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?