The secrets of great customer service

financial foundations

Very little consumes and perplexes organisations more than the question of customer service. This is the organisational issue, brand issue and people issue that no company can afford to ignore. In today’s environment of sliver-thin margins of differentiation, customer service has quite possibly never been more important – so why do so few organisations get it right?

I recently interviewed Cindy Solomon, customer service guru, consultant, speaker and author of the new book Rules of Woo – an entrepreneurs guide to winning the hearts and minds of your customers and asked her to walk us through what it takes to deliver great customer service, what some of the myths and misunderstandings that get in the way are, and what are some examples of doing it great and getting it all wrong. Listen to the interview here.

Michel Hogan: Is providing great customer service more important than it was five or 10 years ago?

Cindy Solomon: Research shows that customer service has become much more important over the last five to eight years. And it is happening because of the commoditisation of just about every product or service that you can imagine. There used to be a time with innovation that meant you owned the marketplace for seven years, now research shows if you have a new product or service you will own that market for less than seven weeks. So service is really the only differentiator that is in complete control of an organisation. As we see during recession those companies who focused their efforts, actions, human capital and financial capital on building true service and loyalty with their customers are the ones who are thriving.

That’s so true, we see that here in Australia, even though we didn’t have the recession dip that a lot of the rest of the world had, there is still this commoditisation of just about everything and there are certain industries that are being more hit than others. Telco and banking are two in particular that seem to be caught in this commoditisation trap, and for what ever reason are really tone deaf to delivering real customer service to help them get out of it. They talk about it a lot but they don’t do much around it.

Absolutely, and that is such a fascinating piece of the puzzle to me, because if you aren’t competing on customer service that means you are probably competing on price. And as you and I both know that is the most dangerous and slippery slope that you can compete on. Because someone can always undercut you, but if you are really focused on providing service and therefore creating loyalty with your customers price becomes more a non-issue.

In my speeches I often say, time is one of the best and most important currencies you can give to customers. And that is certainly what good customer service does, it makes it easy and seamless for your customers to interact with you – and most customers are happy to pay more if it is easy to work with you, if you have a relationship with them, if you make it simple and efficient to deal with them.

I think it is interesting that so many industries are stuck – banking, airlines even some of the mass retailers are so focused on price, and that doesn’t do anything to engender loyalty.

Loyalty is a great result of great customer service, but what does great customer service look like today?

First-and-foremost great customer service is making it easy to do business with you. That your processes and procedures and policies make it easy for customers to not only interact with you on a day-to-day basis, but also to give you their money or maybe to report a problem or an issue that they have with you. So processes and procedures to be seamless and easy to do.

Second thing and the other element of great service are great people. People who are well-trained. People who are sincerely interested in serving the customer. People who are knowledgeable about their product or service. And again, that also plays into the ease of doing business. There is nothing worse than walking up to the counter in a retail establishment or talking to someone on the phone with a question about a product or service, and the person doesn’t have the answer. So knowledgeable well-trained employees are the second piece of that puzzle.

Then the third piece, which is an outgrowth of the first two, is for customers to feel as though you not only recognise them and appreciate their business, but more importantly that you know a bit about them and their preferences so they don’t have to repeat themselves because they happen to get three different people when they call. So that you have, what I consider a relationship between the customer and the company.

Those three things, done to even a moderate level of efficiency and competence, can really set a company apart from its competition.

That leads into this idea that every company needs to have customer service as its number one focus. There are brands out there who don’t – so what if a company doesn’t have a customer service focus – can they still be successful?

That brings up a whole other interesting question. A myth about service is that great customer service means you exceed a customer’s expectations. I think that is completely false. Great customer service is setting the expectation for what you are going to do, then hitting it every single time. So flip the idea on its head and instead of thinking of it as customer service think of it as expectation setting.

One of my favorite examples of this is Ryan Air – a large airline in Ireland. They have the number one customer service ratings in the airline industry in Europe right now. The irony is that Ryan Air is a low-cost, horrifically bad service airline – but they know it.

They set the expectation and are crystal clear about it in everything they do – if you think you are going to get service here you are in the wrong place! What they do incredibly well is get people from point A to point B and for that they will charge you the lowest fair they can charge. That’s the expectation they set and that’s the expectation they meet.

