Customer Service v Price

[The Secret Campaigner]

Do you think it is worth paying a little more for good customer service and support or is price the most dominant factor?

In my experience customers are starting to realise "you get what you pay for" and are looking for more than a good price.

Any thoughts?

 

[LicensedToTrade]

Do you think it is worth paying a little more for good customer service and support or is price the most dominant factor?

In my experience customers are starting to realise "you get what you pay for" and are looking for more than a good price.

Any thoughts?

It depends entirely on your product/service, your market, your position within that market and your customers' priorities.

Price is certainly not the most dominant factor in every given situation, even if it is sometimes perceived to be.

 

[GraemeL]

Any thoughts?

Many. I will be very interested in the reactions to your post.

G

 

[grazzenger]

our customer base is growing as word spreads that we have very good quality clothing, so i'd agree. it's not just about that but it's definitely a key part of the mix.

 

[john todd]

up until recently i was always trying to be about the cheapest (domestic plumbing maintenance and repair) i was always busy but never really making much money
then after spending much time reviewing my strategy and positioning in my local area i decided to try premium pricing with exceptional customer service.
I'm now busier than ever before with completely different customers who would rather pay a higher price but expect a higher level of service, so to answer the question the type of customers i'm now dealing with much prefer quality and service over price.
john

 

[cjd]

People can't imagine support or service - not until they need it, by which time they've already bought (or not bought) the product.

Customers demand the same level of support for a product that they get for almost free as they do for one they spend hundreds on - it's just human nature. The up side of this is that if you actually succeed in providing great support - and it's an absolute pig to get right - a customer will love you forever and tell all their friends.

The moral is, if you sell a service, include the cost of providing service in the price because you'll have to provide it anyway.

 

[Philip Hoyle]

Customers will pay for better service, but the problem is persuading them that your higher priced service is better. You have to rely more on repeat business and recommendations to persuade the customer that you're worth more money. So it's very hard for someone selling "one off" products or services but easy where repeat business is likely.

 

[The Secret Campaigner]

I would completely agree with you John the way forward especially in the service industry is "look after your customer" and they will look after you.

I remember a friend of mine who wanted to set up as a joiner. My advice was to go for premium pricing and premium cutomer service, he thought I was mad. He is now so busy he is looking at taking on staff.

It is an absolute pig to get right in some cases as cjd states.

 

[Ian-M]

I worked for a sales director once who told the story of the Chiropractor. When a potential customer asked about price he told the story of a friend who had asked him if he could recommend a Chiropractor for their bad back. He said he knew a really good one and really cheap one, which one did they want to go to?

9 times out of 10 you could see the potential customer acknowledge that price was not the most important factor. For the 1 out of 10 that wanted to go the cheapest Chiropractor it made you wonder if this was a customer worth having, very similar to the great story above by John the plumber.

Ian

 

[GraemeL]

Do you think it is worth paying a little more for good customer service and support or is price the most dominant factor?

Some good posts here. Chiropractor is a great example.

However, is not the difficulty of convincing a potential buyer to pay more for a good service inversely proportional to the degree of personal grief or potential grief?

Your own health is important to you, very important, so when faced with a must sort out problem (ie you have a bad back) then service is paramount and price is not. But if you fully healthy, without back pain and are considering the cost of health insurance (that could give you free chiropractor), price is much more significant.

Another example might be if your car breaks down, price isnt the first thing that comes to mind for most. Service is. But if you want a new tyre because you can see it is almost worn out, then you have some time and will look for a price, then service.

Translating this into your offer to the market is more difficult. Several insurance companies have tried the 'we take the hassle if you have an accident approach', but I think this only works on those who have had an accident with hassle.

 

[I Love Spreadsheets]

Service is always worth paying for. When something has really low price I start to question the service I will get. I normally find the lower price the worse the service will be.

This has been excellently been demonstrated by Santander. Not only will they give you low banking fees etc they will actually pay you to bank with them. You cant get any cheaper than being paid to used a service. There is a reason for this, their service is the worst of the worst

 

[amy9]

Yes good service is worth paying a little more.

