It is common sense for any business to provide good customer service. But “good customer service” is a relative term. It does not make sense for every organization to provide best-in-the-world service. Instead, the winning approach is to gear service levels to your particular customers’ expectations. Here’s how this works:
Customer Service Across the U-Curve
AFP/Getty Images via @daylife
Remember the U-curve. Virtually all the profits in most industries accrue either to the premium-priced players at the top of the curve or to the most efficient low-cost producers at the bottom of the curve. The majority of players in the middle do not have the product, service, or brand strength to command a premium price. Nor do they have the cost structure to make money at what the market will pay them.
Thus, you need a different approach to customer service depending on where you play.
At the low-cost/low-price end of the curve, customer service expectations are minimal. At the high end, winning requires superior service. This is why low-price providers can get away with keeping customers on hold on the phone and premium-priced providers cannot.
Let’s look at Southwest Airlines as an example. This major U.S. airline is the world’s largest low-cost carrier. Southwest keeps its planes in the air for more time than does its competitors, giving it a lower cost structure that has allowed it to charge lower prices and make regular profits in an industry where most generally lose money and go bankrupt.
The other difference between premium-priced airlines and Southwest – customers flying first class on a premium-priced flight expect their calls to be answered after the first couple of rings, while Southwest Airlines customers might be willing (and in some cases, are expecting) to wait. This requires extra capacity for answering the phone and at the high end where customer service efficiencies are counter-productive.
AppRiver’s Common Sense Approach
Internet security provider AppRiver’s co-founder and CTO, Joel Smith, took me through the approach to customer service they have used since they were “two guys and a spam filter.” In his mind it just makes sense to:
- “Treat customers how we want to be treated,” starting with having a real human being answering the phone.
- Compensate sales people with salaries instead of commissions so they are driven to serve instead of sell.
- Recruit for fit, looking for caring, low-ego, team players, with the “responsibility gene” that makes it impossible for them to “leave a customer hanging” at the end of the day.
- Invest in transmitting values to new hires during their onboarding – through modeling behavior, learning from peers and training classes.
- Recognize and reward superior customer service publicly.
This approach works for AppRiver. Smith explained that, in general, “Tech and bad customer service go hand-in-hand.” By being better than the rest of tech, AppRiver has built a 93 percent customer retention rate and grown from a start-up to $40MM in sales without any outside funding.
Make the Choice that Fits Your Business
To be clear, either approach to customer service is a viable path to winning. Just don’t get caught in the middle, trying to charge a premium price for low-cost service. And every business is a service business today, in one way or another. Most importantly, if I’m one of your premium customers, answer the phone!
(By the way, I called Smith’s bluff and dialed AppRiver’s customer service line. A real human being named Justin answered the phone and was extremely pleasant and helpful!)
This is an example of the heart of The New Leader’s Playbook: BRAVE Leadership
We’re all new leaders all the time. So remember all the time that leadership is about inspiring and enabling others to do their absolute best together to realize a meaningful and rewarding shared purpose. With that in mind, BRAVE leaders pay attention to their Behaviors, Relationships, Attitude, Values, and Environment – all the time.
