In a digitally wired world, it’s more difficult for businesses to differentiate themselves, and consumers have more choices than ever. More importantly, they have much more influence in determining the winners and losers in the business arena. The fact isthatU.S. consumers view the customer experience as much more important than the price they pay.

In the not-too-distant past, smaller businesses subscribed to the notion that customer service was a necessary cost of doing business. However, today, in the digital age, excellent customer service is an investment that can actually offer competitive advantages while driving business growth.

Businesses trying to determine how much time and resources they should invest in customer service should consider the following.

Mediocre Customer Service Costs Money

According to the American Express Customer Service Barometer, more than half of U.S. consumers have scrapped a planned purchase due to bad customer service.

The same study found that one-third of consumers would change their patronage because of lousy customer service.

But it gets worse. On average, consumers tell 15 people about a poor service experience, while they tell 11 people about a pleasant experience.

The critical takeaway here is that lax customer service can actually cost businesses money.

Superior Customer Services Grows Revenue

It has been said that customers can recall the level of service they receive even if they can’t recall the price they paid. American Express conducted a study showing that 70% of consumers are willing to spend, on average, 17% more money with businesses that focus on providing superior customer service.

...And Profitability

A study by Harvard Business Review reveals that superior customer service increases customer loyalty and lowers the churn rate (the rate at which customers choose to end their relationship with a business). That’s vitally important because the cost of acquiring new customers can be anywhere from five to 25 times more expensive than the cost of retaining a customer. The study found that by increasing customer retention rates by 5 percent, a business can increase profits anywhere from 25 to 95 percent.

Customer Service is the New Marketing

Word of mouth is still the best way to market your business, and digital channels such as social media can amplify its effect exponentially. According to a study by the Temkin Group, more than three-quarters of consumers would recommend a business after having a positive experience with a business. By treating superior customer service as a key marketing initiative, businesses can lower their customer acquisition costs.

Customer Service is the Best Investment You Can Make

Traditionally, smaller businesses have been reluctant to invest too heavily in customer service, often treating them more as a cost center. Now, an increasing number of small businesses recognize that providing excellent customer service is not just for larger companies and can directly impact their bottom line. But it takes a combination of time and resources, and the sooner, the better.

Here is how a business should consider allocating its time and resources:

Hire and train the right people. Unquestionably, a well-trained customer service teamwith the ability to communicate effectively with customers can transform your business and grow your customer base.

Build the right culture. Providing superior customer service needs to be a top-down, bottom-up initiative with an all-consuming focus on creating happy customers.

Buy the right technology. The right technology can improve efficiency and lower the cost of providing excellent customer service. Investing in a customer relationship management (CRM) program and increasing your social media presence can build your brand, increase customer loyalty, expand word-of-mouth, and increase cross-sell opportunities.

The Bottom Line

For many businesses, providing superior customer service may be the difference between surviving and thriving. For those that can’t or won’t compete on price, it may be the competitive advantage you need. In terms of how much time and resources to commit, achieving the highest level of customer service possible should be your business’s top priority.