Avoid These Three Cost to Serve Mistakes

Avoid These 3 Cost to Serve Mistakes

Sometimes, it is not a single big hit that destroys a business but rather thousands of tiny cuts. If you aren't careful, your cost to serve can be just that.

Overly dramatic allegory aside, there are several cost to serve mistakes that are surprisingly easy to make that can cost your business dollars, customers, and in extreme cases, overall success. Fret not, because in this article we will examine three of the most common cost to serve mistakes that should be avoided and how to correct bad behavior if these habits have taken root.

Before we go further let's take a look at what exactly cost to serve is and why it is so crucial to be on the ball about it.

The main difference between the cost to serve model and the general costs of business is that the former varies drastically from customer to customer. It is your customers and the ways in which you serve them are either contributing to your growth or eating away at your bottom line. Factors such as not enough or even dirty data, bad pricing, and poor customer service could be chipping away at your company as we speak.

Let's dive in...


More Data, More Success

It is impossible to identify an issue if you don't have all the relevant data. The problem that so many companies have is they get tunnel vision looking at data that only shows the big picture and they are unable to see the minuscule costs that stack up. Failure to avoid this error will undoubtedly drag any business down. Fortunately, the remedy is as simple as avoiding this cost to serve mistake.

Yes, you likely have a lot of data to go through. And yes, it will require an eye for detail and it is likely going to take some time to get through all of it. But the payoff could be that you build tighter brand awareness while also finding ways to satisfy your customers and simultaneously cutting your costs to fulfill their wants.

The age of technology gives us access to software and new approaches, such as LPaaS, that takes on the once herculean task of tracking every variable involved in your supply chain. While it's not impossible to keep an eye on your ever-changing cost to serve for every customer, having a secure strategy to handle all the data and connect the dots leaves you available to take action instead of just counting all day. Logging things like packing material used, minutes spent fulfilling orders, and overall time stored in a warehouse are just some of the easy to forget expenditures that cost to serve programs can highlight.


Cost to Serve With a Smile

The second mistake to look out for is allowing too much time to be spent dealing with individual customer issues for long periods of time. This can leave other customers on hold for a long period which could end up costing you more than the price of simply providing better service with quick resolves.

It is important to point out here that if you are running into this issue, it is not always going to be a case of slow customer service reps. On the contrary, it may be a capacity issue.

If your business is doing what a business should, which is to scale, this puts additional strain on your customer service model. This is not inherently wrong or bad, it is simply a byproduct of a growing business. The point is that you need to keep an eye on that area of your business and scale it alongside everything else. While the rest of your business is increasing and you start acquiring more customers, it is on your customer service department to handle all of them.

The good news is there are a few ways to combat the risk of poor customer service taking away from higher profit, such as equipping employees with the knowledge and tools to quickly resolve issues or using a digital call service to handle simple requests before involving a human representative.

Touch-tone call services naturally have the advantage of being available around the clock even on the holidays, although at times they do have their limitations. However, one way in which they shine the brightest is by being 40% to 60% less expensive than having a person on the line, and those savings add up quickly. Digitizing your companies response to basic inquiries can streamline the customer's experience and keep wait times lower for those that need further assistance.

When an issue requires human interaction and intervention, it should be prioritized to be handled by a competent and well-trained employee that can get it done in a timely manner.

Lastly, while scripts are a good way to get new phone operators acclimated to speaking with customers, the best way to ensure they are providing your customers with helpful advice and quick resolutions is to make them familiar with the products and services you offer. Familiarizing themselves with these things allows for them to more quickly and comfortably dispense advice or help in regards to your products and services. Equipped with this knowledge and the ability to discuss them confidently will allow for more fluid conversations that result in solutions from a place of in-depth knowledge. Not only will it help speed up the process but it will simultaneously put your customers at ease and feel as if they are in capable hands... because they will be.


The Price Is (Possibly Not) Right

Now that you have all the data you need and your customer service is on point, you can move on to the next hurdle.

It is now time to make sure you have not been coaxed into one of the worst mistakes of all: incorrect pricing. Many failed ventures only took into consideration production and base shipping when factoring the price of their goods, and the slow but constant expenses of cost to serve ground them down. Obviously, you want to be competitive but not to the point of running at a loss, success at the cost of success isn't really success is it?

With just a little tweaking any pricing problems you may be experiencing, from the cost of manufacturing to the cost of shipping, are easily rectified and will surely show financial improvements almost immediately. Don't forget, not all of the factors are under your control, as failing to take into account the overall 5.2% growth of inflation is enough to tip the scales against you. Be it from internal or external forces, it is your responsibility to keep prices affordable for your customers while also being profitable to your business.

This is where you begin really taking a deep look at where and how you are sourcing materials, cost of warehouse space to hold stock, expenses involved in shipping, etc...


These are the Cornerstones of Avoiding Cost to Serve Mistakes

There are many more mistakes that can be made when it comes to handling your business' cost to serve but the biggest three are failing to see all the data, inefficient customer service, and simple pricing errors.

Avoiding or correcting all of them still isn't a guarantee for success but it does help to have as little hindrance as possible and these are the most common pitfalls that business fall into in regard to cost to serve mistakes.

The best way to get your cost to serve data organized and optimized is to begin, or potentially outsource, a cost to serve study.