But when it comes to online shopping the most important thing is trust.

The user has to trust the site they are buying from. I will always choose a more expensive site that I know and trust than I cheaper one about which I have reservations.

 

[mhall]

We never compete on price and, hopefully, never will. Someone will always undercut you on price, but they can't match us on anything else

 

[I Love Spreadsheets]

But when it comes to online shopping the most important thing is trust.

So very true. I was recently in the market for a new games console (either a 360 or a PS3) and the choice was to buy it from a local independent or online from Game/Gamestation as they all had the deal I wanted.

Well Sony lost out and a purchased a 360. Not because Sony got hacked (I believe that will happen to most companies at some point) but because of the disgusting way they handled it. They tried to hide it, shift the blame etc but did nothing to inform or protect their clients.

The local guy won out over Game and Gamestation because their websites were far too flaky. The shopping cart kept emptying, pages couldnt be found etc. As a result there was no way I was going to enter my credit card details in to their site.

 

[I Love Spreadsheets]

We never compete on price and, hopefully, never will. Someone will always undercut you on price, but they can't match us on anything else

This is a problem all programmers and designers hit at some point. You will always get clients that find sites that offer people doing work for 50p an hour on the other side of the world and expect you to work for the same rates.

When this happens I just withdraw my quote and walk away. They normally phone up a couple of months later to say what a disaster it was.

 

[WJP]

I don't mind paying more for good customer service, if what I get is good customer service! I find that all too often claiming to have a higher level of customer service than competitors is used as a fall-back excuse by business owners who, for whatever reason, can't or won't lower their prices. That's fine if they actually deliver, but all too often they seem to think that just saying that their customer service is excellent (or writing it in big letters on their website) is enough, whilst actually they need to follow through on their promise to make it at all meaningful.

(Before anyone comments, this isn't aimed at anyone here, it's just something I've observed outside of UKBF).

 

[Digital Ark]

Service has always got to come first. Unfortunately when people buy on price, many times this has a hidden cost in poor service, not getting what you want, no aftercare, etc.

 

[mhall]

I don't mind paying more for good customer service, if what I get is good customer service! I find that all too often claiming to have a higher level of customer service than competitors is used as a fall-back excuse by business owners who, for whatever reason, can't or won't lower their prices. That's fine if they actually deliver, but all too often they seem to think that just saying that their customer service is excellent (or writing it in big letters on their website) is enough, whilst actually they need to follow through on their promise to make it at all meaningful.

(Before anyone comments, this isn't aimed at anyone here, it's just something I've observed outside of UKBF).

I'm not taking it personally,

If you don't get what you percieve as good service, you should walk away. We get paid for the value we bring to the customer and that is not about price in my mind. If you are not happy with the value we give you, you won't come back. If we don't deliver, we would have no business

 

[davidgilham]

I like to break it down into 2 areas,

Businesses who sell a product - the product will be purchased 9/10 because it's either a recognised brand/there is an established need for it so the customer already knows what they want - chances are they are not forseeing any issue with the product therefore customer service will probably not come into their purchasing mind as strongly. Therefore the primary purchasing factor will be price.

Businesses who sell a service - the service will be purchased probably on a trust basis, trust is largely made up from establishing relationships with customers, this in turn means giving good customer service. Yes price is still a factor, but trust and relationships take over more strongly in the purchasing process.

 

[Dan Frazer Gardening]

I agree with those who sell on sevice and reliability. If I visit a potential new client, or speak to them on the phone, for a quote and they mention 'getting a couple of other quotes' for the task I simply won't quote and am happy to tell them directly why.

Cheap service providers and tradesmen cut corners to gain work. They use cheap equipment that may fail and cause them to miss jobs, they rush the work to get it done and still have a wage at the end of the day.

I price my work fairly, and in a way that allows me to keep up my precise and sometimes quite obsessive standards. My clients appreciate this and don't try and haggle me down on work. Haggling in my trade means asking for a lesser service level.

This has had a knock-on effect on me and when I now employ other tradesmen to do work I will always seek out recommendations and not go for the cheapest simply because of price.

