It is often said that customer service is what sets independent specialty retailers apart, lets them compete with big box stores despite usually higher prices, and keeps their customers loyal. In fact, half of small-business retailers who compete against major merchants say customer service differentiates their business from their larger competitors.

They confirmed this belief in a recent survey conducted by RatePoint, a provider of customer feedback and online reputation management services. And about 51 percent of retailers surveyed told the National Retail Federation that an emphasis on customer service and experience would be their strategy for success in 2010.

But in a tough economy, when retailers are tempted to cut payroll to keep costs under control, many can't help but wonder how much that service is really worth. Now we can put hard numbers to that touchy-feely appeal, thanks to Strativity's 2009 Customer Experience Consumer Study, conducted in collaboration with Customer Service Experts Inc. Even in the midst of the recession, Strativity found that companies that deliver exceptional customer experiences are rewarded with customers who buy more, leave less and are willing to pay higher prices. For independents, that can only be good news.

Customers who enjoyed exceptional customer experience are almost three times as likely to continue doing business with companies for another ten years or more. Some 40 percent were willing to pay 10 percent or more to continue purchasing from companies delivering great experiences. And if their experience improves, their spending goes up: more than 70 percent of consumers surveyed indicate that they are willing to spend 10 percent or more with businesses if those businesses exceed their expectations. More than one-third of consumers surveyed said that they are willing to spend 25 percent or more if their expectations are exceeded.

The bad news is, customers also penalize companies that fail to deliver the desired experiences. Some 52 percent of unhappy customers say they will continue doing business with a company delivering poor experiences only if it offers a discount of 5 percent or more, and Strativity found that customers who received an inferior customer experience are ten times more likely to cease doing business with companies within the next 12 months.

Fortunately for retailers, this is not likely to be an uphill battle. Forrester Research found that retailers, as an industry, have the highest loyalty levels, and when shoppers are asked how they choose the companies they do business with, good customer service was more important than low prices. Nevertheless, this isn't universal, especially among two key demographics being targeted by gift vendors, according to Gifts & Decorative Accessories' recent Trends and Forecasts survey. Gen Y consumers were the least enamored with good service, and Younger Boomers were the most interested in low prices.

But there's good reason to aim for the customer who prioritizes service over low prices: Forrester found that service seekers were more likely than price seekers to buy more products, stay with their current provider, and recommend their provider to friends and colleagues.

What aspects of customer service make consumers most loyal is not necessarily obvious. Strativity found that consumers say the two most important aspects of the customer experience are an easy and fair payment process and products and services that deliver great value. But it turns out neither of those correlates strongly with loyalty.

What was most important? The emotional aspects of the interaction: quick and effective issue resolution, common sense and discretion, exceeding expectations, ease and simplicity. And when it comes to how they interact with your store, real people are still the most important: The most loyal customers are the ones who are satisfied with retail stores, written communications and telephone interactions with real people. Liking the website or automated phone system is not as powerful in generating or reinforcing consumer loyalty. While that is bad news for stores trying to save money by replacing people with programs, it offers another plus for specialty stores who tend to have a lot more personal customer contact.

Most people feel they know it when they see it, but there are a few quantifiable aspects which contribute to customer service satisfaction. St. Michael Strategies lists greeting customers, establishing their needs, highlighting promotions, resolving grievances and closing sales. But to do this, according to St. Michael, stores should maintain a staff to customer ratio of between 1:10 to 1:15. If there are more customers per salesperson than that, the effect can be lack of service.

That doesn't necessarily mean hiring more staff, however: The company suggests measuring store traffic so that you can shift personnel hours to maintain coverage. (A recent Hay Group survey among 25 top national retailers found that 64 percent of the retailers surveyed said that they have lower than normal staffing levels, so now is the time for smaller stores to make that difference felt.)

Just adding, or juggling, staff may not be enough if those staff members aren't up to speed. "With a reduced number of customers, retailers can't gamble on outdated — or non-existent — selling skills," remarks Greg Winston, sales trainer and author of Opting for Opulence: 14 Proven Strategies to Master Selling in the Luxury Market. "Each customer contact today is worth easily 50 percent more than it was two years ago." Luckily there are a ton of titles and trainers out there eager to help retailers take their staff to the next level. (Check out the Bookshelf Blog on www.giftsanddec.com for some places to start.)

Rick Segel, author of Retail Business Kit For Dummies and a regular speaker at gift shows, suggests data collection — not just address, phone and email, but career, hobbies, even when they like to shop. "Whenever you or a salesperson try to get a customer to open up, remind her that finding out this information will help you better serve her. And when you ask for her contact information, explain that having it will allow you to send her coupons and exclusive sales information. When customers know how they'll benefit, they'll be far more likely to talk," says Segel.

Customer service goes on even when your customer is not in the store, according to Segel, and newsletters and mass mailings may not be enough "Think of ways that you can contact them that will be specific to them or you. Send them a birthday card or a short article that you think might be of interest to them." Segal also suggests creating a customer wish list, seek out anonymous feedback via customer service surveys, and creating a customer advisory board. Still want more feedback? You can always try hiring a Mystery Shopper.

T. Scott Gross, author of Positively Outrageous Service, recommends one technique for exceeding, not just meeting, expectations: doing something random and unexpected, out of proportion to the circumstance and playful. One example Gross gives is an Italian restaurant launching outside of San Antonio. Once a month, on a Monday or a Tuesday, and totally without warning, the owner paid for the meal, drink and dessert of everyone there, leading to spectacular word of mouth. Another was a restaurant who unexpectedly washed car windshields at its drive through. A third store sent a regular customer a surprise Christmas present and phone caroling session — at Easter! Southwest Airlines spotted Gross on a flight and ran an impromptu giveaway of a copy of his book to the passenger who could guess how many sheets of toilet paper it took stretch the length of the plane. Then, says Gross, "a flight attendant came racing down the aisle unfurling a roll of TP as she went!" (The answer: 172).

Another not-so-obvious approach to customer service is suggested by Michael D. Brown, author of Fresh Customer Service, who says that the key is to put the employee, not the customer, first. "In order to please the customer," says Brown, "the employees must like the work they do and be given the information they need to deliver quality service.

Employees who are micro-managed, not trusted to make decisions, or forced to follow rules that don't make sense within the parameters of their position are going to dread coming to work and spread their discontent onto the customers."

Brown suggests that to improve their service, store owners should give employees recognition and gratitude for a job well done, walk with employees through one entire day to see how they work best, and trust employees to make decisions and act with authority. "Leaders have been operating under the premise that the customer is number one for decades," says Brown, "But in today's world where lines are long, information is scarce, products are out of place or out of stock, and no two employees have the same answer to one question, focusing solely on the needs of the customer is just not working."

Whatever technique works for you, don't forget to measure its success in smiles — and sales. Great customer service is the best way to boost your business in any economy or season.