3
Oct

The Underappreciated Cost of Customer Escalations

By Evan Klein

Price Unhappy Customers

Prior to founding Satrix Solutions, I was responsible for the professional services division of a prominent financial technology firm that served nearly 1,000 customers. During my tenure, I had hoped to concentrate primarily on developing our people, growing the business, creating value for our customers, and improving the customer experience.

Instead, I found myself spending way too much of my time on dealing with activities related to customer escalations. I’m sure this sounds familiar to many of you in similar positions today.

Customer Escalation Management

Unhappy Customer

Many of the executives I speak with today agree that expending so much effort on playing defense – scrambling to prevent the loss of revenue – distracts from the primary focus of strengthening a company’s market position and further establishing its competitive advantages. But how do you combat this issue?

In my case, each week would begin with a sense of optimism, but inevitably the unwelcome news would come. Our competitors were becoming more effective at messaging against us and they were offering aggressive pricing to steal from the market leader (us).

This meant my team was constantly in triage mode, systematically following the process we developed to try to save accounts that were lured in by competitors with big promises and discounted pricing.

My strategy focused on using these moments as a valuable learning opportunity, which in turn, would allow us to apply that knowledge to improve.

What did our typical customer escalation process look like?

1) Review all of the account notes
2) Find the customer agreement to review the contract details
3) Schedule meetings and get the deep dive from all internal account team members
4) Connect with the customer to understand their perspective (which often required a flight to visit them in person)
5) Create a turnaround plan (i.e, make promises, alter scope, offer discounts, shift account people around, etc.)
6) Then, if we were able to retain the customer, check in regularly thereafter to ensure they felt things were improving

By following the process outlined above, the number of escalations and lost customers fell considerably the next year, and the year after that.

Benefits of Improving Customer Satisfaction

As the time required to handle customer escalations decreased, my direct reports and I were able to focus on enhancing our service model and creating more value for our customers.

The pendulum started to shift and our reputation in the industry improved. Our customer satisfaction scores began to improve, our sales team suddenly found it easier to get meetings, and sale close rates increased – both to existing and new customers.

Moreover, we learned from our Sales Win Loss Analysis that improvement in the company’s reputation and enthusiastic customer references were a driving force in our ability to close more deals.

It was certainly a challenging few years, but working in that escalation frenzied environment in the early years, I developed a strong appreciation for a business strategy more and more being referred to as retention marketing.

Hidden Costs of Unhappy Customers

Quite simply, I experienced first-hand how customer dissatisfaction is not only a drag on revenue, a company’s reputation and employee morale, but also on organizational resources.

Conversely, I clearly witnessed how much customer loyalty can energize sales, thanks to increases in customer lifetime value, sales into existing accounts, and referrals.

While much has been written about the burden customer churn has on a business, my experience demonstrates that the cost of customer escalations can be equally as profound – even if the revenue is eventually saved.

So, while my tenure began with some very challenging dynamics, the business stabilized and then improved considerably thanks to a solid team, a well-defined process, and a much greater emphasis on the customer. The entire organization was relieved when we were able to pivot from constantly being in a defensive posture, to having the time and resources to focus on strategic endeavors that would prove to benefit our longer-term prospects.