 

[internetspaceships]

I like to break it down into 2 areas,

Businesses who sell a product - the product will be purchased 9/10 because it's either a recognised brand/there is an established need for it so the customer already knows what they want - chances are they are not forseeing any issue with the product therefore customer service will probably not come into their purchasing mind as strongly. Therefore the primary purchasing factor will be price.

Businesses who sell a service - the service will be purchased probably on a trust basis, trust is largely made up from establishing relationships with customers, this in turn means giving good customer service. Yes price is still a factor, but trust and relationships take over more strongly in the purchasing process.

Hi David

We sell a product but the reason people happily pay more for our product than some others is because of our customer services.

We're also renowned for putting things right in the unlikely event of a mishap.

I get what you're saying however it's not as cut and dried as product vs service.

Jon

 

[davidgilham]

Your dead right, certain market places completely buck the trend, I guess the point im trying to make is:-

Your vacuum cleaner packs up, you need a new one, dyson looks nice, comet are £9.99 cheaper than Curry's, and my local electrical retailer is about £99.00 more expensive but he's been around for years and says hello when you walk past his shop..... it's Comet every time.

Unfortunately it could be a sign of the times or the attitude of the newer generation.

I agree that this is not a clean cut case.

Dave

 

[movietub]

In a resturant,, specialist shop etc then service can count for a lot. But retail in general, and especially in ecommerce, the chargeable value of customer service is not what it used to be. Particularly if you sell branded goods - as nowadays anything with a barcode can be price checked against everyone else within seconds. Ok, not everyone shops like this, but more and more people do everyday!

PC world were the subject of a case study a few years ago that revealed the absolute most they could charge above their online price instore was 15%, more like 5-10% on most stuff. And when we have played around with competitive pricing vs quality of service, I would say the same. 5-10% is a fair premium to charge for something if it sold with passion and the customer handled with care.

There are many that believe otherwise though and will tell you that price isn't *that* important. Well I'm afraid it just is! It's all very well charging £11 instead of £10 if you have the item in stock, have been helpful to the customer, and generally made their purchase easy and pleasant. You've made a small extra effort, they have paid a small extra premium, it's all good and quickly forgotten. But you can't charge £12.50 for something that they can buy elsewhere for a tenner. Why? Because £2.50 buys a pint in a pub, or a sandwich, or jar off coffee. All things that the customer will ultimatley feel represent better value more than a friendly smile or a smooth checkout process online. In retail customer sevice is a way to get ahead, a way to outdo a competitor. It is not something to sell in it's own right however. What you sell are products, and when you price you look at what you can realistically sell the product for. Customer service is a better mechanism for encouraging growth or repeat custome than it is for justifying extra margin.

 

[LicensedToTrade]

Your dead right, certain market places completely buck the trend, I guess the point im trying to make is:-

Your vacuum cleaner packs up, you need a new one, dyson looks nice, comet are £9.99 cheaper than Curry's, and my local electrical retailer is about £99.00 more expensive but he's been around for years and says hello when you walk past his shop..... it's Comet every time.

Unfortunately it could be a sign of the times or the attitude of the newer generation.

In your specific example if you take price out of the equation you are left with an independent retailer who cannot real add much extra value for money to the consumer. With growing consumer awareness of the SoGA, Comet is now on a level footing with the independent retailer in terms of consumer protection. If the only difference left between Comet and the Independent Retailer is a tenner or a smile when you pass the door then in most cases people would accept that you can put a tenner in the bank but you won't earn interest on a smile.

If the independent electrical retailer was able to offer something above and beyond that of Comet in service levels then that ten pound price difference would be of less importance to the consumer.

 

[movietub]

If the only difference left between Comet and the Independent Retailer is a tenner or a smile when you pass the door then in most cases people would accept that you can put a tenner in the bank but you won't earn interest on a smile.

If the independent electrical retailer was able to offer something above and beyond that of Comet in service levels then that ten pound price difference would be of less importance to the consumer.

My point exactly. A tenner isn't a lot of money. But 99% of the people in any shop at any given time wouldn't give anyone a tenner for smiling at them nicely of being mildly more informative than someone else.

