge and control these costs?

These are scary times to be in business, and determining the real cost of doing business may be something you would rather not know.  The good news is that we can closely examine our costs and focus on methods for identifying controllable costs and minimize those costs.  Let me give you one area you can control that will produce a win/win for you and your customer. 

Advertising and Marketing should always be looked at as an investment in your business.  You are investing in your business by buying customer leads to convert into sales.  Creating and implementing effective advertisement and marketing campaigns are a great ways to increase sales.  Should you look at this as a cost of business or and investment? 

If the advertisement effectively attracts potential new customers and if they can be converted to a customer that will return again and again, then your investment has paid off.  If, however, a potential customer has a bad buying experience then your investment in advertising and marketing has turned into a cost of doing business. 

There are a number of factors that can contribute to a bad buying experience, which we’ll discuss in later issues of B/NV.  Now we want to use a simple tool to calculate the direct and indirect value of that potential new customer.  Below are links to a worksheet that will help in your calculation.  The sheet is available in two formats, one an Excel spreadsheet which contains formulas.  The second is a PDF file for hand calculation. 

Value of a Customer (Microsoft Excel)
Value of a Customer (Adobe PDF)

The good news during this economic turbulence is that you will have time to examine your business, make improvements and be ready for the inevitable upturn-- returning with a leaner more profitable company.  Knowing the value of a customer, new and old, may not only pleasantly surprise you but will be a helpful tool in evaluating and quantifying advertising and marketing returns.  Your staff will also see the value of providing good customer service. All of this will go a long way toward promoting the success of your business and moving it to the next level.

Let me know if you have any comments, questions, or suggestions.
Write David W. Weatherholt at david@bnewsviews.com

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