Six Key Principles of Customer Service

Image by libraryman via FlickrAt Startonomics, Thor Mueller gave a genuinely insightful and original talk on how customer service can be a form of marketing. His central thesis was that in today's crowded market place, where customers are increasingly hard to reach via traditional forms of advertising, a superlative customer service effort can yield strong, perhaps invaluable, word of mouth. Word of mouth, as many studies have shown, is an incredibly potent marketing force.
To make his point, Thor invoked the now-famous episode where Zappos, a firm known for providing customer service above and beyond the call of duty, sent a customer flowers when they learned of her grandmother's death. It is a touching story, and earned the company a myriad of hits in free exposure as it was told and re-told over the internet.
I agree with the main thrust of Thor's argument but would like to add a few points, largely based on a class that I took at Stanford studying services. First, Startonomics was a conference primarily about metrics driven management. So, how do we measure customer satisfaction? Sure, surveys and other methods of data-gathering are helpful, but what is the one metric that will move the needle? You have to get down and measure whether or not your customers would recommend you to their friends. Retention is another important metric, but I do not believe that you should be looking at many more metrics in measuring customer satisfaction because optimizing them will not move your bottom line.

Customer Service is the New Marketing (Thor Muller, Startonomics SF 2008)

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Further, the key to a satisfied customer can be expressed in the following equation: customer satisfaction = actual experience - expected experience. So, if the actual experience that you provide for a given customer is better than his or her expectations he or she will have a good (positive utility) experience, but anything below expectations will be a bad (negative utility) experience. This is a slightly more rigorous way to express the fact that it is all about succeeding customer expectations, not necessarily providing the best customer service in the world.
So, what are the implications of this?
1) You should try and set your customer's expectations low so that you can more easily surpass them. The trick is to do this without deterring any customer's near the top of your funnel. So, what's an example of this? An e-commerce company might have an "official policy" on shipping, fees, etc and routinely provide customers with special breaks so that they, in turn feel special. And, when you provide a customer with some special treatment, make sure they know it! Or, a lead gen company might provide an initially low estimate of the benefit to a user of filling out a form only to promise them an even bigger benefit at the end.
2) You should always end strong. People's estimation of your performance is not a monolithic, single unit. It is something that is built up over the time of their interaction with you, and biased towards positive or negative variations over that period. So, an experience that ends on a high note is usually judged by customers as better than a uniformly strong experience equal to, or in some cases better than, that final high note of the improving service experience. This is something that is hard for a lot of sites to do that monetize indirectly through ads, but such sites might consider investing more heavily in content discovery for users so that you can draw them deeper into your site towards more popular content.
3) Recovery is key. Customers tend to rate experiences where a service has rapidly corrected to fix a mistake better than a service that does not have any mistakes. Be sure to handle mistakes well, as this is a key "conversion point" for turning dissatisfied customers into satisfied customers. This point is most applicable to e-commerce companies.
4) Combine negative events, split positive events. Perceptions of experiences are funny things - it turns out that people do not rate an experience as poorly if everything bad was concentrated into one interval rather than into several discrete intervals. What does this mean? Well, for e-commerce companies, it could mean combining all of your extra fees into one comprehensive fee. Or, for a flash games company it could mean that users should only have to wait to play at the beginning of the game rather than at regular intervals through the game.
5) By this point, readers will probably point out that exceeding expectations may likely have the unintended consequence of setting higher standards. Zappos can't send flowers to all of its customers after all. The solution is to make sure that the customer's perceived experience fits as closely as possible with his or her expectations for service. You won't be able to please all of the customers all of the time, but this is the best that you can do. More specifically, there are several gaps in service that you'll want to look at and try to address.
-User desires vs. what you think that the user desires. Solution: Listen closely to what your users tell their friends about your site.
-What users want/what your positioned to deliver. Solution: This is very similar to the above, but you need to thoroughly understand your site from the user's perspective, mapping out their experiences in great detail and trying to understand what it is going on in their heads while they are on your site. This is a long way of saying: put the user at the center of your site design!
-Promised/Delivered experience. Solution: The best way to combat a gap between what your users are experiencing and what you are promising them is to make sure your whole team is crystal clear about what exactly you are promising to users.
6) The meta-question here is whether or not you and your site should spend your resources on delighting relatively satisfied customers or moving unhappy customers to a relatively satisfied state. Perhaps both are possible given your resources and experience, but the answer depends on what you are trying to accomplish. If you are trying to ACQUIRE customers, you're going to want to please the heck out of users who were somewhat satisfied before. For, it is surprisingly wonderful experiences that lead customers to refer friends and generate that elusive word of mouth. Think about service that would get you a 9 or a 10 rather than a 7 or 8 when rated by users. If you want to RETAIN customers, you're going to want to make sure you convert your unsatisfied customers into customers who, while they may not be elated with the experience they've had with you, are relatively satisfied. Think about moving someone who would rate you a 5 to a 7.
Above all, incredible customer service is not free marketing, nor is it cheap. Zappos, for example, requires ALL employees to spend four weeks in their call centers and go through extensive training. Would that time and money just be better spent buying traffic? I can't answer that without more data, but these six points should help you think through your customer service more analytically and effectively.