Apart from anything else, what sort of people buy or sell helpfullness and smiles anyway? If your product is being sold down the road for 20% less then you sort out your pricing, it's the pricing that's wrong! Either way you should keep on smiling, that's just the job of anyone in retail.

 

[LicensedToTrade]

My point exactly. A tenner isn't a lot of money. But 99% of the people in any shop at any given time wouldn't give anyone a tenner for smiling at them nicely of being mildly more informative than someone else.

Apart from anything else, what sort of people buy or sell helpfullness and smiles anyway? If your product is being sold down the road for 20% less then you sort out your pricing, it's the pricing that's wrong! Either way you should keep on smiling, that's just the job of anyone in retail.

Uncompetitive pricing for independents is usually the symptom not the cause. If they wish to sort out their pricing the need to sort out their buying in the first instance.

 

[internetspaceships]

Gahh again I find myself agreeing with LTT.

Buying is the key.

 

[LicensedToTrade]

Gahh again I find myself agreeing with LTT.

I think it is something to do with the unusual weather we have been having in October.

 

Uncompetitive pricing for independents is usually the symptom not the cause. If they wish to sort out their pricing the need to sort out their buying in the first instance.

Oh and thats so easy to do?

Problem for the independants is there overheads as always.

Earl

 

[internetspaceships]

To LTT:

Probably so, but you still can't see your way to tapping the "thanks" button on one of my posts can you? *giggles*

 

[movietub]

Uncompetitive pricing for independents is usually the symptom not the cause. If they wish to sort out their pricing the need to sort out their buying in the first instance.

Yes. Believe me I could fill a whole thread with what I see as the blindingly obvious reasons so many independants fail. Why they basically deserve to fail in fact.

for example whip out a debit card in many small shops and they will charge you anything upto 60p for the pleasure of not making them go to the bank with cash. In spite of the fact that it should only cost them 10p to process the debit card, in spite of the fact that they should know that less and less people carry cash every day. They get themsleves into this predicament as they are lack the gaumption to call their card procesors and negotiate rates, so instead people learn to go somewhere else when they don't have cash on them. So then the shop-keeper loses the turnover on cards to ever negotiate decent rates. None of this matters to them as they probably don't know what their rates are anyway.

Given these basic problems, it seems unlikely they are going to succesfully bend a sales rep over for some extra discount.

I can say these harsh words with impunity, as these same people feel that buying a computer and getting online to see how the rest of the 21st century does things has no place in their business. Instead, they simply while away their days shaking their heads saying 'I just don't understand it'. Completely baffled as to why their self percieved god-given right to their livelihood should ever be withdrawn by Mr TESCO down the road. You can try telling them that TESCO started out life flogging surplus goods from a nice traditional market stall, but they won't listen.

In short - they are not business-people. They just happen to own the business they work for.

 

[movietub]

Oh and thats so easy to do?

Problem for the independants is there overheads as always.

Earl

True, but if you want to seek out the root cause of an independant retailer struggling, then its no good just looking at what they could have done last week, or what the problem is today. In most cases you probably need to go back 10+ years to get to the point that someone first lost their drive to outdo their competitors and instead became a stubborn stick in the mud. That's the point at which overheads become an issue, because they become proportionatly higher as the business starts to slow.

Expand or die, in short. Throughout the history of retail the number of sellers has only ever decreased, with the remainder growing in size. It's a very slow and painful death, and most people don't even realise it's happening until it's way beyond curing.

 

[The Secret Campaigner]

Some great comments on this thread, I would just like to add :

Make sure if you are buying on price alone you are getting the same product. For example B&Q are selling a top brand lawn mower from a British manufacturer which gives the impression you are buying British when infact it is imported from China. The company will supply "British Made" mowers to independent retailers.

If you are a retailer struggling with competition from the larger multiples, dont moan and groan to your customers, your customers are not interested, accept the fact they are cheaper and offer something different.

Most important of all your customers like a smile and welcome when they enter your premises. Acknowledge their presence and look after them. Make their shopping experience a pleasure.

It amazes me how many people have forgotten how to smile.

