June 17th, 2021
The X-Factor: Superior Customer Service
As cost of materials, components, labor and transportation continue to rise, the inevitable result will be price increases for door and window products. Most manufacturers will hold off for as long as they can, fearing loss of customers and market share. Eventually, however, price increases will become necessary. So, when customers hear the news about prices going up, how will they react? Will they jump ship and go somewhere else, or will they stick with you and remain loyal? The answer lies in superior customer service.
Superior customer service is the one factor that can boost your company’s immunity to customer attrition as a possible outcome of price increases. Indeed, an economist might tell you that the better your customer service is in comparison to that of your competitors’, the more “inelastic” your product demand shall be.
What does that mean? Well, economists have determined that the prices of some goods are very inelastic—that is, a reduction in price does not increase demand much and an increase in price does not hurt demand either.
For example, gasoline has low price elasticity of demand. Drivers will continue to buy as much as they need because they simply cannot go without it. So, the price of gasoline is very “inelastic.” Other goods are much more “elastic,” so price changes for these goods cause substantial changes in their demand. But if your company offers superior customer service, then your pricing will become more inelastic. This will help protect your market share.
So, what is the definition of superior customer service? I started pondering this after a recent experience with Amazon.com. I ordered an item from Amazon that was shipped by a third-party vendor. It required assembly. During an attempt at assembly, it was noticed that some of the sections were out of square making proper assembly impossible. The vendor approved the return, but their email said that I had to pay return freight. When I called UPS to get an estimate on the freight for this very heavy package, I was told it would be $105 for an item that cost $149. Returning this would not really be worth my time, right?
So, I called Amazon customer service. It only took three minutes to reach a real person at Amazon. There were no pre-recorded messages saying, “Listen carefully as our menu options have recently changed.” When I explained the cost estimate for return shipping, the customer service rep said, “No worries, I will help you!” After, putting me on hold for less than a minute, she came back and offered to give me a $150 Amazon credit to cover the return freight that was estimated to be $105. She went on to say that if the actual freight cost ended up exceeding $150, then I should call back and she would increase the credit accordingly. I was amazed.
In my eyes, the three elements that made this customer service experience superior were:
1). A system that enabled me to quickly get in touch with a real human being from the very beginning;
2). This person had the authority to offer a solution; and
3). An equitable solution was offered in an expedient manner.
Now, given the way this situation was handled, do you think I will be spending a lot of time comparing prices with numerous other vendors the next time I need to order something for my home or office, or do you think I will continue to trust Amazon? You guessed it: that van with the blue arrow labeled “Prime” will continue to be seen pulling up in front of my house!
So, with manufacturing costs on the rise, and door and window fabricators facing the prospect of having to raise prices to protect their margins, customer retention strategies are being seriously pondered.
Superior customer service may turn out to be the X-Factor!