Why you should care
You have a marketing budget. Don’t blow it on something that doesn’t make a difference. Learn when to cater to customers — and when to back off.
Customer service doesn’t always matter. Or, to rephrase: It matters, but not as much as you might think — especially when the economy goes south. “Counterintuitive,” says professor Nita Umashankar at Georgia State University. Indeed, but that’s the conclusion she and her colleagues reached after studying how one airline struggled through recent economic ups and downs.
The researchers found that during the recession, customers — naturally — became more concerned about value for their dollar. So much so that pinching pennies became more important than any amount of good customer service. As far as airlines go, this is an old story; just think of the old value airline PeopleExpress. Customer service doesn’t much matter when all customers can think about is their wallet.
Focus on giving people value for their money in a downturn — and then focus on service on the upswing.
But what is surprising is that service makes slightly more of a difference during an upswing economy — reversing previous assumptions that, during a bad economy, companies can make up for consumers’ rough times by pandering. Umashankar and her colleagues used the Gallup-Healthways Well-Being Index to track what’s a good versus bad economy, and mapped that to experiences with a major airline.
“People become price sensitive,” Umashankar says, “so experience is less important to them than when things are going well.”
Customer service meant a 10 percent gain in revenue when the economy takes a hit and a 20 percent gain when it’s doing better, the study found.
This doesn’t mean the lowest price always wins. Instead, focus on giving people value for their money in a downturn — and then focus on service on the upswing. Customer service guru Shep Hyken, an author who speaks internationally on the issue of service, business and customers, agrees.
The $8 matinee might have wooed you a few years ago, but today’s buyer might demand a reclining leather seat and booze.
“A loyal customer still wants the experience but is more likely to leave over price” in a downturn, Hyken says. “At no time does price become completely irrelevant, but in good economic times, it becomes less relevant.”
Still, consistency remains vital — if you forgo all customer service good practices to tighten the belt, you may never recover.: ”Inconsistency will cause an unpredictable experience, causing the customer to move toward price versus value,” Hyken says.
Umashankar notes that while her group focused on airlines, she believes the lessons hold true for any business that combines service with a commodity — in this case, a seat. So, movie theaters would be another example. There’s the ticket price and a seat, and the $8 matinee might have wooed you a few years ago, but today’s buyer might demand a reclining leather seat and booze.
For a business, here’s the key: When the economy contracts, even if your clients’ wallets don’t, focus on value for the price. And when money starts to flow again, focus even more on the details of service.
Your bottom line depends on it.