Do We Prefer Bad Customer Service?

In a recent article for, The Atlantic, Daniel Indiviglio postulates that: " We like bad customer service". I sincerely hope this isn't true but he does bring up some interesting points. The article is largely a response to another article written by Jay Goltz in the New York Times. Both make some compelling arguments as to the reasons behind why we encounter poor customer service.

Goltz postulates that there are three main reasons for poor customer service: Healthcare, aggressive pricing strategies and over educated workers. He writes "Smart companies are refocusing on customer service because they can see the value" and that "The customers will have the last say"

Indiviglio takes a different approach to the subject. He doesn't directly criticizes Goltz's message. Indiviglio says that: "we like what bad customer service provides: cheaper products" and that companies are not incentivized to provide great customer service because people care more about low prices. He illustrates this with a $50 difference in airline tickets.

I have to say that I agree with both authors to a certain degree. There are many factors contributing to diminished customer service. The question becomes not "how can we improve customer service?" but "should we?". For me the answer is a resounding "YES!" and I'll tell you why:

In most cases in the long run customers will punish firms with poor customer service. It is a firms goal to differentiate itself in the market. This is particularly important in today's consumer landscape. How often have you seen two firms in direct competition directly across the street from one another? Convenience has quickly become one of the less effective ways to differentiate (between physical retailers of course not online versus brick and mortar). For purposes of this discussion we can assume that goods are largely homogeneous (yes I like the lamps at Target and the coffee at Starbucks...work with me). So there are two main ways most retailers can differentiate: price and experience.

If it is true that, "cash is king" most firms will have to differentiate based on price. Slashing prices, offering rewards programs and cyclically raising and lowering prices are all strategies to get more people through the door. For a lot of firms this is going to be the best strategy, there has to be a cost leader after all. What results when firms try to compete to be the cost leader is often large scale attrition resulting in a lot of companies reducing profit margins some to the point of insolvency (I'm looking at you Circuit City, Linens & Things and CompUSA).

Another strategy s to differentiate based on the experience. Those of us lucky enough to shop at high-end retailers like Nordstroms or Apple know what it is to have excellent customer service. There is an additional value added to a good when it has been purchased in a positive experience. We can't all be the Cadillac of the industry (I don't think Cadillac is even the Cadillac of their industry anymore) but we can strive to enrich the customer experience for proposes of building loyalty and positive buzz.

Is there an easy way to measure the ROI for good customer service? Not that I know of. But you can't underestimate the impact of negative customer experience. the modern customer has networks far larger than they ever have before. Grassroots boycotts and negative press can be toxic for your business. Sure many consumers will look for the bargain. Cost differentiation in the right circumstance can be the best choice. However bear this in mind: you should provide great customer service because it could grow your business and increase your margins, but you should avoid bad customer service because it will eventually hurt your bottom line. Customers have great memories. They may not always punish a firm for poor service, but are you willing to roll the dice?

Is customer service important in a recession?

I have been wondering if the downturn in the economy will result in an improvement to customer service in the marketplace. Conventional wisdom dictates that as companies tighten their belts and look to ways to recapture falling profit margins it is still important to provide excellent customer service to entice customers and encourage repeat business.

But do consumers care about customer service in a recession?

During tough times some may think that price (and with rising gas prices, convenience) becomes the only important differentiating factor between firms. I don't think this is necessarily the case.

Customer service speaker (sounds like a great job!) Kevin Stirtz recently wrote: "Customers are smarter now than ever. They know the difference between a company that exists to help them and one that exists to pick their pocket." He was talking about the importance of creating a customer-centric service culture to create a sustainable business and I couldn't agree with him more. Today's consumer works hard for their money and realizes now more than ever the importance of a dollar. They are going to be far more willing to part with those dollars on an emotional level at a company that truly values their business.

In a great article Lior Arussy asks the question: "Why’d we ever focus on customer experience to begin with?" He lists multiple factors for why it is that we focus and customer service and shows that none of those factors change during a recession. If anything it is more important to keep a focus on differentiation due to service during a recession because there are fewer dollars chasing goods.

I am happy to report that I have been experiencing some great customer service lately. It seems like everywhere I go cashiers and sales associates are truly happy that I am spending money at there stores. This could be due to a few factors. Maybe employees have made the connection between reduced sales and a reduced labour force. You could help employees come to this conclusion but be careful not to sound threatening. Your good intentions could have a negative impact. A "times are tough and we are all in this together approach" beats "shape up, or ship out" any day.

It also seems like there are a lot of people taking positions that they are frankly over qualified for. Because of the rise in unemployment some workers are taking what they can get. These star employees provide excellent customer service while raising the standards of the team. Problems may arise when these employees are enticed to leave for better positions. When the economy is back in an upswing retention will become an increasing issue. Your customers will notice when their experience changes and will punish you for it.

I think that customer service is without a doubt important during a recession. This is a short run view though. What will really be important is improved customer service in a recession continuing through the business cycle, that is where a company will move from just floating to being sustainable and successful.