As the economy falters, more people are working harder for every dollar, and parting with it ever more reluctantly.
The Deloitte Research Leading Index of Consumer Spending tracks consumer cash flow as an indicator of future consumer spending. The index has been falling since October 2007 and fell again last month. "Consumers in nearly every income group are being more cost-conscious," said Stacy Janiak, Deloitte's U.S. Retail leader.
In this environment, what’s happening to customer expectations? Our tolerance for shabby service is going down. According to RightNow’s third annual Customer Experience Impact Report issued earlier this month, we expect more as we spend more carefully. They found that in 2008, a record high 87% of consumers stopped doing business with an organization after a bad customer experience, up from 68% in 2006. They also found that even in the current down economy, 58% of U.S. consumers say they will always or often pay more for a better customer experience.
What are the implications of rising customer expectations despite a tight U.S. economy? First, companies should think twice about cutting customer service. Second, they should look at who is getting high marks for customer service and understand what they are doing right. Last, they should look inward and evaluate what they can be doing better to meet rising customer expectations.
So, which brands get customer service right? In March 2007, Business Week published its first-ever ranking of 25 client-pleasing brands. The Top 5 on Business Week’s list include: USAA, Four Seasons, Cadillac, Nordstrom and Wegman’s. All those are commendable and expected.
More recent, interesting and revealing are the findings from the third annual National Retail Foundation-American Express Customer Service Survey conducted by BigResearch in January 2008. The survey of 8,800 consumers found L.L. Bean delivers the best customer service in all retail formats. Internet-only retailers Zappos.com, Amazon.com, and Overstock.com came in second, third and fourth. I haven’t purchased from L.L. Bean in years (preppie is not my look anymore and my kids aren’t into it, either), but am a fan of Zappos and Amazon, and customer service is a big part of why.
Zappos makes it easy and risk free to buy from them. By not charging extra for standard shipping (in either direction), they eliminate some of the biggest barriers to online shopping – the hassle, disappointment and cost of returns. When I’m unsure what size shoe I need, I buy two pairs. That way, I get the right size, I get a return postage-paid envelope and all I have to do is drop the extra pair in the mail and wait for the refund to hit my credit card. And, they do surprise free shipping upgrades.
CEO Tony Hsieh tells customer service stories that rival the urban legend about Nordstrom allowing a customer to return tires (which the store never sold). One story is about a customer who was traveling on business and didn’t know where to call to have pizza delivered to his room. He called Zappos and asked for help. The Zappos customer service rep got the necessary information, placed the order and had the pizza delivered. Of the company’s 10 core values, #1 is: Deliver WOW through service.” And they do!
And Amazon is a definite favorite in our house. The site is fast and easy to use, and they have an ever-expanding assortment to choose from. Because we buy so much from them, all our shipments are upgraded to next day at no extra charge. This week’s Sunday NY Times profiled Amazon’s long road to surpassing Ebay in market capitalization. “While E-Bay was buying into classified advertising, online payments and Internet telephony, Amazon spent hundreds of millions of dollars building its brand as a trusted retailer — hiring customer service representatives and returning money to customers when transactions went awry.”
Together, this data is a wake up call for retailers and others. The economy is tough and getting tougher, and brands known for great customer service should be better able to ride it out.