Would you like Service with that?
I think for most people, it’s pretty clear; we’d rather not need service.
We’d rather not need to call about an error on our credit card, take our car to the shop, or invite a repairman into our homes. We’d much rather have things that “just work.” The classic example is the POTS, which is going the way of the dinosaur, but remember how reliable the dial tone was? The phone company created a service that was reliable 99.999% or five nines reliable, which meant the phone was out for about 5 minutes a year. Don’t you wish your cell phone was a tenth as reliable?
We know that’s not the real world; things break and need service. So, in fulfilling that commitment lies an opportunity. I started reading about something this week called “service recovery.” This concept is that excellent service can trigger better customer loyalty than if the customer never needs service to begin with. I think this was illustrated in my laptop example. I am much more loyal to this manufacturer after I needed service than before.
The question with service recovery is if it’s just rare and whether or not it can be fostered within a company as a competitive advantage. I think it can be and while rare, the alternative is much worse for your company. A new survey done by the Harris Interactive shows that 84% of people are willing to share a negative customer experience. So while you customers might not be as willing to sing your praises, they are sure willing to speak ill of you.
Some other interesting data points in that survey as well: 87% of people have stopped doing business with a company due to bad service. So when you looking at reducing your spend in service next year due to economic factors, make sure you account for all the new customers you’ll have to acquire to replace the ones that leave. A typical manufacturer will spend 8-10 times the amount of money acquiring a customer than making the ones they have loyal. Even through for many of these companies, service and parts can generate three times the amount of the original sale, as reported by both McKinsey and AMR. Where do you think the wise investment would be?
A final point out of that Harris study: 58% of people are willing to pay for a better experience. Shannon mentioned that in this post. I am a prime example of that; I will pay to be treated better. I pay for AppleCare, VIP tickets to shows, or commercial-free radio. I think there are many more people out there like me who would be willing to shell out a few extra bucks for the promise of an above average experience. If individuals are willing to pay for better service, shouldn’t your company invest as well?
October 23rd, 2008 at 8:30 pm
Nice writing. You are on my RSS reader now so I can read more from you down the road.
Allen Taylor