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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."
you'll probably find that just 7 companies made 80% of the stuff you own. We gave up on enforcing antitrust laws and let companies merge whenever they wanted.
You can no longer "vote with your dollars". At this point the only thing holding them back is a (very mild) threat of government regulation. Even that is viewed as just another minor expense buying off politicians.
I've said it before and I'll say it again, we can change this whenever we want. But it involves some trade offs. People have to become more politically active and their politics have to be more focused on economics.
Also, people have to band together and agree that _nobody_ gets screwed over. One of the chief problems we have is that folks want gov't regulations to protect them and their interests but lose interest (or become actively hostile) to anything that might impose the slightest cost on themselves.
This is encapsulated the the phrase "I got mine, fuck you". That shit needs to stop.
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It is like going to a restaurant and you get terrible service. You get up and walk out. They will be around for awhile. Eventually enough people will do that same thing. Where as the restaurant that gives good consistent service gets repeat customers and stays in business longer.
Not all restaurants rely on repeat business. For instance, restaurants that rely on tourists. In San Francisco, the worst restaurants are at Fisherman's Wharf, and along Grant Street in Chinatown. If you go down the side streets to where the locals eat, you will have a much better experience.
Doesn't work if there company provides a service you require and has no competition. They'll just refer you to collections.
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...
but No Customer Service is a subset of Bad Customer Service.
It also is immensely profitable.
Why bother outsourcing your calls to a third world country (or US state where English isn't even a second language) when you can create "customer" interfaces that are designed to make it impossible to actually access?
Sometimes it's better to cut your losses, toss the offending hardware or software and do some reviews before you re-purchase.
Google for anything but heavily overpaid corporate support is a good example of this. Have you ever found a problem with a Google Service and tried to report or have it fixed?
There are other companies that are basically stealing anything you pay them for customer support.
They can't do anything about your problems, except bump them to "valued third party" support companies, who charge you even more.
Profit = (sales) * (profit margin)
so is a function of two variables.
At some point along that scale, profit is maximized The company is happy because it's making lots of profit. The customers are happy because they're getting stuff for cheaper because the company isn't wasting money on excessive customer service.
If you're a naive businessman who thinks you should make sure 100% of your customers are satisfied*, then yes having worse customer service will increase your profits Likewise, if you're a naive businessman who thinks cutting customer service expenses will always increase profit, then no, at some point having worse customer service results in decreased profits. Pretty much everyone who has run a business understands this. These professors would too if they'd spent some time running a business instead of only theorizing about them.
* (The phrase, "the customer is always right," doesn't mean you should give the customer whatever they demand. It means you're better off selling the customer what they want, rather than what you think they should get. In other words, what the customer thinks they want is always right. The phrase has unfortunately been appropriated by abusive customers trying to justify their excessive demands for service from businesses.)
the companies that you see having the worst customer service often have little to no competition. The worst offenders here being Cable TV/ISPs. Often there is one or two providers available for a given address, so the Cable provider is of the opinion that the customer has to come to them if they want service. So treating them like crap doesn't lose them anything.
On the flip side, you look at the larger internet sales companies. There are fifty people selling the same product, and normally within fifty cents of everyone else. So if you get a crappy customer sales experience, you will take you next purchase down the road to someone else.
Good customer service is about triage and customer retention. If a customer has called customer service, you have already lost money on the sale because you have to pay a service rep to help this customer out. That help could be anything from hand holding, an exchange, refunds or gift cards. If the customer walks away from the customer service experience saying "This company fixed the problem in a pain free way and didn't complain or make my life difficult. I'd try them again." then you have a chance at another sale. If the customer is thinking "I got my refund but I had to pull teeth and sit on the phone for an hour", then that customer is going to reduce their shopping at that store and tell their friends about it.
In environments where the customer service rep is instructed to stymie or frustrate the caller: The short term goal of keeping the customers money is fulfilled. The long term goal of getting more of the customer's money fails. This adds to the fact that the customer service rep does not bring any perceived value to the customer.
So in a low competition environment, customer service sucks, because it is seen as not needed. In a high competition environment, customer service helps retain customers. Improved customer service takes a long time to see results; it can take months or years to see the results of a loyal customer base that is willing to pay an extra quarter on a product because they trust that customer service is not going to screw them if the product is wrong.
Architectural plans are like computer source code with a couple of differences: You only compile once.
