The answer to the above question is not really easy to give. It depends on a whole lot of factors, such as the specific line of business of a company and its characteristics, the competition, the size of the market and so on. It also depends on the company itself and its culture and goals.
Most people agree that good customer service provides tangible benefits to any company. Some of these benefits that apply to most types of businesses are:
- Customer retention and loyalty: satisfied customers are keen to buy again from the same company, if everything went according to plan. Also, if something goes wrong and rectifying is swift and without side – effects, customers most often than not will stay loyal. Loyalty is very important also because it is a lot cheaper to retain a current customer compared to attracting a new one (according to some studies even five times cheaper).
- Word of mouth: satisfied customers will rarely share their experience with others about a specific company. They will do so if the opportunity arises, but they won’t rush out to advertise good service. On the other hand, dissatisfied customers tend to tell everyone they know about their unpleasant experience and this can quickly lead to the build – up of a bad reputation. Word of mouth is very strong and thus it can lead to negative marketing.
- Customer support can be used a strategic competitive advantage. In lines of businesses that the end products are more or less the same, in terms of both price and features, superior customer service can be easily transformed into a source of competitive advantage, providing some differentiation.
Customer service is undeniably good. But there are situations that the benefits it offers are too miniscule compared to the costs involved in providing top quality customer service. Therefore, many companies (a lot more than we, the customers, would like) tend to perceive their customer support facilities as a cost center and simply try to minimize that cost. Of course this point of view is a bit short minded, since good customer support and the reputation built – up that goes with it has probably long term benefits that are very hard to quantify. On the other hand, many companies do not really care about long term benefits, especially when there are urgent problems to face now.
There are also several markets that customer support is not as effective as in others. This does not mean that customer support is not necessary in such cases; it rather implies that the company can just stick to the basics and take care of only very important issues, being able to safely ignore more “trivial” and complicated situations. Here are a few examples where customer service may safely be considered a lower priority:
- Internet retail and e-business in general: In e-commerce customer support is of course very important to help a company become trustworthy. But this can be done without really good customer service, especially when the company performs massive amounts of interactions. Rating systems on internet are typically end up being a 5-point scale (stars) or a 10-point scale with one decimal point (numbered scale). In such systems where the rating is provided by actual consumers, having a very good logistics mechanism and a working supply chain can make sure that 90% of the customers are served without issues. Does the remaining 10% matter enough to invest a lot of money in order to resolve their problems as quick as possible? Or, to put it in another perspective, would you buy a product for 20$ from an online retailer with rating 8/10 or would you prefer the same product for 25$ from an online retailer with rating 9.5/10? For low cost items, cost leadership is everything. On the other hand, if the product at hand is a car (expensive and long-term investment) the situation changes. Customer support there is a lot more critical.
- Markets with very low number of competitors. A typical example is the telecommunications market after it stabilizes (i.e. small players are out of the market, a handful of giant companies owns the vast bulk of market share). In many countries around the world telecom providers are notorious about their lacking customer support. Understaffed call centers, many badly trained customer service representatives and so on. The reasoning is simple: unsatisfied customers don’t have many options. Since completely dumping the phone is not an option for most, their only escape would be to go to one of the few other competitors which have similar service levels anyway. They are so nicely trapped! And the number of dissatisfied customers that do the switch won’t matter much in the short term. Of course, in the long run, a company with better customer service will probably gain an advantage. But the tradeoffs they have to pay for that long term advantage may be too much.
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There are, of course, many other situations that the best customer service offers visible short term benefits. Such as, for example, local retail stores where the customers purchase in person or any type of market where word of mouth plays a very important role in general.
Unfortunately, the customer does not always matter enough.
