Good Service Worth 9.7% Price Premium… And Far More


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By Michelle Norris – EMEA Marketing Manager, Jacada Inc.

According to a new survey from Ovum, good service is worth a 9.7% price premium, amounting to $268 billion per year across all consumer categories in the USA.  Wow! 

But I don’t think that even comes close to capturing the true value of customer service to a business.  What about the impact of improving customer satisfaction (and the monetary value in terms of improved retention and share of wallet); the reductions in cost to serve as a result of efficiency improvements in the call centre;  or the potential for increased revenue from improving opportunities to cross and up sell, for example? 

I like to think I am pretty typical of all educated women of my (undisclosed!) age.  Certainly of those without children.   I use the web to search for the best deals possible, with service quality having greater weight in my decision-making process when I need specialist knowledge I have to trust (changing my pension or getting my car serviced, for example) and/or as the perceived risk increases if something were to go wrong (purchase of a large ticket item, eg).  I would then consider paying a price premium to feel I’ve ameliorated the risks.   Typical, of most of us, I think.  But I am also willing to pay more to actually avoid a company after receiving bad service.  To move to a different supplier.

Case in point… I’m boycotting a leading budget airline.  I’m no longer willing to put up with the inconvenient airport locations and departure times, surly and unhelpful staff or the hidden charges (how can they justify charging for you to print out your own boarding card?).   I’ve flown with them a number of times, and accepted all of this previously.  But the final straw was that I had personal proof that no one cared if I had a problem or was unhappy.  I knew that the outspoken company leader doesn’t – he’s actually stated that people are welcome to go elsewhere if they’re not happy.  But I called the contact centre, and realised that this attitude was endemic.  I don’t know why I was surprised, but this one personal contact with the organisation made me re-examine all the other negatives about the company that had slightly irritated me before and the real cost of travelling by that airline.  I decided that I wasn’t going to use them again.  And if I can’t find similarly-priced flights (and I do look) I’m certainly willing to pay 10% more to not feel cheated and unvalued!

OK, I am a little more flexible as I don’t have to fund a whole family’s flight costs.  But it’s wider than that.  People are willing to pay what they think something is worth, based on their expectations, individual wants, needs and experiences.  Companies build value into their brands based on a normalized view of the needs, wants and demands of their target customers.  This airline – for many – can deliver poor service because no one expects good service from them.  People are just glad they’re not having to stand up in the back or pay for toilets (yet)!  And there is a perception that it’s cheaper than other options (not always true, but an intrinsic part of the brand identity).  Reasons why one of the most hated airlines in Europe flies more people than any other. 

But I am a strong believer that all the parties in any relationship have to feel that they are getting something out of that relationship.  And that in most relationships there comes a time of benefit re-evaluation, as it were.  I want to feel listened to.  Valued.  And my call into the airline’s contact centre proved to me that I wasn’t.   So I took my business elsewhere.

Given some research we’ve recently undertaken in our key territories, other companies should beware.  In the UK, for example, just 8% of people felt valued after calls to providers of their products and services.  If these people, too, decide to move elsewhere to avoid a repeat of poor customer experience then companies are in danger of losing much of their hard-won customer base.  And that’s going to cost companies much more than the 9.7% premium talked about in the Ovum survey.

Republished with author's permission from original post.

Cindy Knezevich
Cindy Knezevich is Director of Global Product Marketing & Communications at Jacada (NASDAQ: JCDA), a leading provider of unified desktop and process optimization software solutions for the customer service and support market.


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