Top

You Can’t Have Great Service and a Low Price. Or Can You? 

Chip Bell | Oct 1, 2015 403 views 2 Comments

Share on LinkedIn

Some smart person somewhere sometime (probably a priest) suggested confession was good for the soul. So, I will swath my soul and admit out loud I have been an ardent enemy of price as a competitive differentiator.

In my own defense I know the investment that customers make (whether time, hassle, or funds) is a part of their definition of value. And, I can appreciate that there are one-off exceptions to my “price is not a differentiator” bias. But too often I have worked with organizations—especially B2B companies—who want to chastise my pitch for creating a great customer experience by lecturing me that, at least in their business and for their customers—it was all about price.

Customers obviously want a fair price. But I have firmly believed most will pay more for a great experience—just ask Nordstrom! My bias was reinforced by a recent nightmare experience my niece experienced after booking a flight to NYC with Orbitz. Full disclosure: I am a big fan of my world-class travel agent and thus avoid all travel discounters like Orbitz, Travelociy, CheapSeats, or Priceline.



Early last Thursday evening before her flight the following day, my niece called in a panic. She had just learned her flight to NYC had been changed to a later departure time making it impossible for her to make a concert with friends–the sole purpose of her trip.

“Orbitz won’t call me back,” she lamented, “and I worry seats on alternative flights are getting booked while I hold; I’ill end up missing the trip. I know its Thursday night, but can you please call your travel agent and ask her to help me?”

I called my travel agent at home and she went to work on the case. She learned there had been an equipment change two months earlier and Orbitz had failed to inform my niece. My travel agent quickly found her a flight that would get her to NYC in time for the concert, obviously at a higher price than the Orbitz fare. But, my travel agent was not ready to end her world-class service.

Armed with the details, she contacted Orbitz on behalf of my niece. Her investigation started with a 45-minute hold followed by an agent who indicated that, since my travel agent had already booked her an alternative flight, her airfare with Orbitz would not be refunded. When my travel agent read her Orbitz’s policy on refunds, the agent curtly said, “Well okay, but it could take 45 days for a credit to be issued on her credit card.”

After my niece was back from her great NYC trip, she promised to never again follow her “save-a-dollar” default and would work with an independent travel agent. The agent’s fee is an insurance policy if there is some hiccup with a trip—now more the rule than the exception. I was elated my price bias was solidly affirmed. Great service experience–1; lowest price—0.

But, the next week I watched an interview on CNBC between interviewer Becky Quick and the jet.com CEO and co-founder, Marc Lore. The company was launched in late July 2015 as a revolutionary new shopping club. Lore was intriguing, visionary and confident his experiment would give Amazon—the 500-pound retail gorilla—a run for their money (literally!!). He even succeeded in making Amazon Prime seem almost impersonal.

I rushed to my laptop to learn more. As I watched Pakistani comedian, Kumail Nanjiani explain how jet.com worked, I realized that many of the features found in great customer experiences had been incorporated into the jet.com web experience. They had embellished the pitch of “price” with the features of experience. Here are three principles:

Connect to the Customer’s Identity

Why do people love a Harley-Davidson motorcycle or a Starbucks experience! A key feature of all cult-like brands is the way the product or service offering becomes a part of the customer’s identity. When you are a member of the Harley Owners Group, a Deadhead (Grateful Dead), or a Parrothead (Jimmy Buffett), you feel a part of an insider group of fans. You get special privileges, early announcements, behind-the-scenes looks that non-members never get. Lady Gaga’s fan club hears about her comings and goings long before the media tells the crowd. So, jet.com follows the same “membership has privileges” concept and makes customers feel like partners by enfolding them in a “just for you” experience. They even created a new word, “Here’s how to jet,” making their brand name a verb as well as a noun (like “Xerox it”).

