A Small Business Owner's Guide to Customer Service

Small business owner working with client
••• Getty Images

At its most basic level, customer service is an organization's ability to supply their customers' wants and needs.

But this definition leaves out the transactional nature of customer service, and it’s this transactional aspect that drives customer loyalty. "Customer loyalty exists when a customer chooses to do business with a company even when a less expensive, more convenient, or higher quality alternative is available somewhere else," according to the National Business Research Institute.

You can say, for instance, that a warehouse model business — where goods are laid out, customers choose items themselves, and carry them to a self-serve checkout — supplies a customer’s need for a product or products (assuming the customer finds what he wants). But from the customer’s point of view, there’s no customer service involved in such a business model.

Customers assume that customer service involves an interaction with another human being, whether that person helps them find something, choose something or buy something. (How to Help a Customer takes a closer look at the basic customer service transaction.)

And that’s the core of good customer service — bringing old customers back, and attracting new ones through the “good news” that current customers are spreading about your business

A Better Definition of Customer Service

For businesses, then, a more useful definition is that customer service is a business’s ability to satisfy its customers. Because only satisfied customers have the potential to become loyal customers.

Companies can have all the elements of customer service in place, from wait-staff through return policies, but if customers are not satisfied with the way their transaction was handled or its results, they won’t be back. 

Customers and business managers alike like to talk about what good customer service is (and isn't), but this definition by ACA Group sums up what excellent customer service is beautifully: "Excellent customer service (is) the ability of an organization to constantly and consistently exceed the customer's expectations."

Accepting this definition means expanding our thinking about customer service; if we're going to consistently exceed customers' expectations, we have to recognize that every aspect of our business has an impact on customer service, not just those aspects of our business that involve face-to-face customer contact.

Why Good Customer Service Is Critical to Small Businesses

For small businesses, committing to continually strive to provide the best customer service possible is especially important because:

1. Customer loyalty is crucial to most small business’s bottom line. Good customer service is the prime driver of customer loyalty. On average, loyal customers are worth up to 10 times as much as their first purchase according to the White House Office of Consumer Affairs.

2. Good customer service saves small business’s money. Depending on which study you believe, and what industry you’re in, acquiring a new customer is anywhere from five to 25 times more expensive than retaining an existing one (Harvard Business Review).

3. Businesses (especially small businesses) can’t survive long-term bad press. Customers judge the customer service of every business they deal with — and they’re much more likely to share bad ratings with other people than good. 

What happens after poor customer experience

  • 78 percent of customers cancelled a transaction or intended purchase after poor customer service (American Express Survey)
  • 96 percent of customers don't bother to complain to the business, and 91 percent never come back ("Understanding Customers" by Ruby Newell-Legner)

Dissatisfied customers will tell between nine to 15 people about their experience — and about 13 percent of dissatisfied customers tell more than 20 people about their poor experience, according to the White House Office of Consumer Affairs. On the other hand, happy customers who have their issues resolved tell between four to six people about their experience. 

The stakes are even higher given that complaints about customer service are easily disseminated on social media platforms such as Facebook and Twitter and reflected in online reviews (such as Google reviews).

4. Providing top-notch customer service is one of the few ways small businesses can compete with larger retailers.

In fact, as Daniel Butler, vice president of Retail Operations for the National Retail Federation, points out, this “buyer experience” is where owners of small stores have a big advantage over their chain-store counterparts.

“They can actually be in touch with their customers and make a personal connection.”

How You Can Use Good Customer Service to Build Customer Loyalty

1. Set Customer Service Standards

Employees and customers alike need to know what the expectations are. Customers need to know what your business is willing to do for them and employees need to know how you expect them to provide your products and/or services to the customer. Just telling them is not enough; you need to create a document that lays out what you consider to be acceptable customer service standards.

2. Put the Right Staff and Processes in Place

As Liz Tahir says, there is no way that the quality of customer service can exceed the quality of the people who provide it (10 Tips for Effective Customer Service). So your small business needs to have the resources in place to provide the kind of customer service that will meet or exceed customers’ expectations — whether those resources are front-line counter staff or efficient product distribution systems that will get your product delivered to the customer on time.

Customer service software that provides a help-desk solution or customer relationship management (CRM) can simplify and streamline many of your customer service interactions. You can also provide your employees with apps that will enhance customer service. Retailer Lowe's, for instance, gives its customer-facing employees six apps designed to help them serve customers, including an app that helps employees determine dimensions for customer home improvement projects.

