Service Demands in your Startup Business

1. Customers Are Demanding—And They Should Be!

Customers are generally demanding—and they should be. There are millions of companies out there competing for their dollars. Every family and individual has only X dollars available for discretionary spending. That means that if your product or service is optional, you need to fight incredibly hard to keep your service factor up, thereby increasing your chances for success.

If you are offering a product or service that would be considered a staple—a need; nonoptional—service is equally important. The Internet, which we will discuss more in the section that follows, plays an increasingly important role in setting customer expectations and overall demand for products and services.

1.1. The Role of the Internet in Customer Demands

With the Internet lowering costs and creating a strong demand for low prices to allow for more of that discretionary spending, you will need to provide not only low cost but superior service to keep and grow your client base.

In many cases, the Internet has created what economists call a “perfect market.” A perfect market is one in which a buyer sells a product or service for exactly the price it is worth at a given moment. eBay is the leader in this type of thinking.

With traditional businesses, there is a lag in time. For instance, if I release a product, the price consumers really place on it often isn’t reflected in actual price until I realize my product isn’t moving off the shelves. I determine this based on
resell information (which is often late and behind the curve), and then I make adjustments to price or product differentiation accordingly. However, the news of my adjustment takes time to work itself into the minds of the general public, meaning it will still be a while before my alterations make a difference.

With “perfect markets,” though, the value of any object or service is real time. For instance, around gift-giving holidays, demand for products is up and eBay and other real-time auction sites find that final selling prices are higher— demand is higher. If a particular item is difficult to get via traditional means, then anything available on eBay will go for more money than it would when supplies return to normal.

If you are running any sort of online business, you will want to watch all online competitors, including stores and auctioneers on eBay, because they will directly impact your price. If the name of your product is XYZ, a simple weekly or daily search for XYZ on sites like eBay will return what is currently available.

You will also want to build feedback mechanisms into your own website, even if you have a traditional brick-and-mortar store. More today than ever before, consumers are relying on other consumers to give them honest opinions and feedback. Check out Amazon’s book reviews or Zappos’s shoe reviews. Do you read those before you buy a book or buy a shoe? Chances are high that you do. These are considered higher in validity because they are from a random sample of actual buyers rather than a magazine review or an editors’ choice award where one or two individuals are looking for specific things that they find important.

1.2. Expectations—Even If You Are the “Low Price Leader”

Many entrepreneurs and business owners wrongfully believe that if they are the low price leaders, service won’t matter as much. This is true for a certain segment of the population that has far more time than they have money. We see this as a trend with the unemployed, for instance, and with extremely low-wage workers who work below the poverty line. However, in general, this doesn’t hold true for most Americans.

Have you noticed that even the king of inexpensive retail, Wal-Mart, is service oriented? They tout service; they keep smiling people at the door to hand you carts and they train their employees to watch checkout lanes for long lines and open new lines immediately. They make certain individuals are available for each major area of the store, and they make it easy to get a hold of a manager. They have even made returns easy by keeping information on hand so that returns without a receipt are not difficult—a service that the majority of large chain and department stores (Target, Macy’s, Nordstrom, etc.) are adopting.

Even if you are the low price leader, people still want a minimum level of service. Any time you create hassles or difficulties, time delays or inefficiencies for your consumer, they are more likely to pay a few pennies or even a few bucks to go elsewhere and get minimum customer service levels. Don’t make this vital mistake.

2. Service Demands

We have gone through demands on product organizations, but what about the outlook in the service sector? More companies than ever are outsourcing, but that is mostly cost related and not because companies here in America are offer­ing poor services. There is a labor shortage in America, and a capital shortage overseas. This makes it logical that we’d exchange with other country’s labor and capital.

If you are a service-oriented business and want to keep your customers, you need to stay focused on core competencies and provide quick, reliable information, near-immediate access to data, and fast responses to clients.

2.1. Change in Service Outlook

America is, more than ever, a service-sector environment. Many manufacturing plants are closing up shop and going overseas where products can be made more cheaply, increasing profit margins and stock prices and impacting shareholder value. However, as we discussed in Chapter 10, a large portion of growth in exports is in services. Americans are providing everything from management consulting for the Chinese, where they have few managers and lots of workers due to strict hiring requirements, to information technology workers for South American companies looking for Americans with an education in technology to build their infrastructure.

The service outlook for American businesses is growing stronger by the day. Even if your business is product- or commodity-based, which is often price sensi­tive, you may find yourself growing your business into a service sector related to your product offerings.

2.2. Profitable Versus Unprofitable Companies and Service

It is a modern myth that if you are a service company and you provide good service, you won’t make any money. Many highly educated professors in business schools across the nation cite the airlines in America as an example of the worst of the worst—service providers not offering what they supposedly do best, which is provide a service. As a result, they’re not profitable.

But what about the myriad companies out there that are both service oriented and profitable? What about even those specific airlines that have remained relatively profitable, given the high cost of oil in recent times and poor consumer sentiment about the industry in general? I’m talking about Southwest Airlines, for one, and Virgin America, a relative newcomer with high expectations in the U.S. markets.

