Lately, there has been a fair amount of productive dialogue as to whether service and experience are the same thing, i.e. a rose by any other name. It’s pretty well understood that service is a component of overall experiential value delivery. Sometimes it is differentiating, and offers consumers definite benefits – such as practiced by companies like Zappos, Wegmans, Ritz Carlton, Rackspace, Southwest Airlines, Trader Joe’s, Amazon, Baptist Health Care, and Zane’s Cycles – and sometimes it is just one of multiple factors which contribute to customer loyalty or disloyalty behavior. Bob Thompson chronicled a part of this very well in a recent, widely-read, blog, where he looked at customer experience vs. customer engagement. http://customerthink.com/customer-experience-vs-customer-engagement-a-distinction-without-a-difference/
Customer service and support is, then, an element of both engagement and experience; but, it is often used as a surrogate term, to be inserted in place of either engagement or experience.
Recently, we’ve seen a public example of performance results from concentrating principally on service enhancement and relabeling, or mislabeling, it as ‘customer experience’, while somewhat neglecting product: http://customerthink.com/casualties-of-highly-competitive-commoditized-services-marketing-lets-start-with-sprints-framily/ The tacit belief at Sprint was that service, largely on its own, would drive customer behavior.
All of that said, there’s little argument that customer service, especially when practiced from a proactive and emotionally-driven base, has economic value and should be seen as a contributor to enterprise profitability rather than merely a passive, reactive, even grudging cost of doing business. As a support for this proposition, It is also often hypothesized that consumers would spend more with companies providing better service. In this post, we’ll look at whether, and to what degree, this is true, false, or somewhere in between.
For several years, up through its purchase by Oracle in 2012, RightNow Technologies commissioned a study (conducted by Harris Interactive), where they stated that great customer service (which they labeled as experience) influences downstream purchasing decisions – at least in online retail. A key finding was that half of these consumers indicated that they would buy from an online retailer if they had great customer service or a previous positive experience. After this positive result, 31% of consumers said they purchased more from the retailer. Overall, RightNow found that 86% of consumers would spend more for a better customer experience (CEI Report, 2011, RightNow)
Oracle released a research report in 2012 – “Why Customer Satisfaction Is No Longer Good Enough” – in which it was revealed that 81% of consumers would be willing to pay more for a superior customer service experience, with nearly half (44%) willing to pay a premium of more than 5% (Oracle Press Release, December 2012).
More specific, so that the reader doesn’t have to parse whether the study is addressing customer service or customer experience, was the American Express Global Customer Service Barometer, a 2011 survey covering the U.S. and nine other countries. The study explored attitudes and preferences toward customer service. Among key findings, the study identified that 70% of Americans are willing to spend an average of 13% more with companies they felt provided excellent customer service. This was significantly higher than corresponding 2010 results (58% of Americans would spend 9% more). Note: The flip side is that two-thirds of consumers said companies aren’t paying enough attention to service: 42% said companies don’t do anything extra to keep their business, and 22% thought that, through passive service, companies take their business for granted.
Back to spending more for service. The American Express study found that the willingness to spend more for superior service wasn’t confined to the U.S. The average amount of additional spend ranged from 7% to 22%:
– India, 22%
– Australia, 12%
– Canada, 12%
– U.K.. 10%
– France, 9%
– Italy, 9%
– Germany, 8%
– Netherlands, 7%
Looks compelling, doesn’t it? Well, though it seems like improved service could represent a major business opportunity, this is one of those instances where there is a big difference between what customers say and what customers actually do.
Before companies begin investing in improved customer service so they can raise prices, they need, for example, to know exactly what processes to upgrade, and to what degree. This requires application of research techniques like threshold analysis so they can determine which, of multiple alternatives – more service staff, cut waiting time, enhanced self-service, use of service support communities, improve first contact resolution, enhance customer interaction capabilities, proactive complaint generation and handling, etc. – to improve.
Even, however, if companies know how much, and where, to spend on service improvement, they have to be fully assured that customers would see the difference and be willing to reward them, financially, for it. Beyond the resources expended for enhanced service, they need to create brand image recognition that this company now provides service that is so superior to competitors that there would be real willingness for customers to spend more. That’s a very tall requirement, in the scaling Mt. Everest category.
Sometimes, like Sprint, companies will invest in improved customer service, but not manage the value of the overall experience well enough, and customers will still defect. More often, even if targeted research and pilot testing more accurately reflects customer spending behavior, there isn’t much (or not enough) concrete data to motivate businesses to spend on better service, such that they would reap the rewards of increased customer dollars – so, they don’t.