3. Train Your Staff 

Employees who are dealing with customers need to do more than just be friendly if they are to deliver good customer service. Get over the idea that enthusiasm and a smile are enough (although they are a great start); effective customer service training must be reinforced and taught on a recurring basis.

4. Treat Your Employees as Your First Customer 

No one enjoys being served by a grumpy disgruntled person. Unhappy employees will never create happy customers. So keep your employees happy. When your employees are happy they will look forward to work, because they are valued and appreciated, says Laura Lake — the kind of employees who are ready and willing to value and appreciate your customers.

5. Solve Customers’ Problems Quickly and Easily

Customer problems are the best opportunities to create loyal customers. Research by the Customer Contact Council found that exceeding customers’ expectations had surprisingly little effect on customer loyalty; it was the amount of effort a customer had to make to resolve problems that correlated strongly with customer loyalty. In fact, 94 percent of customers who were able to resolve issues painlessly said they would purchase again from that company. Learn how best to deal with customer complaints.

6. Create a Customer Loyalty Program

Customer loyalty programs can not only help create loyal customers but help you gain new customers. For instance, studies have found that recipients of restaurant loyalty rewards are twice as likely to refer a new customer immediately following a reward redemption (Thanx). Successful loyalty programs can also boost your small business’s bottom line as they provide motivation for loyal repeat customers to buy more — always a more cost-effective and easier way to increase sales than attracting new customers.

7. Assess Your Customer Service Regularly 

Customer feedback is a great tool for improving customer service and customer loyalty. Your customers are literally telling you what they like or don’t like about your products or services regularly in person, through email, by phone or through social media. Use these interactions to identify consistent issues and act upon them.

You should make sure that you also seek the opinions of your less vocal customers, by conducting customer assessments and/or using customer surveys.

For small businesses, the watchwords for customer service should be assessment and improvement. Upgrade Your Customer Service in 3 Steps will show you how you can improve the basic elements of the customer service your small business provides.

Best Practices: How to Provide Good Customer Service

Remember the golden rule, treat customers the way you would like to be treated? That’s no longer good enough in a world where customers have so many different choices as Matthew Hudson points out in How to Build Customer Loyalty. Instead, treat customers the way they would like to be treated. These articles, that cover best practices in customer service, will show you how:

