Poor customer service costs typical FTSE 100 over £100m annually in company profits

28 March 2012

The Value of Service Calculator estimates impact on revenue and profits to UK organisations

Companies can now estimate the cost to their business of delivering poor service following the launch of a new financial modelling tool (‘Value of Service Calculator’) from workforce management specialist Cognito.

The tool provides organisations with the ability to model increases in revenue, reductions in cost and the overall improvement in profits that service excellence can drive. It is based on reductions in revenue from lost customers, the cost of replacing customers, opportunities to charge premium prices, market opportunity cost and customer on-sell value.

The calculator prompts companies to enter a set of key business data, including existing company revenues, profits, levels of customer dissatisfaction and churn measures, and the cost of new business. It then allows the company to apply their desired percentage improvement ratios for excellent service and then calculates the resulting benefits. The results show that even a small improvement in service output metrics can translate into a double digit increase in profits - for some companies this could deliver increases of 25% in revenue and over 100% in profits.

“These calculations are particularly poignant given the recent YouGov survey which showed 60% of UK consumers believe customer service has either stayed the same or deteriorated over the past three years,” said Jonathan Chevallier, Strategic Development Director at Cognito. “I’d urge organisations to test this approach to prove that customer service doesn’t just cost companies in complaints, it costs them in hard revenue and profit if not delivered properly.”

Become a bobsguide member to access the following

1. Unrestricted access to bobsguide
2. Send a proposal request
3. Insights delivered daily to your inbox
4. Career development