Monday, March 19, 2007

Good service--a product's most lucrative feature?

Customer service is so often seen as a necessary evil, or, worse, the first place to cut costs, that it's easy for product managers to focus on other areas. But an article in the March Harvard Business Review makes it clear that good service creates shareholder value, and poor service destroys it.

The article (link - $$), by Christopher Hart of the Spire Group, points to a study from the University of Michigan, which created a hedge portfolio based on buying companies rated highly on the American Customer Satisfaction Index (ACSI) and selling short those rated poorly on the ACSI, which tracks customers' perceptions of more than 200 companies.

Over a five-year period, the ACSI hedge portfolio grew 144.5%, while the S&P 500 grew 38.7%. (Here are some other comparisons of high ACSI and low ACSI companies.)

The article also shows evidence that service problems have a greater effect on customer's likelihood to recommend than the product problems that create the service calls in the first place.

So, think twice before you disable the "0" key on your IVR or send your contact center to Asia. If it doesn't make your customer service better, it's better not done at all.