Wasting your time on bad customers drives away good customers. I am not going to wait 20 minutes while you deal with some entitled asshole before you deal with me. I am in the service industry and I will not deal with companies that waste their time trying to make happy those customers who are always whining in hopes of getting more stuff for free. If you want to waste time on the 5% of customers who will take up 95% of your time, if allowed, feel free. I just want a cashier who can ring me through.
You can challenge information you believe is false and have it removed from your credit report.
When you challenge it, they have to be able to prove the debt to continue pressing it. If it is over a charge-back, the charge-back being successful makes that close to impossible for them; the best evidence everybody has, including them, is that you were in the right.
If you clear the charge-back step, you already won. They have to win at that stage to have any hope, and their chances depend entirely on your CC company. If your CC company gives good service, this really works.
Bad advice. A chargeback means your credit record gets hit big time, and you now have a debt collector calling you and your family at all times of the day.
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.
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It's almost as though you have no clue what the fuck you're talking about. You're thinking chargeoff, which is something entirely different. One is the result of you calling your credit card company and initiating the process of them pulling your money back out of the pocket of some company that is trying to rip you off; the other is the result of you not paying your bills.
APK quotes people (including myself) without context and should not be trusted. Just thought you should know.
Actually, if you are a Masshole, the Commonwealth's Attorney General's office has a consumer affairs that is supposed to handle this kind of "We're too big to care what you think" vendor. When I was in high school I had a friend who had an internship there sending out ominous letters to vendors like that. Usually that resolved things, because the Attorney General's letterhead gets the letter forwarded to corporate legal, who are well-acquainted with the Mass AG office's scalp-hunting ways.
The government stance in Massachusetts favors regulating businesses and protecting consumers over promoting business. You might as well take advantage of that, since your tax dollars are paying for it.
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In some cases, not even 15 minutes. Called my credit card to tell the delivery did not happen, in spite of the vendor saying it was delivered. Since the vendor was Amazon, they did not even ask if I tried to contact them -- they just credited me the money with no questions asked.
Wasting your time on bad customers drives away good customers. I am not going to wait 20 minutes while you deal with some entitled asshole before you deal with me. I am in the service industry and I will not deal with companies that waste their time trying to make happy those customers who are always whining in hopes of getting more stuff for free. If you want to waste time on the 5% of customers who will take up 95% of your time, if allowed, feel free. I just want a cashier who can ring me through.
Wish you hadn't posted AC so this was more visible.
Neglecting good customers to deal with bad ones is bad customer service. Letting a shitty customer make your good ones feel uncomfortable or irritated is bad customer service. Asking your good customers to oblige a bad one is bad customer service.
Some people are just toxic, and will poison everything they touch. Good customer service is understanding that and not letting them touch your business.
A pub I frequent occasionally has a homeless guy come in and have a few drinks. He smells a little, but is quiet and his money is as good as anyone else's. Dude never gets asked to leave until he starts falling asleep on the bar. But the bachelorette party pre-gaming their night out? After they cleared half the bar with their yelling and screeching, they got asked to leave. Sure, they were going to spend a lot more money than that homeless guy, but it wasn't going to make up for the people who couldn't stand being in the same room as them. It also wouldn't be worth losing potential customers coming in for the first time and getting the impression that it's always a deafening madhouse and deciding not to come back.
Firing customers occasionally often is the best business decision to make.
Velociraptor = Distiraptor / Timeraptor
True, an MMO could run on a single computer with a single player. However, MMOs are supposed to be massively multiplayer with perhaps 1500+ people playing at once, sometimes having 40+ people in a local area for a raid, along with the need to ensure that the servers never go offline (thus needing redundancies, etc.), which becomes the expensive part of maintaining the service. They also need multiple server admins that handle day-to-day problems with accounts (including data corruption, scams, etc.) and a creative team to keep the content fresh if necessary.
A random private server may replicate gameplay, but lacks the commercial-grade redundancy that ensures that multiplayer still works when there's one major failure. Thus the random minecraft server can suddenly stop for practically any reason. In exchange, one can switch to a different private server and still play the same game (at most, they may need to export/import/rebuild the character for an MMO).
The scam bit is locking down multiplayer rather than allowing private servers, something that's also happening to some games that previously worked on LAN. The best option against that is pushing back by making a large number of non-server-locked games available (and there's still plenty of free ones around, either board games or computer ones.)
Looks like Betteridge has finally met his kryptonite.
Best wishes, Sir Ian: it was nice while it lasted.