Bad Service Creates Opportunity
Categories: Marketing | Customer Service | Entrepreneurialism | Competitive Advantage
Posted by
Paul Orfalea
at
5:53 PM
4
comments
For many years, conventional business wisdom held that a satisfied customer might mention your company to one or two people, but a dissatisfied customer would tell nine. Today, the average Facebook user has 140 friends who will surely be instantly notified of customer service transgressions. Millions of people write blogs, and while many may have no readers at all, many others boast readership far exceeding the nine people an unhappy customer of the past would contact.
One might think that widespread, credible, instantaneous communication puts a lot of power into consumer's hands, and it does, but one would also have to wonder why bad customer service is still so prevalent.
In a blog entry called The Rise of Business Populists, Fast Company cofounder Bill Taylor quotes a Harvard Business Review article that pretty much explains why bad service persists: it's profitable. Mobile phone companies, for example, all find slightly different ways to mistreat their customers, but there seems to be an unwritten understanding that all of them will "infuriate their customers by binding them with contracts, bleeding them with fees, confounding them with fine print, and otherwise penalizing them for their business."
Consumers cannot exercise their ultimate power - the power to vote with their wallets - until they have a slate of candidates. Dissatisfied customers have a louder voice than ever, but the power in that growing chorus accrues to entrepreneurs. When companies habitually abuse customers, Taylor points out, "...it constitutes an open invitation for blank-sheet-of-paper newcomers to right wrongs and change the game."
He cites Southwest Airlines as an example - noting that its recent decision to not charge for checked bags is part of its long-term strategy to simply treat customers better than its competitors. Any first year economics student recognizes that availability of substitutes significantly impacts price elasticity. If there were no Southwest Airlines, the other carriers would not have to charge for bags because they would still be charging two-to-three times as much for each ticket. Southwest changed the game in 1971 by focusing on customers, and the other airlines still cannot figure it out.
Some people think they cannot be entrepreneurs because they don't have a big, new idea, but you don't have to invent something new to be an entrepreneur. You just have to solve a problem. Aspiring entrepreneurs should search the Internet every day for customer service horror stories. These companies are vulnerable to competition and their customers are looking for an alternative. Why shouldn't it be you?
Comments
Travis Falstad wrote on 02/16/10 9:30 PM
It's been interesting to see how some existing companies have even used social media to cut their support costs and try to turn around a negative image. I used to loathe Comcast for lack of response to issues. They are one of a few who made a very significant effort over the last few years to reach out via Twitter. Twitter is used for many completely useless things but I think it hits spot-on with support. Frank Eliason is the public face of their effort (twitter.com/comcastcares) and the effort has helped them get positive media attention in the WSJ and others. I'm no longer a customer but seeing their current quick response to issues makes me wonder if I would give them a second chance.
This effort had to be the result of some customer service manager there who was into social media, sincerely wanted to improve the customer perception, and was entrepreneurial enough within his own organization to push for a different direction. Good for them.
Jason D'Mello wrote on 02/16/10 9:39 PM
This post is spot on. It seems that customer service is strongly correlated with competition in the marketplace. I recently read of a Chinese shopping technique, called "Group Buy." Basically, consumers form coalitions and track every sale and discount in their area from local stores. Through communicating with each other, they build up demand for a particular product, and all visit the store at the same time, demanding to get the product for the lowest price for everyone, essentially bullying the merchant. The negotiation is said to take hours before the merchant finally gives in, and sells his inventory at an undesirable price.
Sometimes I think that big business in the US is doing the same thing to us as customers, especially companies like AT&T and TimeWarner Cable.
Kelly Lui wrote on 02/16/10 10:14 PM
I think it's good to note that consumers really do have more ways to reach the masses with negative information about companies. The main reason that this is good is because it'll show companies that they can't get away with treating their customer poorly.
Jerome Gross wrote on 02/12/10 7:06 PM
You're so right! I truly believe that it all boils down to not only how well you treat your customers, but how well you understand them as well.
The not-so-secret ingredient for success so many ignorant, failing businesses refuse to use: EMPATHY.