Delighting Customers Doesn't Pay

Sales and Marketing Management

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The emphasis on 'wowing' customers is misguided

ARTICLE | MON, 11/25/2013 - 00:00

This is the golden age of customer service. In a world of commoditization, many companies place an emphasis on customer service as a key means of creating a competitive advantage.

With companies such as online retailer Zappos enjoying exponential growth while touting a founding principle of “delivering happiness,” it’s no wonder that the conventional wisdom in business is that superlative customer service leads directly to loyalty.

But what if that’s wrong? What if the viral stories of delightful service that get told and retold are actually misdirecting business strategists away from a more sensible and effective mission?

The question was asked by a group of analysts from CEB, a leading executive consultancy. Their finding: Loyalty is driven by how well a company delivers on its basic promises and solves day-to-day problems, not on how spectacular its service experience might be.

“Most customers don’t want to be ‘wowed’; they want an effortless experience. And they are far more likely to punish you for bad service than to reward you for good service,”
state Matthew Dixon, Nick Toman and Rick Delisi in their new book, “The Effortless Experience: Conquering the New Battleground for Customer Loyalty.”

Are you a hassle to deal with?

Customers operate according to a broad and simple set of rules. Either you make things easy or you don’t. The authors of “The Effortless Experience” argue that the primary role of customer service is not to boost loyalty by delighting the customer, but rather to mitigate disloyalty by reducing customer effort.

Their data from more than 97,000 customer surveys shows emphatically that the strategy of delight doesn’t pay. The authors state there is no difference at all between the loyalty of those customers whose expectations are exceeded and those whose expectations are simply met. Loyalty actually plateaus once customer expectations are met.

The two most important takeaways from this finding are that companies tend to grossly underestimate the benefit of simply meeting customer expectations and massively overestimate the loyalty returns from exceeding customer expectations.

“If your goal is to increase loyalty, it turns out that whatever additional resources, energy or budget you need to consistently exceed expectations brings almost no corresponding financial return at all,” they state. “Once you’re consistently meeting the expectations of the majority of your customers, you’ve already done the most economically valuable thing you can do.”

From a customer’s perspective, when something goes wrong, the overriding sentiment is “Help me fix it.” Resolving problems quickly and easily, allowing the customer to carry on with his or her task is all that’s required.

Delight is rare

The argument that shooting for consistently meeting rather than exceeding expectations makes more sense is supported by the authors’ finding that customers’ expectations in their study were exceeded a mere 16 percent of the time. An overwhelming 84 percent of the time, customer expectations were not exceeded
(and, indeed, often not even met).

“Delight is a tough target to hit with any regularity, and we typically miss that target. That it is so exceptional is what makes it so memorable,” they state.

What’s more, the authors say their global survey found no statistical relationship between how a customer rates a company on a satisfaction survey and their future customer loyalty.

In fact, 20 percent of the customers who reported that they were satisfied by their service interactions also expressed intentions of taking their business elsewhere. And equally confusing is the fact that 28 percent of customers who reported being dissatisfied said they intended to remain loyal.

“When we present this data to senior leaders, the immediate reaction typically resembles something like the stages of grieving,” the authors write. “First, there is denial…but eventually there is acceptance.”