The true cost of poor customer service

I tend to write a lot about customer service and how (poorly) companies handle customer dissatisfaction because it’s such a source of success and failure. Customer experience is something I try to excel at as a business owner. Unfortunately, not every business shares my priorities, as this case shows.

This case began when I made a book order online. I buy a lot of books as I love learning through reading. Leading a busy life, I didn’t track the exact shipping time and the exact shipping date. But after a week or so, I did get an SMS and an email stating that I had a package waiting to be picked up. They did not however state by when I had to get it. So I managed to eventually get the time to go pick it up. It turns out that the package had been sent back the very same day.

I did not how this kind of situation was supposed to be handled so I sent an email to the company, expecting a prompt reply. No answer came back even though they claim having a 24 hour email response policy.

Now, five days later I called them to find out. It turned out they intend to charge me for not picking up the package in time. It’s not a big charge but it’s an expense I’d rather be without. Normally, this would be expected. I think such a charge is completely justified if you inform the buyer in time about it and also let them know the date by which they need to retrieve the package.

I said as much to the customer service representative on the phone. I said neither delivery notification mentioned a date so I’d simply assumed 3-4 weeks as is usually the case. I could not reasonably be held responsible for them failing to provide adequate information.

What follows didn’t surprise me one bit, knowing how bad many businesses here are at handling customer complaints. Instead of taking responsibility, she blamed the shipping company. My counter argument was that it’s not an acceptable excuse and that they, as sellers, are responsible for the entire chain of delivery even if they’ve chosen to outsource parts of it. As a result, they need to address this situation regardless of whose fault it is. As a customer, I don’t care. I just want it to work.

I also mentioned I’ve bought books for perhaps close to a thousand euros over the years and I expected them to return my loyalty. If she could not cancel the charge, perhaps she could speak to her manager and ask him or her to find a solution. She seemed completely unable to even consider such a course of action and kept blaming the shipping company.

I then told her that if they sent the invoice, this would be the last time I bought from them. She seemed totally unperturbed by that and kept insisting that it wasn’t them charging me so technically they were not at fault. At that point, I’d realized this wouldn’t lead anywhere so I said that I didn’t want to waste more time on this or them and hung up.

Why poor customer service is expensive

This would not be the slightest bit surprising if they’d been clear from the beginning about the terms and provided adequate information to me. They did not, however. But that wasn’t the real problem. Their biggest fault was not training the customer service staff in how to handle these situations. That lack of training is now costing them lost revenues.

Recall that my last resort was threatening not to order from them ever again. I was honest about that. Most dissatisfied customers would just walk and never buy again. They’d not give the seller a chance to understand the magnitude of their dissatisfaction and come to terms. The price of that dissatisfaction is my CLV, or customer lifetime value.

The CLV is, in plain terms, the total amount of money this company can potentially earn from me buying from them. The CLV is an amazingly useful key metric in a business. It can be applied when budgeting for marketing as well as designing policies for customer service.

I buy a lot of books, which was evident from my order history. As a result, my CLV is likely one of the higher ones if you were to calculate the average CLV of their customers.

All that money and all those future earnings are now gone. As a customer, I can buy from wherever I want. I decide who gets my CLV. In today’s market, it’s easier than ever to choose. Customer loyalty is rare. We no longer frequent the same stores our entire lives. However if we do, then those businesses need to recognize that or risk losing us. Customers cannot be taken for granted.

The problem with this customer case is that it’s likely not an isolated case. I believe it’s symptomatic and this company likely loses a lot of money, every day, because of how they handle customer complaints. A lot of CLV’s out the window. A lot of profits and growth potential wasted.

My impression is that it’s apparently more important for them to be right, than for me to remain their customer. Thing is, it doesn’t matter who’s technically right, even considering all the fine print. The fact that I feel wronged is cause for concern. This isn’t about being right, it’s about staying in business. And in this instance, they failed.

Getting customer service right

Luckily, this situation can be remedied. Most companies can turn their customer service from a liability into an asset.

First, the customer support staff needs to receive training and learn to be more empathetic with customers. You want them to realize you feel wronged and you want them to champion your cause. Their job isn’t to repeat company policy. It’s to offer a shoulder and show concern.

Second, customer support staff needs to have some leeway when it comes to meeting customers halfway. In this case, if the customer service representative been trained she’d known that writing off a €15 fee made economic sense considering my CLV. But if she wasn’t authorized to do that, she’d still have her hands tied. But it would have been better as she would at least have brought the issue to someone with the authority to make a call.

Third, customer support staff needs to understand they have a pivotal role in the entire business. Customer service is a fantastic source of information. My email and phone call alerted them of two things: 1) their 24 hour email response policy wasn’t living up to its promise to customers and 2) the shipping agent wasn’t providing adequate information to the recipients. Both of these are customer experience aspects that they will want to address to stay competitive. However I doubt any of that got reported to someone who could do something about it.

An opportunity for publicity and commercial success

Luckily, more and more companies start to realize the value of fantastic customer service. Zappos have been remarkably successful and earned publicity for the quality of their customer service.

This isn’t rocket science. It doesn’t take a massive investment in technology to be good at this. You just need to realize whom you’re working for and what problem you’re solving for them.

I make a conscious decision to buy from companies who get this. Companies who don’t, I avoid. If I think they’re particularly bad, I write about them. Like I did now, about Bokus. I hope they read this and start to be more like Zappos. Until then, I’m shopping elsewhere.

Tuesday, May 19, 2015 - 14:03

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Welcome to my blog. My name is Jakob Persson and I'm an entrepreneur and consultant. I work with companies to create measurable change by focusing on users, customers, market strategy and pricing. I'm a deep and broad specialist-generalist with skills in business strategy, digital marketing, pricing, interaction and service design as well as project management and software development.

This is my personal blog where I write on topics that interest me such as design, value-based pricing, marketing and technology but also on personal interests.

I am the founder of Leancept which makes companies more competitive through value-based pricing and customer intimacy.

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Jakob