SMEs fail to care for customers in recession
Customers of the UK’s small businesses are demanding greater levels of service for the same or less cost from SMEs struggling in the recession, new research reveals today.
The study, Who Cares?, by online business insurance comparator simplybusiness.co.uk finds that although SME bosses are increasingly worried about losing customers, most are prioritising finding new business over caring for existing clients.
Customers become more demanding
Three quarters (78%) of SMEs are experiencing demands for greater levels of service for the same or less cost from customers.
Around two-thirds (64%) of small business leaders believe this is because clients know their custom is greatly needed in this difficult economic environment.
Additionally, customers are paying later – a third (33%) of SMEs highlighting an increase in late payments during the last six months.
As a result, around one in five (18%) SME bosses feel that customers’ increasing demands during the recession are having a negative impact on their relationships with them, and over a third (34%) feel this is placing greater stress and pressure on their workforce.
SMEs do nothing
Over a third (38%) of SMEs have lost customers as a result of the recession and almost half (48%) of entrepreneurs are worried about losing more.
Yet despite these findings, less than a fifth (17%) of SMEs plan to place a higher priority on offering good customer service in the recession. Indeed, only a fifth (20%) have increased spend on customer retention compared with last year.
Small firms are prioritising finding new business over taking care of existing customers. Only 18% of companies are spending more business time on customer retention this year, compared to nearly double that amount (30%) that have increased time spent on hunting for new business.
Tony Deacon, Chief Executive, simplybusiness.co.uk, said: “A telling impact of this recession is the power it has given back to customers.
“They know that small businesses are crying out for custom and, as a result, it’s very much a buyer’s market.
“Small businesses need to focus on customer service if they are to survive in this most challenging of markets.
“Not enough SMEs are actively working on retaining their customers. It is vital that more of an effort is made to keep clients happy whilst actively seeking out new custom.
“If small firms fail to act, they should be prepared for their business to fail.”