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Would You Pay More for Excellent Customer Service?


Posted by on August 8, 2010

A key tenant in Social CRM has always been around providing users with a better experience.  In addition to delivering a great product one of the best ways to provide a better experience is through excellent service (yes there are other things).  Here’s a simple personal example.

In my neighborhood there are two large grocery store chains; a Trader Joe’s and a Safeway.  I spent my first few months living here going to Safeway because I didn’t know the Trader Joe’s existed (even though it was half a block away…ya, don’t ask).  Safeway is a typical large grocery store complete with their Safeway card “loyalty” program.  If you’ve ever been to a Ralph’s, Lucky, or a Food Emporium then you know exactly what I’m talking about.  The service at all of these grocery stores is usually the same, that is to say “neutral,” as is my experience.

Trader Joe’s on the other hand offers superior service (at least all the ones that I have been to).  There is never a shortage of clerks that I can harass ask about food, there is usually a friendly “sampler” at the back of the store ready to over me some type of food I’ve never had (two days ago it was edamame humus and naan), and I get the sense that employees care that I’m there (on numerous occasions employees opened up bags or boxes of food to let me try the contents before I purchased).  Overall the service at Trader Joe’s is great, and so is my experience.

What’s the point?

Well the point is to say that service largely shapes our experience, and the question is, “would you pay more for excellent service, if so, how much more?”

According to a recent American Express study, “Americans will spend 9% more with companies that provide excellent service.”  That’s actually quite a significant number (and would be even if it was 5%).  Consider the following the numbers from the study:

  • 91% of Americans consider the level of customer service important when deciding to do business with a company
  • 24% of Americans feel that companies value their business and will go the extra mile to keep it (which means 76% do not)
  • 48% feel companies are helpful but don’t do anything extra to keep their business
  • 21% believe that companies take their business for granted
  • 75% are very likely to speak positively about a company after a good service experience
  • 59% are very likely to speak negatively about a company after poor service
  • 81% are likely to give a company repeat business after a good service experience
  • 51% are likely never do business with a company again after a poor experience

Think about what these numbers mean in terms of how people turn to social networks (or just the internet in general) to voice their opinions and provide feedback to companies and to each other.  Their messages are dramatically amplified.  75% of Americans are likely to speak positively about a company after a good service experience.  This means that I can tell a friend of mine about how great my experience was or I can blog about it and tweet about it so that I now reach thousands of people.

This brings us to what I consider to be one of the most interesting pieces of information in the study, the three most influential factors for consumers when deciding which company to do business with.

  • personal experience (98%)
  • company’s reputation or brand (92%)
  • recommendations from friends and family (88%)

There are plenty of very interesting stats in the full report which I recommend you take a look at.

These numbers are all very relevant to Social CRM which seeks to empower customers to become advocates and improve user experience.  When you consider the numbers above and then consider the social customer then it becomes quite apparent that Social Customer Relationship Management (SCRM) should seriously be considered as a viable investment.

Why?

Well, take a look at this chart which shows that in the U.S Americans spend more of their online time on social networks then on anything else (by far, and notice the increase) and then consider that according to Internet World Stats over 77% of Americans (that’s over 266 million) are Internet Users.

There are so many stats and pieces of information on how Americans use the internet and social networks that it gets a bit overwhelming.  However, when you consider the numbers above and then consider the social customer then it becomes quite apparent that Social Customer Relationship Management (SCRM) should seriously be considered as a viable investment.

I think the next big question is what kind of goods are customers willing to pay more for?  Take a car for example.  Would you be willing to pay an extra 4-5k on a $50,000 car provided that the salesman provided you with great service?  What about spending more on a computer or a television set?  What about clothes or home furnishings?

Take a look at the report and tell me what you think.  What are some of the implications or interpretations that you have?  Would you be willing to spend more for excellent service?

  • http://twitter.com/paulalexgray Paul Alex Gray

    Great post and thanks for sharing the report and data sources as well. I've always been astounded at how many businesses, particularly larger ones have very poor customer service experiences from inconsistency in offering, to pretty basic errors in delivering the product or service.

    It generates a great deal of dissatisfaction amongst customers who feel let down. It also goes against some really basic laws of business, i.e. the 80:20 rule in which 80% of your profits come from your best 20% of customers and that it's much easier – or less costly – to retain a customer than attract a new one.

    I think in many industries having a stronger service offering – that is a legitimate and valid offering, not just paying lip service – is a way to differentiate and help to acquire and keep customers. I'm never sure though about customers being willing to pay more. I think this is one of those things where what customer's say differs from their actions. E.g. given the choice, an extra 10-20% on top could be perceived as a lot. In daily life you see lots of examples where people are willing to pay a bit more – e.g. around things like car warranties, but plenty her people are out to save every last cent – e.g. discount airlines and hotel websites geared around finding the cheapest possible room rate.

    I wonder if it's more a case of businesses that do offer better service will draw their main benefit in losing fewer customers, thus having a more stable base and more secure revenue streams.

  • http://nateriggs.com nateriggs

    It's an interesting study and I agree with your take, Jacob. Except that there is a very large base of consumers who, even if they were willing to pay more for good customer service, don't have the means.

    You second to last paragraph is interesting. Are you are suggesting that the web and social CRM are pushing us to move towards premium service clubs? Consumers should have the ability to buy “First Class” service much like a first class airline ticket?

  • http://randymurrayonline.com/ Randy Murray

    I'd pay more for a car, not because the salesman provided great service, but because I'd experienced great service at the hands of their, er, service department.

    I drive a Lexus, now six years old and I plan on driving it another six. Their service is stunningly good, probably worth an extra $10k on the life of the vehicle. It's not cheap, but when I call to schedule service, I pick the time, they always have it ready when they promise, and they give me a loaner.

    I expect pleasant service at the point of sale, but that's not where I plan to spend extra. I plan on spending extra when I have evidence of great service AFTER the sale.

  • http://twitter.com/intosandeep Sandeep Panesar

    Nice post. I wouldn't pay more for tangible things like a car, a house or

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  • http://elevenfourteen.com 1114organic

    two great examples of companies charging more for a higher quality product and much higher level of customer service for me are Wholefoods and Nordstroms. I am more than willing – within reason – to part with my hard earned money for a higher quality product as well as having a person who is very knowledgeable in their field and be able to make solid recommendations. To be able to ask the fishmonger what fish is best for Kabobs and why or what the texture differences are and be able to get a response other than the cod is on sale to me is worth a few dollars more.