They tell you upfront their flight attendants are surly, they are only there for your safety and don’t care about anything else. If you want a pillow you’re going to pay for it. If you want a blanket you’re going to pay for it. If you want food, bring your own. Yet they have the highest customer service ratings.

What they have done is set an incredibly low regards to service but have set a high-expectation where their strength is and then they meet that expectation. They are brilliant at turning planes, at staying on time, at having few cancellations, because that is the part they do really well. So they have set a standard for their company that they can meet every time – which is no service, but in fact that builds a trusting relationship because the expectations are clear and they meet them.

Where companies get in trouble is when they give lip service to service and then don’t achieve the promise they make to the customer with any sense of consistency. No matter where customer service is in your priorities, it’s about understanding from the executive to the front line what the expectation is we are setting for our customers, and having the ability in processes, people and training to meet that expectation every single time. That’s what creates the dialog and loyalty with customers that drives bottom line profitability.

The airline industry seems to struggle a lot with the idea of service and the Ryan Air story is such a great counter to that. But we all hear about customerzillas – where customers are behaving incredibly badly and the organisation’s responses don’t seem to make a lot of sense. The mantra seems to be that the customer is always right. But that’s isn’t true. So how should companies deal what I call customerzillas within a customer service framework?

Research shows that there are three distinct groups of customers. The percentages fall out that 2% of your customers are advocates. People who love you no matter what you do. They have a deep and abiding trust in you and they tell your friends about you. Then there are 2% at the other end of the spectrum who are your “customerzillas” or the serial killers as I call them. These are the people who you simply cannot make happy. You build your product sideways, you package it in green wrap not clear, you ship it in different way, you do it on different timelines. What ends up happening is those 2% of your customers end up costing you up to 40% more to sell to than the 96% in the middle who are your bread and butter.

What I recommend to companies with these customerzillas is to wrap your arm lovingly around their shoulders and walk them down to your competition. Because they will then suck the life out of them just the way they are sucking the life out of you. The tough part about the customerzillas is, because they will never be happy and they will never be loyal, they will bad mouth you no matter what lengths you go to. In addition, no matter what extraordinary service measures you provide they will constantly be demanding more.

When I’ve done financial analysis on these types of customers with my clients it shows they end up costing them money every time they interact with them. So great service companies deal with them by helping them find another company to go to.

One of my clients – a five star resort chain who is known around the world for great service, sends those clients thousands of dollars of certificates to go to their number one competitor. Hoping in turn that they will not come back to them. Because they cost so much time, so much energy and create such negative word-of-mouth they have found the most cost-efficient and profitable thing for them to do is help them send their money elsewhere.

Over the years you have worked with many companies and I know you have a huge library of great and appalling customer service examples. What are some good and bad examples you use for your customers and clients?

Let’s start with the good examples of companies that I think are really hitting it out of the park when it comes to customer service. And I want to be clear about this, great customer service is not a cost of doing business. Great customer service is a selling tool that enables you to more profitably bring customers into your business and keep them there so that you are not simply shovelling new customers into your sales funnel but losing them out the back end and having to replace them.

There’s a great quote and I wish I could remember who said this, “great sales without great service is like stuffing money in a pocket full of holes.”

Great service is vitally important to the bottom-line profitability of the organisation and can be done in any size organisation and it can be a cultural tool to create sales and profitability no matter what the size of the company.

A recent example is a small, probably million dollars in annual revenues, company – a salon in Clevland Ohio called Vanity Lab. This is an organisation that not only espouses that the customer is the most important asset it has, but also backs it up with policies and procedures training and people to allow customer to feel that they are literally part of a family.

I happened to go to check them out because I had heard such amazing things about them and while I was there, unsolicited, one woman who worked there said “I will never be able to work anywhere else because the woman who is the President makes us all feel like part of the family and we and our clients are such a family that I can’t imagine working anywhere else…”

Now that’s all well and good but what’s important about this is that each person who works there are responsible for four times the revenue generation as compared to the industry standard for a spa. That means they bring in, by cross-selling, up-selling, etc, four times the revenue that a normal salon worker will bring in.