Learn More About Small Business

roth ira early distribution exceptions what is federal earned income credit cost of living state comparison totally free credit report no credit card required how does one become a doctor absolutely free credit score no trial how to get a business ein number gdp per capita in the united states best paying jobs without a degree for women how to get a business ein number how to build a fruit fly trap how much federal income tax withheld pumpkin eating another pumpkin carving halloween pumpkin carving ideas easy nys unemployment phone number for claiming benefits how to get green card who gets earned income credit thanks for coming to my baby shower college students working part time how much to mail letter in us what is the tax percentage in usa what are the qualifications for earned income credit home remedy to clean stainless steel purpose of w 4 form how to become an actress at 16 how many numbers to win lottery cheetah print baby shower themes 30 per hour annual salary how much social security is withheld how are long term capital gains taxed one pound is equal to how many cups who gets earned income credit homes by owners for sale best outlet mall in san diego all i want for christmas is you ecard 11 dollars an hour salary how to make a box bed frame how to become an actress at 14 with no experience how to find a job in college starting salary for real estate agent how to get rid of house ants naturally how long does it take to become a us citizen how to calculate gross margin ratio debt to credit ratio definition how can i get fleas out of my house where to sell used phones for cash top rated virus protection 2014 can i get a home loan how to calculate the gross profit how to become a child actress how much does concrete cost a yard how to amend federal tax return steps to become a physician internal revenue service austin texas phone number best tires for the money how can you buy a house with bad credit what clothes to wear with short hair styles what is a medical doctor do how to clean a cast iron grill pan emergency substitution for baking powder how to become a citizen of the us price of gold today in usa what job would i be good at test where can i get a free birthday dinner what is the maximum unemployment benefit in ma m&t bank check cashing policy where is my tax amendment where do i send amended tax returns how much social security is withheld from my paycheck how do i put money on my paypal debit card how to calculate gross margin ratio irs phone number to check refund status how does secured credit cards work credit cards for 18 year olds with no credit history house for sales by owner how much downpayment should i put on a house social security tax rates 2014 how much does 3 yards of concrete cost chances of becoming a famous actor free on your birthday restaurants rate on 10 year treasury price of gold today in usa income limits for child tax credit how to calculate a profit margin educational games for preschoolers free online is forever 21 open on thanksgiving i wanna be an actor how to find profit percentage what to do to become a nurse practitioner 403 b withdrawals before retirement cash homes for sale by owner how can you buy a home with bad credit best antivirus software 2014 reviews build king size bed frame how much is 1 yard of concrete cost credit card approval with bad credit how to get tax extension how many strawberries in a pint can i get a home loan internal rate of return example absolutely free credit score no trial math pages to print out retail store cards for bad credit how to get rid of indoor fleas different ways to win powerball places to go eat for your birthday can you cash a check at western union can you be denied employment for bad credit best way to get rid of fleas in a house harkins theater northfield movie times games to play at a baby shower for a boy price of gold in 1999 easy way to clean stainless steel pounds in a bushel of corn irs federal income tax withholding tables 2014 different ways to win powerball federal earned income tax credit how many oz in cup dry how many pay weeks in a year 1 lb of gold price can you add gift cards to paypal school to become a pharmacist gdp per capita by country florida real estate for sale by owner what does apo address mean where can you download free albums pumpkin eating another pumpkin stencils you are my sunshine father daughter dance google pdf to word converter steps to become a physician what is a real estate agent salary how many allowances to claim cost of living international calculator 24 hour home depot houston places to go eat for your birthday 10 dollars an hour 40 hours a week what is us tax rate how to get rid of house ants with natural remedies down payment on a house how much bank of america travel rewards redeem how to calculate gross margin ratio where can i cash a check besides a bank how to ammend a tax return easy way to clean stainless steel minnesota capital gains tax rate 2014 debt to credit ratio definition how to carve a scary pumpkin faces harkins theater northfield movie times debt to income ratio auto loan what is considered a high paying job baby girl games for baby shower calculating irr on financial calculator best outlet mall in san diego how much will be withheld from my paycheck Donor-Advised Funds: Democratized Philanthropy What Does a Vice President Do? Create an Employee Handbook/Policies & Procedures Manual Eligible Self-Employment Tax Deductions World Economy and its Impact on the U.S. How to Become a Journalist - Media Career Profile What to Expect From a Career in Advertising International Relations Major Skills List Pump It Up Review of eBay's Seller Hub Lowe's Build and Grow: Free Classes for Kids Example: Bookkeeping Entry When Buying on Credit Biggest Disadvantages of Ecommerce If I Divorce, Is the Ex Entitled to My Retirement Pay? The Difference Between an Art Gallery and an Art Museum Common Media Job Titles in Media How to Find a Substitute Teacher Job How to Estimate Concrete Prices What