With the increase of online shopping, competition is getting more fierce by the day. There is no doubt that offering the best customer service will put your company one step ahead of the competition.
After the huge success of Zappos.com, many internet startups are trying to follow the “best service” rule. But, is it really that easy?
By working with many ecommerce companies along with my own company, I have witnessed in first hand, how hard and costly it can be to try to run a company with great service.
Business planning and forecasting is the key before implementing an important service decision. Most of the business owners are pretty good at forecasting. Before implementing a new service option such as free overnight shipping or a 365 days return policy, it is not rocket science to come up with all the variables, and forecast how this new policy will impact your business both financially and from other aspects of the business.
Before getting all excited and adding more costly service options, many business owners don’t think about calculating the cost of unethical customers. Let’s talk about a real life example.
An Unethical Customer Gets a Free Replacement for a 15 Year Old Sweater with Land’s End Lifetime Guarantee
Megan Writes In: A friend of mine had a sweater from Land’s End that she’d had for about fifteen years. It was getting pretty old and beat up simply because of normal wear and tear. A few weeks ago when she unpacked her winter clothes, she found that one sleeve had finally worn off the sweater. she called up Land’s End and complained, invoking their lifetime guarantee. They sent her a replacement one – not exactly the same, but pretty similar. She was quite proud of this “free” sweater. I was less than impressed. What do you think about this?
Read the full story here if you are interested in the details. There are literally thousands of customer stories similar to this one all over the web, some true and some not.
How to Calculate the Cost of Unethical Customers
When Zappos.com started offering “Free Shipping Both Ways”, don’t you think that they were smart enough to guess many customers would purchase several pairs of shoes, try them and send the ones they don’t like back? Of course, they were and they did their homework. In business, in order to implement a new rule you might need to sacrifice from another one. If you will offer free shipping both ways, you have to forecast the cost as accurately as you can and implement it into your price matrix.
Especially with new business rules, without any historical data, it might be hard to forecast these types of cost. Your regular return rate can be less than 2%, but with a policy update such as free shipping both ways might increase your return rate to over 10%. If you are implementing a policy update to your customer service which might bring in high cost, you might seriously think about gradual implementation. Instead of offering the new service policy to all of your customers, start offering it to small groups of customers from different demographics, and calculate your cost with a smaller data group.
When to Say NO to Unethical Customers
Even the companies with best customer service offerings have limits and rules. Do you think Zappos.com never say NO to a customer? Of course they do.
When dealing with customers, you have to come up with business rules and train your staff appropriately. Let’s say, if a customer returns over 20% of the merchandise within a given period, one of your customer specialists should call the customer, and try to resolve the problem on the phone. Be fair, offer all the warnings to the customer, but when it is time to draw the line, don’t hesitate to draw the line.
Even if you do your best, you can never satisfy all of your customers. Some of the customers are very hard to satisfy and some are simply taking advantage of your policies. Sometimes, there’s a very thin line between the unsatisfied customers and the customers who practice unethical methods to take advantage of your service policies.
The correct step is to make the right business decision at the right time to say NO to unethical customers and move on.
Have you ever had an unethical customer you had to stop offering your services? I’d love to hear your stories.
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{ 1 comment… read it below or add one }
Very interesting post.
The interesting thing is that I think this mostly applies to the US. I’ve lived in the middle east as well as in Europe, and the level of service is nowhere near as good there. So even if you had a justified reason to ask for a refund/replacement, often you would not even get an answer let alone the product itself.
Although I think this system is generally open to abuse (and I know personally people who are proud for abusing it), I believe that in the long run it does pay off. Yes, you put faith in your customers, but they return the faith. If that were not the case, I don’t believe most companies would continue it here.
In other countries this faith doesn’t pay off, and that’s why it won’t work.
Excellent article!