No matter what your business, to stay in business you have toattract and retain customers. How do you do that? One way is todeliver a quality product or service in a high-quality manner. Inother words, it is a combination of what is offered and how it isoffered that determines whether a buyer will become a loyalcustomer. Training is one way to make sure that employees’technical skills and customer-service skills meet customerexpectations. When making a business decision, two basic elementsare typically considered: costs and benefits. In the case oftraining, the issues are: (1) how much does the training reducecosts? and (2) how much does the training increase revenues? If thetraining sufficiently reduces costs and/or increases revenues, thenthere is a strong business case to conduct the training. Yourability to identify the potential sources of revenue and costs andto estimate their levels can be an important business skill. It canbe the basis by which you can successfully make the case for neededtraining for your employees.

1) Given your answers to the previous questions (1. How muchdoes the training reduce cost? and 2) How much does the trainingincrease revenues - no data necessary), estimate the combinedimpact on the bottom line of direct and indirect savings generatedby training. Extrapolate this number over a one- or two-year timeperiod.

2) As you have read, training can increase revenue. The revenuecould come from increased quality of the customer experience due tothe impact of training. Consider, as an example, the followingtable of customer survey responses before and after training. Thenumber are percentages of customers in each satisfaction categorysix months before and six months after employees received theirtraining. A key change is a reduction in the "Verydissatisfied-will never return" category of customers, which felfrom 15 to 5 percent.

A) What will this 10-percent change mean to the bottom line?Assume that the avergae revenue renerated per month by a customeris $500. Also assume that you have 500 customers.

B) What is the increased revenue due to the training for thepast six months?

C) What would be the revenue generated if you had 1,000customers?

	Very dissatisfied-will never return	OK, but would return	Satisfied- would return
before training	15	15	70
After training	5	15	80

3)  Make assumptions about the costs in each of thesedirect cost categories and any other direct costs you can think of.Also assume that you can expect a 10-percent reduction in each ofthese categories. Generate the direct cost savings estimate due tothe training. Training can also impact the bottom line by reducingindirect costs. These are costs that may not be obvious, but thatare still important. For example, the safety of work processes orequipment can be improved due to training if workers handlematerials or equipment more safely. Employee turnover can also bereduced, because of improved job satisfaction due to thetraining.

4)Assume that training results in a 10-percent reduction in yourturnover rate. Also, assume that the cost of a turnover is 1.5times the departing employee’s salary. For a given average employeesalary of your choosing, estimate the reduced costs due to thereduction in turnover.