Sustaining Customer Service While Cutting Costs

A recent article in BusinessWeek titled Customer Service in a Shrinking Economy, discusses how companies are dealing with the need to maintain a high level of customer service while there is tremendous pressure to cut costs. For instance Zappo’s CEO Tony Hsieh is shifting dollars that were previously used to surprise new customers with overnight shipping and instead focusing these resources on overnight shipping for the most loyal customers.

Here’s an excerpt that describes how BMW was able to cut costs while improving customer satisfaction in dealerships by offering free wifi.

When No. 22 BMW rolled out Wi-Fi service at its dealerships last year, the move was intended to give customers a cheap way to pass the time while their cars were serviced. The cost was next to nothing since BMW just expanded the broadband dealers already used to run their businesses. But now that customers can use their waiting time productively, fewer are opting for free loaner cars, which are pricey for dealers to maintain. BMW’s Alan Harris says Wi-Fi, along with software that helps dealers better estimate loaner needs, has helped BMW cut its monthly loaner expenses by 10% to 15%.

The article found that the best service companies are finding ways to creatively cut costs without sacrificing service and allocating their scarce resources to retaining loyal customers rather than trying to acquire new customers. This is often better than simply cutting customer service staff, which Hertz did when it announced layoffs of 4,000 employees on January 16th. Loyal customers became very frustrated when there was not enough staff to help them and many customers probably left due to bad experiences.

Bad experiences can have a damaging impact on a brand since customers are much more likely to tell others when they are unhappy and encourage their friends and family to avoid that company. I recently heard a story at a company party in which Delta refused to help out this poor individual who needed to fly out a day earlier when her interviewer had something unexpected come up. From talking to the agent she learned that it would have been easy to change the flight since the plane was mostly empty, but the agent and her manager were on a mission to do everything they could to not help the customer. They actually said that they would only help her out if it was an extreme emergency like a funeral, in which case she would have to provide a copy of the death certificate! They made the customer pay an extra $180 dollars to re-book, which was as much as buying an entirely new ticket. It made me wonder if Delta management instructed agents to be extremely difficult if someone wanted to rebook, so they could double charge the customers for added revenue. However, tactics like these only lead to angry customers who actively avoid doing business with you in the future.

Photo by Thad Zajdowicz