Mieke Welvaert shows that while great service is always appreciated, she explains why some don't try or don't care in some areas - and get away with that attitude

Mieke Welvaert shows that while great service is always appreciated, she explains why some don't try or don't care in some areas - and get away with that attitude

By Mieke Welvaert*

I quite like our office, it has a great view and an easy layout, but I do get locked out of it from time to time.

Not because I don’t have a key, oh no. But, sometimes our staff keys just don’t work.  Naturally we can get this sorted within an hour or so, but we’ve been locked out the building, office, and in the bathroom (awkward, I know) so many times that I might just be past the point of forgiveness.

It’s moments like these that really makes me wonder whether the person responsible is trying to be useless.

Seeing as this is not the only service I’ve had a bad run with in the past few months, I thought I’d explore for you whether there can be real opportunities and motivations to provide a lousy service.

Normally, there is a very strong incentive for people to do a good job, and even a great job.  Customer satisfaction is key to client retention and one’s business reputation, ultimately determining a firm’s success in the service industry.

Bad service in a central city restaurant will often mean customers will go somewhere else for their next meal out, or refuse to pay, demand compensation, or leave.  Repeated bad service means the end for many a business.

Fortunately for us customers, our power en masse is great enough to ensure the level of service is at least equivalent to what we pay for.  However, consumer power can be undermined.

Firstly, I have assumed that customers can command a certain level of service on the basis that they have other options; that they can vote with their feet.  But what about when the service you’re unhappy with is attached to other services which provide more highly valued benefits?

If our key card access was a restaurant, we’d have left long before now.  But because the problems with our key card access are packaged with other services we really do want, like our office space, our ability to dictate terms is reduced.  Sure, we could go to the extreme, vote with our feet, and move out.  But, the benefit of having the space far outweighs the hassle of being locked out of it once or twice a month (although if someone gets locked in the bathroom all weekend, this viewpoint might change). 

Secondly, even if we could completely ditch one service without jeopardising our access to others, consumers still might put up with something substandard.  Why? Well it’s a bit like a bad relationship where you stick around because the effort of leaving is much greater than maintaining the status quo.  Even though you may not put up with that sort of thing in your love life, search costs and set-up costs always have an effect on how much we are willing to accept from the services we consume. 

Weighing up the costs of leaving gives you a fair idea of how much bad service you as a customer are willing to withstand in order to stay with your current provider.

As another example, a few weeks ago, my home internet was accidentally disconnected.  Normally it’s a quick fix to get everything back up and running again but our service provider kept cancelling the job.  As a result, we were without internet for two weeks.  Despite all this, the flat seems pretty unwilling to let go of the situation and move on (maybe we all need to re-read “Who moved my cheese?”).  The extra gigabytes of data bought on our phones to ration away on TV On Demand and necessary things like Facebook, alongside the many many hours we spent on hold trying to sort out our reconnection, were all worth less to us than the effort it would take to change providers.  This reaction is living proof that people can still put up with bad service, even when, in hindsight, we could have probably have short-cut the whole situation by moving to another provider.

If either of these two conditions exist, there is an opportunity for service providers to take advantage, without much threat of a shrinking client base.  But the question remains as to whether there is an incentive for a provider to do badly, or less than they have promised. 

At a basic level, there is little incentive to provide a wholly bad service, because there is too much of a risk that your customer base won’t return.  But because customers tolerate a certain degree of uselessness, a firm knows that their service only has to be good enough most of the time.  This outcome inherently results in an incentive for service providers to not be perfect.

Like consumers, service providers face trade-offs between their time and effectiveness.  Say your job is problem solving.  If a quick glance at a problem yields a short answer that is correct 90% of the time, and each “quick glace” procedure takes three minutes, you can resolve 20 problems an hour.  But if you took ten minutes to fully evaluate the problem, resulting in a 100% problem-solving success rate, nine times out of ten you’d be wasting your time.  As a result, a problem-solver’s best strategy is to use your quick glance method to solve as many problems as possible within the time you have. 

But then you, the service provider, have that extra 10% of problems returning to your pool to solve.  Fortunately, most service providers have systems in place to keep record of a customer’s “problem history”, meaning that the second time around the provider knows that this is an abnormal problem which requires more time.  At this point, unless the customer is one you can afford to lose, the problem gets solved.

This process effectively involves outsourcing the costs of “abnormal problem identification” to the customer.  If customers face significant costs of changing providers (which is less of a case with restaurants, more of a case with internet providers, and even more of a cost when it entails changing rental properties) then the fact of the matter is, customers will accept having to wear those problem identification costs themselves.

Does this mean that service providers intend to be useless?

The answer is both yes and no.

If a customer has an abnormal problem, the provider is unlikely to solve it on the first go – not because they can’t, but because they don’t know yet that your problem is abnormal, and they are constrained in the time that they can spend to work it out.

As a result, the provider only intends to be useless when they actually are being useless.

On the other hand, this uselessness means that more problems are solved for the wider client base, so maybe (and feel free to disagree) it is best for everyone that from time to time, consumers have to take one for the team?

----------------------------

Mieke Welvaert is an economist at Infometrics. You can contact her here »

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

3 Comments

Keeping the customer happy is an out of date idea in many sectors, especially big companies. They have identified it is more productive to control their environment ( and the customer) than it is to give service. Which is why companies buy up competitors to control the market. Currently that is "Z". It's why the supermarkets reduced to a mere two big chains.
There was an error on my Telecom bill recently - just try reading the bill and finding some indication or where to contact. If you are lucky enough to find an avenue, try using it. Just barrier after barrier.
Customer service as a way to success ? They have found better ways to make money

>>> "...all worth less to us than the effort it would take to change providers. This reaction is living proof that people can still put up with bad service, even when, in hindsight, we could have probably have short-cut the whole situation by moving to another provider."

Or that 'people' are aware that the other options are not likely to be an improvement. Moving internet providers is usually quite easy, but why bother when a) the problem might be caused by the wholesaler (Chorus) and thus present with any retailer, and b) the retailers all operate in the same environment and so there are none that have some magically different attitude to customer service. This is the general problem of telcos and utilities, which KH touched on above. They operate on simple statistics and customer acquisitions. Their customer base are just numbers.

Customer retention is not worth much to them as they are unlikely to move anyway. Hence all the new customer promotions, but zero reward for long standing customer loyalty. I find it difficult to encourage friends and family to shift e.g. internet providers, even when there is a clear financial incentive such as $10 or $20 per month lower cost, never mind more abstract things like quality of service.

Unless you're with Slingshot of course in which case it is black and white and you simply must switch away immediately as any alternative is better.

A quick look about the financial world of 2015 (NZ included) shows that "Economists" would have to be front-runners for the Oscar of Incompetence.