Make the Experience Jarringly Transparent

Customers love Nordstrom in part because the retail store always does the right thing. Unhappy with your purchase, Nordstrom takes it back without a hassle. Amazon goes after their vendors on behalf of their consumers, even if it means Amazon takes the financial hit. Trust is crucial in a cynical world of too many con artists, scams and rip-offs. So, one of jet.com’s most endearing features is its openness about the process and clear goal of being your warrior on hidden costs. Two videos, including the hilarious comedy routine by Nanjiani, simply and powerfully inform customers how jet.com works. Customers can watch their savings climb in real-time as they buy. And, their shopping cart is subtly called a smart cart! Jet.com’s revenue comes from an annual $50 membership fee members can cancel at anytime; no strings attached.

Create a Strong Emotional Connection

People love Starbucks because of their intentional emotional connection. You hear your name called three times from placing your order to the barista placing it on the counter (“Cinnamon Dolce for Jane”). Soft music, cushy chairs, and free Wi-Fi make you want to hang around and buy more coffee. In fact, Starbucks has become a popular destination location for customers, as in “Let’s meet at my Starbucks at 45th and Vine.” Jet.com adds colorful site design with funny phrases like, “blue starry things,” “it’s a math thing,” and my favorite, “if we were in a beauty pageant, finding ways to save you money would be our talent” are all aimed at engaging your emotions, not just your wallet.

The jury will be out for a while on whether jet.com survives. CEO Lore projects the company will break even by 2020 with 15 million members. Between now and the end of their long runway, they will burn through a lot of cash before economies of scale and the volume of members turn red ink into black. Along the way, the bold experiment is likely to alter customer expectations about the experience of price, not just the arithmetic of price. And, it could become the strong competitive differentiator I once questioned.

Print Friendly, PDF & Email


Recent Editor's Picks:


Categories: ArticleColumnCustomer ExperienceCustomer LoyaltyEditor's PickService and Support
Tags:
403 views

2 Responses to You Can’t Have Great Service and a Low Price. Or Can You?

  1. Andrew Rudin October 8, 2015 at 7:28 am (861 comments) #

    Hi Chip – I enjoyed watching Kumail Nanjiani’s promo video for Jet.com, and especially enjoyed his word corruptions – ‘transformationalizing’ . . .

    But I read today that Jet.com has waived their subscription fee and now offers their service for free. I am sure that this is especially difficult for Jet.com, because their business model was based on the assumption that subscriptions would provide most of their revenue. The fee-free plan was in response to slow consumer uptake. Desperation? It looks that way to me . . .

    What underlies the perception of high service is what I discussed in my October, 2015 column: risk transfer. Full-service travel agents and high-touch retailers such as Nordstrom are popular with some consumers because they absorb the risks that consumers don’t want – for example, the cost of eating an airline ticket or hotel reservation, or accepting returned merchandise any time for any reason. In fact, their policies are based more on accounting than magnanimity. Those companies build such risks into their pricing, and they have figured out how to do so profitably. For some consumers, that’s a win-win. In some cases, that works for me.

    But not all. Sometimes, I’m willing to accept restrictive return policies and customer self-service in exchange for low prices – or at least for the belief that I am getting them.

  2. Corey Kronengold October 24, 2015 at 12:54 pm (1 comment) #

    More importantly, they are simply bad at customer service. My experience in dealing with their customer service team has been nothing short of atrocious. I’m embarrassed for them.

    It takes them no less than 12 hours to return a customer’s email. I have had an ongoing discussion for a week, simply trying to return a product to them. Replies come anywhere between 12-24 hours later. And they all say, “We’re new, so we’re trying to get better.”

    Nobody is going to order from them after their first time with an issue. When a customer has an issue with an Amazon retailer, Amazon steps in on the customers behalf. Jet just passes the buck, blames the partner, and after 3 days, gives you a $10 credit, which will never be used because you’ll never buy from them again.

Add Your Comment (All comments are reviewed by moderator, no spam permitted!)