When you are a service-oriented business, not providing what you are supposed to can quite literally kill your business. Once you get a tarnished reputation of not providing excellent, top quality service, you will find yourself having a very hard time recovering.

2.3. Learning from the Best and the Worst

MSN Money released the 25 companies where customers come first, reprinted from BusinessWeek. So who made the grade and what can you learn from them? (These are not in order of highest to lowest, but instead separated by industry— you will see some patterns here!)

  • Southwest Airlines
  • JetBlue Airways (remember what I said about airlines?!)
  • Washington Mutual
  • Toyota Motors
  • Cabela’s
  • T-Mobile
  • Apple
  • Home Depot
  • Nordstrom
  • Four Seasons
  • Marriott International’s Ritz Carlton
  • USAA

If you want to see the complete list, you can visit the MSN Money website, which shows you the top 10 and their grades, both in processes and people (note the delineation there—it is hard to be top notch without both great processes and great human resources): 25CompaniesWhereCustomersComeFirst.aspx?page=1.

What about those companies that didn’t do so well? They are trying to learn from the best through training. One popular training method is to have the employee go through what the customer goes through. For instance, if your
customers tend to be military personnel, this might consist of making employees go through training with military meals, military-like schedules, and so on. While simulating a combat environment is tough, some elements can be re­created with ease—the benefit, of course, is being able to view the situation through your customer’s eyes.

Another thing to remember is that customers want to talk to humans. They do not want voice mail and they do not want to be routed through 15 menus to get a live person! In fact, there is an entire MSN Money blog devoted to reaching a human when you call customer service. You can find it at blogs.moneycentral. customer-service.aspx. I suggest you check it out and see what customers are saying about what they want. Make it easy for a caller to get to a supervisor, too—even if that supervisor is you.

To avoid putting consumers through unpleasant processes and unpleasant people, hire right and allow people to get right to you through e-mail or phone. While customer service people usually aren’t paid well and have to handle lots of complaints all day, you need to be sure that the people you hire for these roles genuinely enjoy working with customers and righting wrongs. You can do this through personality profiles and reference checking. I personally use scenario- based interviewing techniques to see how an individual might handle a specific customer issue.

2.4. Listening to Your Customers with Open Ears

So what are some things you can do to make sure you beat the customer service game?

One thing you can do is learn from the best. Even companies like Starbucks, Disney, and Lexus send their executives to leadership training, where the execu­tives from that top 25 list have gone to learn from the best.

We know that customers like it when employees show empathy. There is a cor­relation between consumers feeling understood and feeling content and satisfied with service. Having primary insomnia and being on the road a lot, I can per­sonally testify to this. If the hotel I’m staying at doesn’t care that my room is next
to a noisy elevator or ice machine, I will probably not ever stay at that hotel again. On the contrary, one particular hotel I stay at every couple of months has remembered me so well that when I step out of the car from the airport, my room keys are handed to me. That company happens to be on the list of top service-oriented companies.

You should also take the potential outsourcing of customer service-related activi­ties very seriously, too. Having a customer call an offshore service division for support can be aggravating and can result in negative feelings toward that busi­ness. Watch closely what you decide to outsource and what you don’t.

2.5. Spotting Potential Problems Before They Threaten

With the power of the Internet, consumers are taking their complaints global, and fast! There are many websites devoted to noting consumer opinions about nearly everything. One such site is, and I have personally used it many times to get opinions on lots of companies and products, prior to becom­ing a customer of theirs and purchasing certain products.

I recommend scouring these sites and spending some time each week Googling your company—even set a Google Alert so that you know if and when your company is mentioned in blogs. If anything pops up, handle it right away by contacting the customer directly and setting things right. Usually the customer, of their own accord, will take the time to note that the issue was corrected. If not, feel free to respond to the post or blog entry, explaining what you did and re­inforcing your commitment to service.

If you start to see customers play the loyalty card (“I come to your hotel every six weeks!”), this is a sign that they may not feel they’re being treated fairly for their consistent patronage, and may feel desperate for someone at your establishment to help them.

3. Soliciting Feedback

When you solicit feedback from customers, you are showing them a level of con­cern about the service they received and their perception of that service. When you get their feedback, you need to act on it—and not react to it. When you get negative feedback, realize that it is an opportunity to keep a customer and to create something positive out of a negative. It is also a chance to reward employees when they have done something that improved service perception and quality at your business. Sometimes the smallest things that your employees or contractors do can really go a long way in making your business successful.

You can get feedback through phone surveys, online surveys, follow up e-mails, or mailers. This depends on the type of business you have and how personal you need or want to be. For instance, if your company is entirely online, then it would make more sense to have a web-based survey or an e-mail survey. If you are a highly specialized boutique, then a store gift card in a gold wrapped enve­lope with a personalized note and a solicitation of feedback might be far more appropriate.

