3 Reasons Why High-Quality Customer Service Matters to Startups

First the bad news: did you know that roughly 9 in 10 startups fail? (1) There's a myriad of reasons why this can happen ranging from legal challenges, lack of interest from investors, the macroeconomic environment, and even uncertain political conditions during an election season.

In fact, startups can fail for reasons that have almost nothing to do with its products and services, employees, technical expertise, or strategy. It can come as a shock to many new business owners and their employees that an organization's external environment can be just as perilous as its internal environment.

So what can a startup do to gain market share, instead of becoming a historical footnote? More importantly, what can a startup with limited financial resources do that is within their control and also practical enough to distinguish itself from its more established competitors?

Ready for good news?

High-quality customer service is one major aspect that a startup's employees can influence almost entirely. While it's certainly true that customers are the lifeblood of all businesses, it's especially true for startups that are trying to carve out market share in order to join the 10 percent that survives.

Here are three reasons why high-quality customer service matters to startups.

1. Customer Retention

In today's hyper-connected world, customers can fairly easily substitute your goods and services with offerings from your competitor. This can be an especially grim reality for startups that do not have strong brand equity and/or trust with their customers.

In June 2015, Harris Interactive revealed that the percentage of customers who quit doing business with a company because of poor customer service was 86% - a dramatic rise of 27% from four years earlier. Worse, poor customer service leads to 89% of customers switching to a competitor. (2)

But it's not just egos that are bruised from customer attrition - a startup's finances are also impacted.

Harvard Business Review reported in October 2014 that customer acquisition was up to 25 times more expensive than customer retention. Additionally, it reported that when companies improved customer retention by a mere 5%, profits rose by up to 95%. (3)

That is astonishing!

The point? Customer service is a major differentiator that can be the difference between your startup thriving over the years... and your competitors reading online that you've closed your doors for good.

2. Market Intelligence

It's easy to get caught up in the fast paced atmosphere of a startup, especially when a team believes that it has the "next big thing" about to light the business world on fire. While this can be great for morale, it can also increase the risk of operating within a silo.

High-quality customer service grants a business permission to communicate with its customers in order to find out - in their own words - what they think of its products and services.

These conversations are extraordinarily powerful pieces of market intelligence that can and often will help you to improve your products, to help you to gain insight into what your customers truly think of you and your competition, and to help you to understand what is frustrating your consumers... and what is delighting them.

Market intelligence such as this is high quality, primary research that few, if any, startups can afford to ignore.

3. Word-of-Mouth Marketing

Startups, like all businesses, have finite resources. While it would be bliss to be able to spend hundreds of millions of dollars on advertising campaigns each year, only the largest of corporations (and mock corporations back in our college days) are able to afford such luxuries.

Businesses that value high-quality customer service also gain access to the power of word-of-mouth marketing... at no additional financial cost to the organization.

In 2007, 78% of global consumers thought recommendations from people they knew were more believable than traditional advertising. By 2013, this percentage had increased to 84%! (4)

What about B2B?

High-quality customer service between businesses and word-of-mouth marketing are intricately linked. In fact, 91% of B2B customers state that their buying decisions are shaped and influenced by what they are told from others. (5) 

These are just three benefits that providing high-quality customer service offers a startup. In reality, the benefits are nearly limitless. Master customer service and your startup just might become the next unicorn success story.


  1. http://www.forbes.com/sites/neilpatel/2015/01/16/90-of-startups-will-fail-heres-what-you-need-to-know-about-the-10/#705e2cf255e1
  2. customerthink.com/20-cx-statistics-prove-why-customer-service-matters/
  3. https://hbr.org/2014/10/the-value-of-keeping-the-right-customers/
  4. nielsen.com/us/en/newswire/2013/under-the-influence-consumer-trust-in-advertising.html
  5. getambassador.com/blog/word-of-mouth-marketing-statistics

Michael Buenaventura

June 20, 2016