Tuesday, October 24, 2006

Touchy Feely Customer Service Costs Schools Millions

Just before a recent presentation at a college, a member of the institution’s business office told me he thought it was nice I was talking about customer service, but he didn’t see how it applied to him. His concerns were more basic. Like the budget, revenues, you know – the real stuff – money. He didn’t deal with the “touchy feely” stuff that excited others.

“Ahhhh” I replied. I always try to be nice, polite and provide customer service since to do otherwise would be…Well, it wouldn’t be keeping with my subject.

So I asked him if he would give me five minutes tops to help me with a financial issue that hits some schools. “It would be helpful” I said. He agreed to help me.

I asked him what the population at the school was the beginning of the fall semester.

“About 920” he said.

“And tuition is how much?”

“14,838 with fees”

“The college’s attrition average tuition rate is what?” That he didn’t know but grabbed a colleague in enrolment management. She told him it was averaging about 14% a year.

“Okay so 920 minus 14% attrition is 129 students X $14,838 tuition lost in a year per student which is about $1,914,102. Now let’s multiply that times 72% which is the percentage of attrition that is rather directly related to customer service issues. So the school lost an annualized $1,3781,533 from customer service-related issues. And that doesn’t include the lost costs of acquiring each student, enrolling them, orienting them and so on. Nor does it figure in bad debt written off from attrition or the costs of collecting the debt and other business-related activities from attrition. That’s a chunk of change too. And, if you are like other schools, you lose at least 12% of potential enrollees when they make contact with the customer service at the school. So I would peg the customer service value at the school at well over $2.5 million. That’s a lot of “touchy feely” I would say.”

He listened very closely to the presentation.

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