That doesn’t mean they are constantly selling to you, but rather because they care so much about the organisation and are so well-trained and cross-trained against all their products and services, they make you feel as though you want to give them your money. You want to buy more from them because the experience is so fantastic. From the moment you walk into the organisation to the moment you leave you feel as though you are part of something bigger. You’re not giving somebody your money, you are now part of a family that happens to be a salon and a spa.

So it’s not just that it feels good. But because this organisation has put their money behind great hiring, great training, giving people a stake in selling goods and services, they have been able to take a 2% profit margin company into a 35% profit margin company with revenues that are double the average for similar square footage locations. It’s not just a nice to do – it is an absolute bottom-line revenue generator.

Another example that everyone is going gaga for in US is Zappos. They are one of the best examples of having a customer service philosophy that flows through every part of the business.

A CEO friend shared this story with me. He was sitting on a panel with Zappos CEO Tony Hsieh at a conference recently and they had finished up and decided they were going to order pizza seeing it was late and they didn’t feel like going to the formal dinner. This was the CEO of a five star hotel chain, CEO of Zappos and CEO of UPS (I think). And they were giving Tony a hard time about all the great press he’s been getting about customer service at Zappos. So he said “let’s test it out, call Zappos,” which is a company that sells shoes and other things online, “and tell them you want to order a pizza and see what happens.”

The hotel CEO asked if he was sure he wanted to do it and Tony said to go ahead. So the hotel CEO made the call and put it on speaker phone. When the customer service person answered he said “I am here in Cleveland Ohio and I would like to order a pizza.” And the woman said, “Ok, where are you specifically,” and he told her and she said “can you hold on just a minute.” She got off the phone and when she came back, not only gave them the names of three pizza places that delivered to his location but had also called to ensure that they were still open.

Of course, that is a stunning example and the philosophy as stated in Zappos’ mission statement (and I am paraphrasing) is that they are a customer service company that happens to sell shoes and other stuff. So all of their people are trained to do exactly what the customer needs them to do. They are paid not on the number of calls they take, or how quickly they handle the call, they are paid to develop relationships with the customers rather than just be a cog in the wheel of serving customers. They are one company, who from a philosophical perspective and operational perspective, have been able to pull all the pieces and parts together to create truly exceptional service.

So that’s an amazing example but what about the companies that can’t get their heads around the idea no matter what and are on the other end of the spectrum?

I’ll give a personal example with an insurance company that I use in my book. I was trying to get insurance for a scooter and had been recommended this company by the previous owner. I got online and immediately had problems with their site and couldn’t complete my application and had to call them up. Finally got on the phone with someone and explained what I wanted to do, and in a moderately surly but not terrible way said they would take my application on the phone.

I went through the process on the phone, and if you have ever applied for insurance you know that it is a somewhat arduous process. We get to the end of the application and they give me a quote that turns out to be five times the quote my friend who sold me the scooter had been paying. She lives about two blocks away from me, we’re the same age, but she was paying $200 and I was given a quote for $1,000.

We go back through the application to see what the problem is, taking another 15-20 minutes – I have now been on the phone with them for 40 minutes. It takes another 10 minutes and we determine that the computer will only let her put in a minimum of 4,900 miles per year.

Now I live in San Francisco which is seven miles square and I’m only using this scooter for local errands. I’ll be lucky if I put 100 miles a year on it. But she couldn’t complete the application on the computer because she couldn’t change that number, so she asked if she could send me an application instead.

I have now spent nearly an hour on the phone. She has to mail me the application because she’s no allowed on the internet, so can’t email it to me. She can’t fax it to me because she doesn’t have access to a fax machine. They snail mail it to me which takes a week. I fill it in and send it back and they mail the quote back to me again.

This process which should have been a 15 minute online process has now taken hours of my time and weeks from start to finish. When I get the approved application back again, it is still for the $1,000 because, again, they can’t override the system to change the minimum 4,900 miles. So after three weeks I was never able to get insurance from them.

And of course they stated upfront on their website that “customers are our number one priority.”

My philosophy is that if you ever walk into an office or see advertising that says “customer are our number one priority” – run fast, because if you have to have a sign or a slogan, then customers are not important.


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