Customer service

Do customers view the quality of customer service as a key factor in deciding whether to do business with you?  

The answer may surprise you.

Too many businesses still view customer service as a cost of doing business rather than as an opportunity to do more business. Consequently they outsource their customer service call centres to India or the Philippines, bury their customer helplines and encourage customers to view their frequently asked questions pages on their websites for answers. They incentivise their call centre staff to up sell at every opportunity whilst encouraging them to deal with calls in the shortest possible time.

Strangely this attitude is most prevalent in industries where the differences between one brand and another is least pronounced. Examples that spring to mind are utility companies and ISPs, computer hardware and software retailers but there are plenty of others I could mention. If you dig through the sales literature of any business, quality of customer service is nearly always one of the things quoted as something that differentiates the business from its competitors and yet these same companies are quite happy to place their reputation in the hands of another company. Of course when the margin on products are wafer thin and sales appear to be defined by price not service it is tempting to ‘minimise operational costs’ like customer service. There is another way however, as Harvard Business Review’s (July-August 2010) feature by Tony Hsieh, CEO of shoe retailer Zappos shows.

A different approach

A different approach that views customer service as a marketing activity not a cost centre On the face of it selling shoes on line even back in 2000 didn’t seem like a great idea. If Zappos had taken the view that the internet was a way of maximising revenue whilst minimising cost it probably wouldn’t have been.

Fortunately Zappos took a completely different approach. They made excellent customer service a priority for the whole company. They didn’t view customer service as necessary evil but as a marketing activity, preferring to build business through positive word of mouth not traditional advertising. Zappos built their value proposition around exceptional customer service in the belief that this would create an exceptionally loyal customer base where the lifetime value of a customer could be grown if the customer had sufficiently positive associations with the brand.

Measure customer delight not process

Zappos initially experimented with outsourcing aspects of the operation such as warehousing and dispatch but quickly came to the conclusion that the level of customer service they required necessitated managing anything that impacted on customer service in house. They managed their own call centre even though only 5% of sales happen by phone because they realised that their customers phone at least once at some point. Zappos found that if they handled the call well they could create an emotional impact and a lasting memory which in turn led customers to recommend them to others. As a consequence their Customer Loyalty Teams were not judged by traditional call centre metrics that were driven by productivity and speed of resolution or confined to carefully crafted but cold and impersonal scripts. Instead Zappos don’t hold reps accountable for call times, their longest customer call lasted almost 6 hours! Reps don’t up sell because customers don’t like it. Reps have no scripts so that their personality comes through and this enables them to form a more emotional connection with each customer. Reps are judged on whether they go above and beyond for every customer.

Customer service is personal and individual, you can’t achieve this if customers can’t talk to you At Zappos customers who purchase online are actively encouraged to call if they wish. The phone number is prominently positioned on every webpage.

Personal contact with a rep is key to establishing customer loyalty at an emotional as well as a rational level. To that end most of the customer service effort goes on after the sale. Zappos have extended the returns policy from 30 days to 365 days with free return postage, they give surprise upgrades to overnight shipping, even when the customer chose the free ground shipping option. The warehouse is open 24/7 which is expensive but enables orders arrive more quickly, a key source of satisfaction for e-commerce customers.

Customers are happy but does it pay?

It was not all plain sailing for Zappos. Even though sales went from zero to $70 million by 2003 for most of that time cash had been short as they struggled to cope with growth. In 2008 customers returned 37% of purchases representing more than a third of gross revenue which was just over $1 billion, but Zappos realised customers will buy more and be happier in the long run if they could take out most of the risk from shopping at Zappos.

By the end of 2009 gross revenue had reached almost £1.2 billion and the range has extended beyond shoes to include clothing, housewares, cosmetics and other items.

Whilst ‘going above and beyond’ in customer service may have worked for Zappos, not everyone is convinced that this is a wise strategy. A recent piece of research carried out by the USA based Customer Contact Council to examine the links between customer service and loyalty concluded that “telling reps to exceed customers expectation is apt to yield confusion, wasted time and effort and costly giveaways. The study covered more than 75,000 people who had interacted over the phone with contact-centre representatives or through self-service channels such as web and e-mail as well as hundreds of structured interviews with customer service leaders across the world. This research concluded that exceeding customer expectations during service interactions for example by offering a refund, a free product or a free service such as expedited shipping makes customers only marginally more loyal than simply meeting their needs. 20% of ‘satisfied’ customers on the study said they intended to leave the company in question and 28% of ‘dissatisfied’ customers intended to stay. Worse still although customer service can apparently do little to improve customer loyalty poor customer service can do a great deal to undermine it. Customers are four times more likely to leave a customer service interaction disloyal than loyal. Loyalty eroding factors include, 56% of customers having to re-explain an issue, 57% report having to switch from the web to the phone, 59% report expending moderate to high effort to resolve an issue, 59% report being transferred, 62% report having to repeatedly contact the company to resolve an issue.

So how can one reconcile these two apparently contradictory positions?

On the face of it Zappo’s successful approach is completely at odds with the findings of a very comprehensive piece of research. Zappos believe that ‘going above and beyond’ has been the whole basis of their success. The Customer Contact Council research suggests it makes little difference.

Zappos believe that talking to a rep increases customer loyalty, the research suggests the reverse. As ever the devil is in the detail. What differentiated Zappos was the realisation that its value proposition, was not just its products or its route to market but its whole customer experience and the realisation that customer word of mouth could replace ‘traditional’ marketing activities. I can see how talking to a rep who has little authority, is based in another country, who is clearly reading from a script, where the glossy advertising that showed such promise is suddenly at odds with the impersonal if well meaning service, could do little to boost my loyalty. What is more being showered with upgrades and free giveaways at this point would most likely lead me to conclude that the company realises that this customer experience isn’t what they promised in the glossy advertising so they hope a few bribes might persuade me to come back.

Contrast this with Zappo’s approach to customers service. First I probably heard of Zappos via recommendation on the basis of what that recommender experienced and liked so you can be fairly sure that my expectation is aligned to what I will get. Second I talk to someone who isn’t reading from a script and goes to enormous lengths to empathise and meet my needs. Third they are from the same country so they understand not just what I say but also what I mean. The rep has the authority to do whatever is required to meet my needs so does not have to refer me to someone else. I am not told about the free upgrade at the time so it is a nice surprise when the item arrives sooner than expected so it doesn’t look like a bribe. In short I am made to feel like a valued friend to the business not a number who has been greeted by 5 minutes of bad music whilst being told how much the company values my business, who is only talking to the rep because I couldn’t get the online system to work or I was seeking to return the item I purchased or trying to get the item I had already purchased to work.

7  Ways to Achieve Exceptional Customer Service

 1. Make customer service a priority for the whole company, not just a department.

2. Empower your customer service reps.  They shouldn’t have to escalate a problem to a supervisor.

3. Fire customers who are insatiable or abuse your staff.

4. Don’t measure call times, don’t upsell and don’t use scripts.

5. Don’t hide your phone number. You want to talk to customers.

6. View the cost of handling customers’ calls as an investment in marketing, not an expense.

7. Celebrate great service by telling stories exceptional stories to the entire company.