The Challenge Dividend: Customer Service Gets More Challenging

In writing about business in this blog, I often show that within a particular category of products or services, tough competition leads to improvement. For example, when Virgin Airlines upgrades its business class service, British Airlines has to do the same. The business traveler benefits. But is it possible for competition in one industry drive improvements in completely non-related industries as well? It's a new thought, but one that seems possible.

A few weeks ago in BusinessWeek (no link avail), I found a data point that seemed interesting. According to a poll conducted by Harris Interactive on behalf of RightNow Technologies in 2007, "Roughly 80% of the more than 2,000 adults [polled] vowed never to buy from the same company after a negative experience, up from 68% in 2006."

Think about this for a minute: People are becoming significantly less forgiving of bad service, in only one year. Why could so many more people be willing to completely cut off a company? It could be that customer service overall is worsening, and people are at the breaking point as companies have outsourced this service to India, touch-tones, and websites. But I doubt this is the reason. If anything, the economy is getting tougher, and companies are re-investing in customer service.

Instead, I believe that improved service in some industries is increasing customer expectations for all businesses. Think about this one for a minute: Expectations for customer service are not set differently for each business category. We don't have a "bucket" of expectations for airlines and a different one for grocery stores. Rather, we expect that any company that earns our business deserves to treat us in a standard, quality manner. We expect airlines, retailers, and software companies to similarly take our phone calls promptly, be available at all hours, and give us some kind of remuneration if we get treated poorly.

So my hypothesis is that our general expectations have been increasing, and since it takes longer for individual companies to catch up, we customers are more frustrated - even if the actual service quality in a vacuum is unchanged.

Of course this hypothesis begs the question: Why are people's general expectations increasing? I believe it is a combination of a few firms that are doing an outstanding job, and the rise of the web. To the first point, take the example of Apple Stores. If the Apple Store becomes the model for the best retail experience, retailers of all types need to pay attention. A new bar is set - even if you're not selling laptops and iPhones.

To the latter point, the web is allowing people to self-service their needs, and to easily rate and rant about their experiences. For more on the impact of the web on customer service, check out my friend, Pete Blackshaw's new book: Satisfied Customers Tell 3 Friends; Angry Customers Tell 3,000.

Once people are online, their need for information about their purchases is insatiable. Take Domino's Pizza Tracker tool, which people can use to see each step of their order in progress. This tool is taking off because people like the experience of tracking their package deliveries at UPS and Fed-Ex.

The final piece of the puzzle is that there seem to be more purchasing options than ever. In retail, instead of having to relying on a handful of stores in driving distance, we can check out hundreds of companies online selling the same products. In fact, greater competitive options could itself be the force that is driving higher expectations. When we know that we can easily move our business elsewhere, we become tougher consumers, and, going back to the original poll question, are more like to "never buy from the same company again."

I will admit that my specific hypothesis on increased customer service expectations is pretty raw, but I'm much more confident in the overall message: Competition - and the pressure to improve - often crosses individual product and service categories.