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Is Bad Customer Service More Profitable Than Good? (hbr.org)
Two associate professors of marketing recently shared research in the Harvard Business Review about how customer service is structured at at tech, travel, and finance companies:
[O]ur research suggests that some companies may actually find it profitable to create hassles for complaining customers, even if it were operationally costless not to.... We found that these companies screen complaining callers by using a hierarchical organizational structure. This structure, we argue, keeps a lid on the amount of redress customers are willing to seek. In other words, by forcing customers to jump through hoops, the organization helps curb its redress payouts.
As part of our research, described in a forthcoming article in the journal Marketing Science, we interviewed managers of call centers to understand how their customer service organization is structured, and the way it contains redress payouts. We found that most involve at least two levels of agents. The Level 1 agents take all incoming calls and hear each customer's complaint first. These agents are typically limited in the amount of redress they are authorized to offer to the caller...
So what about the idea that frustrating customers has consequences on customer retention and long term reputation? For example, some experts advise companies with upset customers to reach out to them directly to win them back. But, some companies have little regard for their reputation, especially those who control a large market share... companies with few competitors may find it worthwhile to alienate angry customers in order to save on redress costs.... This may help us understand why some of the most hated companies in America are so profitable and why customer service, unfortunately, remains so frustrating.
At one company "Any caller insisting on a refund was told to call the U.S. headquarters during normal business hours, generating additional tasks for any customer seeking more compensation...
"This design relies on the fact that some consumers are not willing to incur this hassle. When this happens, the company is off the hook for the additional payout."
As part of our research, described in a forthcoming article in the journal Marketing Science, we interviewed managers of call centers to understand how their customer service organization is structured, and the way it contains redress payouts. We found that most involve at least two levels of agents. The Level 1 agents take all incoming calls and hear each customer's complaint first. These agents are typically limited in the amount of redress they are authorized to offer to the caller...
So what about the idea that frustrating customers has consequences on customer retention and long term reputation? For example, some experts advise companies with upset customers to reach out to them directly to win them back. But, some companies have little regard for their reputation, especially those who control a large market share... companies with few competitors may find it worthwhile to alienate angry customers in order to save on redress costs.... This may help us understand why some of the most hated companies in America are so profitable and why customer service, unfortunately, remains so frustrating.
At one company "Any caller insisting on a refund was told to call the U.S. headquarters during normal business hours, generating additional tasks for any customer seeking more compensation...
"This design relies on the fact that some consumers are not willing to incur this hassle. When this happens, the company is off the hook for the additional payout."
I agree. There's no longer a practical way to "vote with your dollars". The only way to exact any change is to vote with more extreme measures. I've been seeing more stories about how tech leaders like Mark Zuckerberg are putting more money into personal security, al la "escape hatches". Perhaps there's a connection?
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Until recently, I despaired at the idea of voting with my dollars. But, the reality is, by choosing to use local or alternative online marketplaces, I can give my money to businesses and individuals who act like they give a hoot about me. I also started trying to actively donate to people, Patreon-style, because that's the world I'd like to live in--where a patronage model is sustainable.
I work for my money, and if I want to donate it to encourage someone else to do things that I enjoy or benefit me, that's my prerogative. I've pirated plenty and rode the free bus long enough, but now that I'm older, I feel more inclined to give back directly to the people who provide the things I want to trade for.
You vote with your dollars by having a plan, not by bemoaning the existing monopolies. Put your money where your mouth is, that's what I say.
Customers are a privilege too not a right or a cost.
Well...yes and no.
I've fired more than a few customers who were, for one reason or another, too much trouble to work with. I never missed their business and wouldn't take them back even if they offered to pay double.
The fact is that the customer isn't always right.
Just cruising through this digital world at 33 1/3 rpm...
It doesn't help when government enforcers are spineless. My neighbors facility has accidents all the time. Slipping, cutoff fingers, broken bones, you name it. Yet, every time OSHA visits his place, they do nothing. Guy is still operating, accidents still happening. It's so bad, that my area has had 8 new Emergency Clinics built up (You don't just build up ER Clinics at the kindness of your heart). Meanwhile, every time OSHA visits my place, with zero accidents, clean floors, abiding to every standard possible, they always find something stupid (Like the yellow line on my floor is slightly fading away) and threaten me with 30 days or I get shut down. You can easily find facilities like I'm talking about on OSHA's own website, even some with daily accidents.
I'm sure if I threatened these OSHA and labor board inspectors with litigation and lawyers, they would stop visiting my place. But I'm not like that, so I'm an easy target for them to prove they're doing work. But they fear the facilities that are a problem because they're afraid of sitting in court for weeks at a time. Either grow a pair or put an end to OSHA, because you're not solving the problem, you're creating more problems.
So as such, what does this have to do with your topic with anti-trust? Same thing. The guys are afraid of lawyers and spending time in court. So enforcement is non-existent for dishonest people.
I've worked closely with legal and HR for years and call center topics appeared regularily.
The real reason has nothing to do with the customers. Those 1st line call center agents are the lowest rank of the corporate ladder, many of them are temp workers, lots of them are badly educated and need absolutely everything spelled out for them. No surprises there, it's not exactly the kind of job someone eager for a career and personal development would choose.
From the company perspective, they simply don't want to give these people who barely care which company they work for too many options to hand out freebies. Many of these people just want to get the call over with, because they are rated by number of calls handled and such KPIs. So if you give them a shortcut such as giving a customer a refund and be done with it, they will routinely take it, even when they shouldn't. That's why they have low limits of what they can hand out, and the more pricey decisions go to a 2nd level where you have more qualified, better trained and more interested about the company (e.g. not temp workers) people.
Assorted stuff I do sometimes: Lemuria.org