Customer service and the £81.5 billion revenue reward

30th Nov 2017

Improvements in customer service could add £81.5 billion* to the UK’s GDP in the space of just 12 months, according to new research released today.  

In the largest study of its kind ever undertaken, the Institute of Customer Service’s ‘The Customer Dividend’ report sees the customer satisfaction scores of 124 different organisations mapped against a number of financial metrics, including turnover, ebitda, profit, revenue per employee and human value capital add (HCVA). 

The results reveal emphatic evidence that when an organisation has happy customers, it is more likely to have happy shareholders.

On average, organisations who maintain a customer satisfaction score above their sector average (taken from the Institute’s biannual UK Customer Satisfaction Index) achieve 9.1% revenue growth year-on-year, and compound growth of 4.7% across a five to eight-year period. Those with a lower-than-average customer satisfaction score achieve 0.4% growth year-on-year and just 3.5% in the longer period. 

Among the firms analysed, Premier Inn (55%), Aldi (21%) and Costa Coffee (19%) are the UK organisations who have achieved some of the strongest long-term revenue growth whilst maintaining a high level of customer satisfaction.

Meanwhile, the Institute’s analysis shows that even organisations moving from below average to average for customer satisfaction scores could be worth £81.5 billion* to the UK economy across a 12-month period. 

‘The Customer Dividend’ report reveals a consistent pattern of strong customer satisfaction performance leading to strong financial performance:

- organisations with higher-than-average customer satisfaction achieve superior productivity among their staff. Across five to eight years, the difference is £552,409 revenue per employee vs £257,614, a difference of 114%. When it comes to human value capital add (HCVA), the difference between high customer service performers and lower performers is 47%: £59,847 vs £40,863

- the average ebitda percentage for higher-than-average customer satisfaction scorers is 24.7%, compared to 14.5% for firms that score lower than average. When it comes to gross margin, the difference is 37% compared to 32.1%.

Broadly, these trends hold true across a number of business sectors, including retail (both food and non-food), leisure, tourism, services, telecommunications and transport.  
The sector which sees the biggest year-on-year turnover improvements for its top customer satisfaction performers is tourism, at 32%. Across a three-year period, the sector which sees the largest revenue growth is telecommunications, at 16.8%. Telecommunications also has the largest gap between revenue growth for organisations who score higher than average for customer satisfaction, and those who score lower than average (16.8% vs 4.5% across a three-year period).

Jo Causon, Chief Executive of the Institute of Customer Service, said: “This research shows compelling evidence that excellence in customer service holds the key to stronger financial performance. Amid a heightening debate around productivity in the UK, our new report shows that organisations with strong customer satisfaction also have more industrious staff, adding as much as 114% to revenue-per-employee.

“How customers react to the service they receive, and how managers motivate their teams, are essential elements of the quest for greater productivity. Mistakes are too costly and every investment needs to generate a genuine return. That is why we are calling on businesses to place their service strategy at the heart of their boardroom – it will add value not only to their customer relationships, but also to the bottom line.”

To find out more, and to download the full ROI report, click here.

Ends

Notes to editors  
* The ONS reports the monthly turnover of the UK’s service sector. Across the nine months of 2017 that the data is available for, the average turnover per month is £166 billion. 45% of this (the number of organisations who, according to Institute of Customer Service analysis, fall below average for customer satisfaction) equals £74.7 billion. On a monthly basis, a 9.1% increase in turnover would be £6.8 billion. Across a year, that’s equivalent to £81.5 billion.

Monthly figures from ONS are taken from here: https://www.ons.gov.uk/businessindustryandtrade/manufacturingandproductionindustry/datasets/topsiproductionandservicesturnover.

Of the 124 organisations that were analysed for the ROI report, 45% had achieved lower-than-average customer satisfaction scores 

For further information please contact:
Sophie Lanning, Rebecca Peck and Bethan Davies
E: [email protected]
T: 0207 010 0826 (Sophie), 020 7010 0877 (Rebecca) or 0207 010 851 (Bethan) 

About The Institute of Customer Service
The Institute of Customer Service is the professional body for customer service delivering tangible benefit to organisations and individuals so that our customers can improve their customers’ experience and their own business performance. The Institute is a membership body with a community of over 500 organisational members - from the private, public and third sectors – and over 3,000 individual memberships. For more information about The Institute of Customer Service go to www.instituteofcustomerservice.com.

About the ROI research
The research into the relationship between customer experience and financial performance addresses 5 key questions. It asks what the relationship is between levels of customer satisfaction and organisations’ financial performance, especially revenue growth, what the relationship is between changes in customer satisfaction and organisations’ financial performance, especially revenue growth, what level of customer satisfaction organisations need to achieve in order to maintain sustainable financial growth and performance, what the critical investments and activities are that organisations have undertaken to improve both customer satisfaction and financial performance, generating tangible return on investment and what the key enablers of effective return on investment in customer experience are. 

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