The Economics of Customer Service

Cite this Article
Elizabeth Nowicki, The Economics of Customer Service, Truth on the Market (December 20, 2006),

Is the retail customer willing to pay for customer service?  Gaggles of books have been written on the topic of customer service, and those books sell based on the belief that customers *care* about customer service.  But do they?  Do we?  Do I?

The idea that somehow customer service matters to the customer is not complex nor uber-creative.(The smarter, funnier, nicer Professor Nowicki dabbles in the topic.)  But does it *really* matter?  Seemingly, it does matter, according to a recent article (to which I cannot link b/c it is on Cornell’s server):

Virtually all Americans (94%) say customer service is an important factor in selecting where to buy goods and services. And 78% say it is a “very important” factor. In fact, at the “very important” level, customer service outweighs price: 61% of Americans say price is a “very important” factor in
deciding where to spend (compared with 78% who said customer service is “very important”). (Overall, customer service is as important as price — 95% of Americans say price is important, and 94% say customer service is important.) Even in the midst of holiday-shopping pressures, 82% of Americans say they are likely to spend more money this holiday season at stores where they receive better service.

I find it hard to believe, however, that customer service really, really matters.  Exhibit A:  Many friends of mine think Wal-Mart’s customer service is not particularly good.  But those friends still shop at Wal-Mart because it is cheap.  Exhibit B:  The closest coffee store to the Law School has employees who have not yet once smiled at me or said “thank you.”  I usually get to overhear internal quibbling while I wait at the counter, hoping someone notices me and is willing to take a pause to wait on me.  Yet I *still* go to that coffee shop because it is the closest one to the Law School.

Perhaps Wal-Mart’s perceived mediocre service is part of their calculus.  Perhaps Wal-Mart has calculated how particularly mediocre they can become before the savings to customers in dollar value is outweighed by customer frustration with mediocre service and customers therefore stop shopping at Wal-Mart.

I guess I need to make my peace with questionable customer service.  I mean, I *did* just pay $5.40 for a fancy coffee served by a not-so-very-service-oriented person.  (Allow me to note that I worked retail since I was old enough to work.  And I waitressed for years.  So I know a bit about customer service, and what the “front line” employees have to tolerate.  Dealing with customers is a difficult job, to be sure, but it seems to me that the employees who do not like to deal with the public should at least make a small effort to conceal their contempt.  I did not want a happy dance from my coffee barrista this morning – I just wanted . . . a “thank you” or eye contact or a smile or a “enjoy” or something other than being ignored for a bit and then viewed with impatience.  Then again, does my $5.40 entitle me to pleasant service or does it only entitle me to a coffee?)