 

[LicensedToTrade]

Oh and thats so easy to do?

Problem for the independants is there overheads as always.

Earl

I didn't say it was easy to do, but it still remains the case.

 

[davidgilham]

I often see it with independant retailers who either charge you for the pleasure of purchasing via debit card or they don't accept card at all!

Number one rule of selling to retail MAKE IT CONVENIENT FOR YOUR CUSTOMER TO PURCHASE or they will most likely not return to your establishment for a future purchase.

Also branding something as 'made in Britain' is becoming less and less important im afraid. We are victims of our own demands, we want a brand name product but we want it cheap, we also want to be paid decent wages...... I'm afraid that as a result we are pushing out manufacturing in our country. I don't necesarily think it's a good thing but I know where I would get my products produced if I was to sell to the mass market.

Price will become a bigger decision factor in the future, look at insurance, compare the market, the only differentiation on that website is the price you pay for your cover and maybe a few optional extra's - but they are still broken down by price.

Dave

 

[mhall]

I often see it with independant retailers who either charge you for the pleasure of purchasing via debit card or they don't accept card at all!

Number one rule of selling to retail MAKE IT CONVENIENT FOR YOUR CUSTOMER TO PURCHASE or they will most likely not return to your establishment for a future purchase.

Also branding something as 'made in Britain' is becoming less and less important im afraid. We are victims of our own demands, we want a brand name product but we want it cheap, we also want to be paid decent wages...... I'm afraid that as a result we are pushing out manufacturing in our country. I don't necesarily think it's a good thing but I know where I would get my products produced if I was to sell to the mass market.

Price will become a bigger decision factor in the future, look at insurance, compare the market, the only differentiation on that website is the price you pay for your cover and maybe a few optional extra's - but they are still broken down by price.

Dave

I think you have chosen a bad example in insurance. It's a legal requirement - we MUST have car Insurance and we will, therefore always go to the cheapest unless there is a VERY good reason not to (a good experience on a claim perhaps)

People don't have to buy what I sell them, they choose to. If I can convince them that I offer better VALUE (not price) than my competitor, I win. That better value can be anything from convenience to a nicer shopping environment through a million other things, price being an important one but not as important as you would think, even in a recession. We are not the cheapest, and that is for a good reason - people know that you get what you pay for. Sometimes we win simply because our staff smile.

At a guess, I would say that, for us, about 25% of people are obsessed with finding the cheapest - fine, let them use the internet, but I know many will return. I don't do maths, but I would rather spend my time with the 75% who appreciate us and I think 75% is more than 25%

 

[movietub]

At a guess, I would say that, for us, about 25% of people are obsessed with finding the cheapest - fine, let them use the internet, but I know many will return. I don't do maths, but I would rather spend my time with the 75% who appreciate us and I think 75% is more than 25%

I would say a similar 25% of our customers are also obsessed with finding the cheapest. I think that's just a fact a life!

But we won't tell them to go and buy from the cheaper place. That suggests that we are no better than the cheaper place, as would simply be swapping their cheap prices for our better quality of service. That's not better, it's just different, an alternative way to buy and sell.

In the end we invested heavily in eCommerce ourselves, price matched on-line and set all of our in-store prices to the same as the website. All I had to do to make it work was find a way of maintaining our top notch service whilst accepting lower margins.

It was actually very busy. Overnight we became the absolute cheapest physical shop in the area for anything we sell. We are so busy now its crazy. Add to that the 80% of new people that instead use our on-line shop, and our buying power has increased so dramatically that we have our margins back as well.

My solution was a lot more complicated than saying 'go away' of course. Effectively restructuring an entire business and doing away with a number of long established ways of doing things. But I feel it was a better solution as I got my 25% back on side and they bought another 100 friends each day.

So I have to conclude that it's wrong to justify high prices with qos, or vice versa. The game is won by re engineering your operation to provide both.

 

[bigbentrader]

I believe price might bring them in, but service brings them back.

I also don't think as a customer I want to be charged extra for a level of service which is actually just good customer service, I expect that as a minimum anyway. But I will pay extra for someone to do something extra which saves me time.