Ever wonder why companies tend to give their existing customers such crappy service? Let's ask James Surowiecki

"Companies end up thinking that their efforts are adding up to a much better job than they really do. In a recent survey of more than three hundred big companies a few years ago, eighty per cent described themselves as delivering “superior” service, but consumers put that figure at just eight per cent."

-- James Surowiecki, on his New Yorker "Financial Page"

this week (Sept. 6), "Are You Being Served?"

by Ken

It's fascinating how widespread the acclaim was for flight attendant Steven Slater -- you know, the fellow who had it up to here with those damned passengers and made that dramatic exit from his plane via the exit chute. As New Yorker "Financial Page" columnist James Surowiecki notes this week, "Everyone knows that the contemporary customer is mad as hell, too—fed up with inept service, indifferent employees, and customer-service departments that are harder to negotiate than Kafka’s Castle."

And why are we all so damned mad? As Surowiecki points out, "C.E.O.s routinely describe service as essential to success, and they are well aware that, thanks to the Internet, bad service can now inflict far more damage than before; the old maxim was that someone who had a bad experience in your store would tell ten people, but these days it’s more like thousands" -- or even millions, he notes, as in the case of Dave Carroll, who had his guitar broken by United Airlines baggage handlers and had the song he wrote in response, "United Breaks Guitars," "has garnered more than nine million views on YouTube." However,

customer service is a classic example of what businessmen call a “cost center”—a division that piles up expenses without bringing in revenue—and most companies see it as tangential to their core business, something they have to do rather than something they want to do. Although some unhappy customers complain, most don’t—one study suggests that only six per cent of dissatisfied customers file a complaint—and it’s tricky to quantify the impact of good service. So when companies are looking for places to cut costs it’s easy to justify trimming service staff, or outsourcing. The recession has aggravated the problem, as companies have tried to cut whatever they could—the airlines, for instance, have trimmed payrolls by sixteen per cent since 2007—but even in more prosperous times there was a relentless emphasis on doing more with less. That’s how you end up with overworked flight attendants, neglected passengers, and collective misery.

Unfortunately, customer service doesn't lend itself to any of the productivity enhancers that have transformed the workplace in recent decades.

Modern businesses do best at improving their performance when they can use scalable technologies that increase efficiency and drive down cost. But customer service isn’t scalable in the same way; it tends to require lots of time and one-on-one attention. Even when businesses try to improve service, they often fail. They carefully monitor call centers to see how long calls last, how long workers are sitting at their desks, and so on. But none of this has much to do with actually helping customers" --

[with the result quoted at the top of this post]

Is it all our fault as consumers, for having become so demanding of lower prices? "Low prices usually mean small payrolls and cheap wages." Still,

there are companies that have managed to use superior service to distinguish themselves from their competitors and still deliver reasonable prices: the employees of the online shoe retailer Zappos.com are famous for going to exceptional lengths to keep customers happy. Doing this, though, requires an investment in service that most companies aren’t willing to make.

As usual, Surowiecki is holding a theory in reserve.

The real problem may be that companies have a roving eye: they’re always more interested in the customers they don’t have. So they pour money into sales and marketing to lure new customers while giving their existing ones short shrift, in an effort to minimize costs and maximize revenue. . . . [A] company’s current customers are often the ones who experience its worst service.

This doesn't seem to make economic sense, since "it's more expensive to acquire a new customer than to hold on to an old one," and "these days, annoyed customers are quick to take their business elsewhere." There's a "but," though.

[B]ecause most companies are set up to focus on the first sale rather than on all the ones that might follow, they end up devoting all their energies to courting us, promising wonderful products and excellent service. Then, once they’ve got us, their attention wanders—and Dave Carroll’s guitar gets tossed across the tarmac.

David Carroll's "United Breaks Guitars": As of my visit tonight, it's at 9,079,065 views -- not counting the song's two sequels.

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