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Customer Service Costs Money Too,
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This review is from: Flip the Funnel: How to Use Existing Customers to Gain New Ones (Hardcover)
As a consumer, I sure do like Jaffe's ideas, unfortunately, Jaffe, like pretty much everyone else endorsing similar ideas, fails to address the fact that customer service costs money. Like another reviewer mentioned about Jaffe's airline experience, treating customers to full refunds, discounted flights when inconvenienced, and other measures is simply not a feasible strategy when most flights barely make a few dollars profit per customer.
The real problem Jaffe and similar authors ignore, is the fact that in the vast majority of mature markets, price is a primary factor for most customers and customer service costs money. Even something as simple as employees speaking to customers in a "nice" way when dealing with complaints costs money...you have to train those same employees on handling customer complaints more effectively. Nearly every single aspect of improving a customer's experience costs money, and when the market clearly declares that it would rather have ill-tempered employees or limited interaction with the company than price increases, Jaffe's entire model breaks down.
Another practice Jaffe indicts are company websites without contact info (other than support request forms). I own a web marketing company and we also do web development and design. More than 90% of the customer support issues we have are user error. I've spoken with others in the software business and I'd venture to guess they'd all have similar stories. We currently service those customers, but we've had to move to a premium support model where we charge hourly for support after the first month because we would have to significantly raise prices in order to service all those requests. While we get plenty of complaints about not providing free support, our marketplace has clearly spoken that price is far more important than service.
I've also tried that customer-obsessed service model in the past when I was in the mortgage business about 10 years ago. Of all places, the mortgage business (in the US) was overrun with shady companies trying to bilk customers out of every dollar they had, so I thought customers would really appreciate a loan officer taking the time to try and save them money on their house payments and help them find a mortgage program that would fit their goals the best as opposed to just selling them whatever made me the most money. I thought, after these customers see how much I truly care about their welfare (and I did), they would undoubtedly send me referrals and become lifetime customers. Didn't happen. Not even close. Don't get me wrong, I absolutely had a number of customers who swore by me and flat out told me they wouldn't work with anyone else. Unfortunately, they were out-numbered by customers complaining that my closing costs were 10% higher than Ditech's, even though I'd spend hours and hours on the phone going far above and beyond what any other loan officers were doing.
That was a lesson I only had to learn once, and that lesson was, even though I, personally, look for a company with a good balance between price, service, and a quality product, most people don't do that. Most consumers place significantly more weight on price when making a purchasing decision...to the extent that they'll ignore long-term cost increases (due to poor quality, poor service, etc) in favor of short-term cost savings. Entire industries have been built around this concept.
Jaffe mentions Apple as an example of a company that "gets" service, specifically referring to their "Genius Bars" where you can get your computer serviced by experienced and helpful staff. That all sounds great, but Apple computers are significantly more expensive than their PC equivalents, and as a result their market share is only a small fraction of the entire computer market. Let's also not forget the fact that Apple has a visionary leader in Steve Jobs and an incredibly talented staff pumping out unique products that nobody's tried before...not to burst your bubble, but it's highly unlikely you have a similarly-capable team. Let's also not forget that there was no serious competitor to Windows before Apple took off so the market was hungry for an alternative.
The bottom line is the best chance a business has of growing is by cutting costs, and customer service is expensive (especially in Tech, which this book seems to be focused more on).
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Showing 1-2 of 2 posts in this discussion
Initial post: Dec 2, 2012 10:51:01 PM PST
It's easy to make excuses, but here's the bottom line: Acquisition is much more expensive than retention.
Posted on Jan 15, 2014 12:30:16 PM PST
Tim Buist says:
Some sweeping generalizations here. Just because your above average service efforts in the mortgage industry didn't pan out does not mean it doesn't work. How did you leverage those happy customers? Probably not to the extent you could have, if they were as happy as you say.
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