3.1. How to Get Honest Feedback

Let me start this section with what not to do: do not barrage your customers with so many surveys and customer forms to fill out that they feel you are dis­respecting their time. No matter how great the service, this tactic often leaves a bad taste in the mouths of consumers. Ask for feedback once, and if you don’t get it, move on. No news is usually good news, particularly if you don’t see sales numbers dropping. It may just mean that the customer is happy—and busy! Calling and then e-mailing follow-ups is just plain annoying and could end up shifting a customer’s perception from a good one to a negative one.

3.2. Acting on What You Learn

We all know the reputations that airlines have in today’s climate. But why do Southwest and JetBlue rank high in customer service? An example in BusinessWeek showcases how to take a bad situation and turn it around into a customer service advantage.

In an article printed in 2007, a Southwest Airlines passenger found himself delayed for many hours before takeoff—five hours delayed, in fact—due to a required pilot change and a plane de-icing regimen that lasted too long.

How did Southwest handle it? Not by leaving starving customers with inoperable restrooms, but by having the pilot walk up and down the aisles, explaining the situation to customers and offering information and updates. Flight attendants kept passengers appraised of connecting flight information, and Southwest, on its own, acknowledged the problem by sending two free ticket vouchers to the passengers affected. Southwest notes that it isn’t something they “do,” but some­thing that consumers “deserve.” (McGregor et al., 2007)

Many business owners argue that some of their customers are just plain old bad customers. Many of us have had to “fire clients” or downsize our workload because the customer was simply being unreasonable. You need to assess whether it’s you or the client that is the problem. Here are some great tips from Liz Weston in an MSN Money column, with regard to how some companies are handling “bad customers,” and whether or not it is actually the company’s fault.

If the client consistently asks you for advice but buys elsewhere, move on.

A client constantly returns most of their stuff to you, particularly after it is worn, used, far outdated, or well past the return policy. What is recommended? Remove the client from mailing lists, and discourage him or her from coming to you again.

Weston also recommends restricting returns, which is easily done through a company called The Return Exchange, based in Irvine, California. This company helps other businesses refuse shoppers that abuse store policies. This is monitored through driver’s license numbers and then sent to The Return Exchange’s Verify-1 device, which records the consumer’s name, address, age, and details of the transaction, then the information is aggregated and stored.

Be careful though—don’t let any system automatically turn away a good client! (Weston, 2008)

There are also flat out bad customers! Who are they and what do they look like? Bad customers are those who return purchases after mailing them in for a rebate; customers who return items so that they can buy them again at a discount; cus­tomers who return or want to exchange used goods.

Some business owners don’t like to sell to companies or people who only buy loss leaders, either. A loss leader is an item that you advertise extremely cheap, at a loss, so that you can get customers into your store with the hopes of convincing them to buy more in the process. You might find you don’t value these customers because the intent of the loss leader is to get people to buy more expensive goods as well, or to be able to upsell that client.

3.3. Permeating Your Organization with Your Business Attitude

You may have the right customer-focused attitude, but what about your partners, colleagues, outsourcers, business associates, contractors, and employees? If you don’t set the right customer-first tone from the top down, those working with and for you won’t take it seriously. You are responsible for setting the service- oriented tone in your business. Do so, and enforce it—even with yourself.

You also want to figure out who your most prized clients are, and treat them exceedingly well. Airlines do this through elite frequent flier programs, giving their best customers perks, shorter lines in security, free upgrades, and so on. Take a cue from them and treat your prized clients very well.

What customer service mostly comes down to is doing what is right, what is fair, and what you would want done, if you were the customer. Put yourself in your customers’ position. Look at the situation through their eyes. Do as much as you can to ensure that, at the end of the day, those customers have something posi­tive to say about your business, and about you. Remember, although good news doesn’t spread quite as quickly as bad news, bad news is not the news you want spreading. Also, don’t forget to lead by example with regard to ensuring that your employees are following the guidelines you have set. It is up to you to set the proper tone for your business, in everything from how phones are answered to how customers are treated when they complain. You can do this through mod­eling the behavior you want others to live by and rewarding them when they do.

There are other things you need to be sensitive to in the workplace as well. How you react to unethical behavior within your company sets the expectation level for your employees and contractors, and sets the ethical tone for your customers as well.

You will want to train your employees periodically on core values; those who aren’t listening may need to find someplace else to work. Take action against violators, whether they are business partners or team members. Stay true to your philosophies and don’t compromise your boundaries or your dedication to your business or customers.

Allow customers and employees to tell you what they are thinking and how they feel through genuine open-door policies. Make sure all communication sets the tone you want in your business—notwithstanding, of course, any disciplinary notes, which may have to take a more aggressive tone. Set the code of acceptable conduct, and have employees sign off on the rules (a form for this can be found in the Fast Forms appendix). Set expectations during interviews—not after someone is hired. Remember, perhaps above all else, that fear-based management rarely works and rarely creates the customer service-based outcome that you desire.

Source: Babb Danielle (2009), The Accidental Startup: How to Realize Your True Potential by Becoming Your Own Boss. Alpha.

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