Happens If Your Car Is Broken Into 7 Financing Ideas for Starting a Business Effective Customer Service Tips Shopular Review 5 Ways to Fix Too Salty Food and Save Dinner Exterior Siding Types For Homes - Benefits Air Force Maintenance Management Analysis (2R0X1) Allstate Boat Insurance Review Back to School: What You Can Do to Prepare for Careers in Sports Installation Overview -- Fort Stewart, Georgia https://www.thebalance.com/create-your-own-job-in-the-recycling-industry-2877900 200 ok text/html 103911 Self-Employment in the Recycling Industry 4 123 64 Jetty(9.0.z-SNAPSHOT) 00:01.114 utf-8 Looking for a job in the recycling business? One approach is to create your own job through self-employment or purchasing a franchise. Small Business Licenses, Permits, and Regulations Better Subject Lines for Nonprofit Email Overall Equipment Effectiveness (OEE) Music Careers and Music Industry Information Government Job Profile: Fire Chief How to Pay Off High Interest Rate Debt Installation Overview -- Hill Air Force Base, Utah Huggies - #HugTheMess Sweepstakes Disbursing Clerk (DK) - Navy Enlisted Rating Are Stocks Riskier Than Funds? Yes. Here's Why. Free Santa Clipart for All Your Holiday Projects Cheapest Web Hosting for Your Online Business AWOL and Desertion in the US Military What is a Normal P/E Ratio for the S&P 500 U.S. Stock Index? How to Become a Certified Global Business Professional Use Employee Training and Development to Motivate Staff 3 Tips for Using Options 5 Reasons to Attend Live Small Business Conferences Repair Requests on Home Buying and Selling Get Free Magazines From Freebizmag.com Corrections Officer Career Profile How Your Payroll Service Can Help With Year End Reports Employee Wellness What is an Employment Recruiter? Army Enlisted Job: 68G - Patient Admin Specialist How to Build a Home Business Profile Tenant's Obligations in Arkansas ASVAB: 5 Auto and Shop Sample Questions Nat. Golf Foundation - American Golf Census Sweepstakes SoundCloud Review Education Career Stabilization (ECS) - Army Enlistment Incentives USDA Rural Home Loan - Zero Down and 102% Financing Hillary Clinton's 2016 Economic Plan Assessor - Career Information Use Your Business' Phone Features Professionally How to Take Responsibility for Your Life How to Change or Cancel Your Employer ID (EIN) Why Teleworking May Not Work for All Organizations The Greenspan Put, the Bernanke Put and Other Central Bank Puts 10 Reasons to Call Your Auto Insurance Agent How to Freeze Halloween Candy financial planning How to Make Homemade Dryer Sheets Cash vs Accrual - Which Accounting Method Should I Use? Is Thanksgiving Killing Your Law Practice? Is Life Insurance a Good Investment for You? Arbitration - How the Arbitration Process Works Qualifying Buyers from a Seller Side Perspective https://www.irs.gov/pub/irs-utl/2013_NTF_Dealing_with_SFRs.pdf 200 ok application/pdf 318079 IRS will file one for you 20.11.2013 19:43:04 4 1 00:00.252 utf-8 How Margin Loans Work Behavioral Interviewing Techniques and Strategies U.S. Military Major Bases and Installations The Side Effects of Bad Credit How to Write the Methods Section of Your Grant Proposal Single Ply Roofing Basics 5 Things to Do Before Moving Out of Your House Overview of Debit Cards And How They Work Is House Flipping Worth the Investment? Are Targeted Internet Ads Worth the Money? 5 Ways to Promote Your Event Planning Business Flight School: Pros and Cons of Aviation Universities Crime Scene Investigator Job Information Bonds 101 Can Retailers Prevent Shrinkage? Why Etsy Mobile Apps Will Increase Online Sales Army Awards and Decorations Nurse Interview Questions About Patient Complaints Getting a Rain Check on a Store Sale How to Sell Your Home Through a Land Contract Keys to Successful Investing and Portfolio Management Choosing A Periodic or Perpetual Inventory System Measuring the Value of Events and Meetings - ROI & ROO Notarized Documents: What they are and How to Get One Jobs Report: Monthly Employment Growth Statistics How to Become a Lawyer government quarters or housing facilities Commercial Vehicle Size and Weights Construction safety The Paperwork Needed for Car Insurance The Top Four Questions to Consider When Choosing A Condominium Insurance Policy Seven Super Trade Show Promotion Steps What Is LIBOR? How It's Determined & How It Affects You Four Factors Affecting College Costs How Career Guidance Helps With Career Development How do I Update My Restaurant Menu? How to Handle a Job Applicant Credit Check How to Get Rid of Dog Pee and Cat Urine Odors How to Calculate GMROI For a Retail Store Punitive Articles of the UCMJ: 134 - Fraternization How a Seamless Buying Experience Yields Greater Profits Top Skills New Organic Farmers Need to Be Successful What Investors Want to See in Your Financial Statements How To Write a Conclusion For Articles Macy’s Preferred American Express Card Review Getting a Business License or Business Permit Split Tax Refunds Using Direct Deposit and Form 8888 How to Write an Awesome About Me Page for Your Blog or Website useful tool Home Inventory List 4 Ways Fund Your Business on a Bootstrap Budget Assets, Liabilities, and Shareholder Equity Explained Hermit Crabs in Ocean City, New Jersey Lighthouse Place Premium Outlets: Michigan City, Indiana How to Negotiate Closing Costs Will Bad First Semester Law School Grades Tank Your Legal Career? Travel Rewards Credit Card Reviews 6 Things I Love About the Freelancers Union Identity Guard Identity Theft Protection Review Best Way to Review a Resume 10 Types of Door Hinges. Are You Using the Right One? Major Stock Exchanges Steps to Successful Investing in the Stock Market Custodian Skills List The Best Time to Buy Linens The Best Online Bill Paying Software and Services Mutual Funds - Investing for Dummies What Is the Unemployment Rate in the US Career Profile: Navy Physician Assistant Quotes About Hard Work What Is the Definition of the Term "Payroll"? A Guide to Investing in Poland Loan Workout Programs - Negotiating your Debt Working in Freelance Media Jobs