Customer Service Math 101: It Ain’t Just a Penny
So it’s been a while since I spouted off about customer service but I just had an experience that peeved me so now is a good time to tee off on the topic again. I was driving home and suddenly had a sweet tooth so I stopped at one of America’s iconic fast food joints and spun through the drive through. It went something like this:
“Welcome to Make You Die of Congestive Heart Failure’s! Can I take your order?”
“Yeah. I’d like an artery clogger super sweet sugar booger special but give me the small… I’m trying to watch my diet.”
“That will be $1.29. Please pull around.”
I spun around to the window and handed the young lady a wrinkled up dollar, a shiny quarter and a nickel with some pocket lint attached to it. And then it happened… Her words reverberated throughout the cosmos, shattered stars, and spawned black holes.
“Thank you sir. Have a good night.”
Have a good night? Look, I wasn’t great in 2nd grade math but I was pretty sure she owed me a penny. A penny. I know – get over it. But it’s the principle of the whole thing. It came across as “I’m too busy to make change for you and, well, it’s only a penny so I know you don’t care so move along so I can clog someone else’s arteries.” Knowing the food she served me would merely kill me slowly, I believe she had the sinister intent of doing it more rapidly by causing an embolism.
Folks, this is customer service math 101. Sure it was a penny. But it’s one penny on the path toward creating a customer-hostile culture.
In another mind-bending customer nightmare experience, a greeting card company jacked me for $9.95 because they had some stupid obscure fine print in their “free” online card service whereby if you didn’t cancel within 30 days of registering you would be auto-enrolled for $9.95 a month. I noticed on day 31 and requested cancellation (I had only sent one card in the 31 days – their website was on the user-hostile side and their cards were less than inspiring). My cancellation request call went something like:
“I’d like to cancel please.”
“No problem sir. I’ve closed your account.”
“And will you credit the $9.95 back? I only sent one card and I’m pretty sure I’m within the cancellation window.”
“No sir. That window closed yesterday. I can’t help you. Have a nice day.”
No. He couldn’t help me. He was about as useless as a screen door on a submarine. Instead of slamming my head off the desk to teach him how to properly handle the situation, I went ape, escalated the call to a supervisor, and got a $10 gift card. On top of that, I don’t buy their cards anymore and I tell my friends and family not to either (I’m spiteful that way).
Okay kids – bust out those calculators because here’s the math of that interaction based on some pretty standard industry assumptions for activity based costing. Let’s look at the financial impact of this little decision the customer service rep made:
Revenue: +$9.95
Cost of customer service call: -$4.50
Cost of escalated supervisor call: -$125.00
Gift card lost margin: -$5.00 ($10 card, assumed 50% margin)
NPV of annual lost sales margin from sales to me: -$100.00 (5 cards/year, $4.00/card, 50% margin, 10% discount rate into perpetuity – trust me… the math works)
NPV of annual lost sales margin from sales to my friends/family: -$100.00 (similar assumptions but they’ll still buy some cards…)
NET INCOME: -$324.55
Really. Shoulda simply refunded the $9.95 and built that positive relationship. Sure, companies have to set standards and draw lines for rebates but for God’s sake, give your associates some leeway and trust their judgment. In this case the customer service rep might have refunded the fee but his hands were tied. Net result: a hugely negative financial decision.
Treat your customers gently and well (for examples of this “done right” check this out or better yet, read about someone who absolutely nailed it in this post). Respect them. Give your associates the leeway to do so otherwise they’ll cost you $324.55. Train them on the proper culture of customer service you expect from them otherwise they won’t make change and give back that penny (and no, I’m not even going to run the numbers on the colossal stupidity of that laziness). If it’s only a penny, make sure it’s your customer’s…
– Mike Figliuolo at thoughtLEADERS, LLC
Ummm, it’s a penny! Usually I’m the one pulling away before they even have a chance to give me the penny. While were on the subject, shouldn’t we just relegate pennies to a collectable only status and what about those hugh nickels. Wouldn’t it be better for all of us if everyone just swiped a card now that signatures are not required for small purchases? I suppose if it was IMPORTANT to Mike, then they should have gone the extra distance for him. ;>
Don’t even start with the free then subscription services where you receive special discounts and fun. What a waste of money. A large reputable retailer recently tricked me into one of these with their ‘want an extra $10 off’ offer that laid out way too many requirements. Reminds me that I need to complain about this offer.
Joe
Joe,
Thanks for the note. It’s the principle, not the penny… And maybe someday we’ll get into the debate here on doing away with those little pieces of copper. In the meantime, feel free to send me every penny you come across ;)
As far as “special offers” – you’re right. They’re never that special. There are ways to do them right and then there’s the other way. I have no beef with companies that are up front, candid, and understanding around such offers. The others will definitely fool you once but usually at the expense of long term goodwill.
Steve,
You know I always value your opinion and thanks for sharing. Permit me to redirect because I know your blog is all about not being annoyed ergo you’re bringing that perspective to the stories I’ve relayed here (I’m assuming I’m addressing the “right” Steve based on your use of “DB” in your comment).
I’m coming at it from another angle – as someone who manages folks who provide service. My ingoing premise is to empower associates to make the right decision for the customer and to always come at things with the customer in mind (which I know is sometimes foreign for the way you run your shop – sorry… couldn’t resist the dig…).
I use hyperbole in my stories to help managers and leaders look for subtle cues in their organization that something is getting rotten in Denmark. I’m also trying to help folks take a broader perspective that it’s not just $10 that such decisions cost your business. Those decisions cost infinitely more (how many cancels have you taken because someone didn’t take 10 seconds to knock on a door or call ahead?). The little mistakes in our businesses have a large economic cost that not everyone appreciates.
As far as my vehicle, I bought it used (never pay retail!). And I actually throw my spare change into the fireman’s boot rather than to the drive through guy. And the children DO appreciate that.
As always, I welcome the rebuttal so we can continue this intellectual blog-based repartee.
M
Mike,
While your comments are correct and on target, you really are the customer from hell. You are seemingly always blowing people up for these small issues.
My advice, and I am sure you want to hear it, is to live a little. Next time you go through a fast food joint, flip the guy a dime and say, “keep the change!” You will be a better man for it.
Life is too short and this sense of entitlement that we have as consumers is way out of whack. Having a fit over a penny or even $10 is crazy. You probably pull in about a quarter of a million a year and drive a Lexus so stop complaining.
Do it for the children!!! You DB!!!
Steve
Mike,
I get what you are saying, because many times when this has happened to me at a large chain, I wonder if it’s endemic in their culture. While a penny isn’t much to me, perhaps, it’s still my penny. On the other hand, if you do the math (maybe now we’re getting into 5th grade stuff), and they don’t return a penny to 10 million customers, well–now that’s a bit more than pocket change!
But both of your stories really come down to this–it’s about service and your brand. What do you want your business to represent? And, maybe I like your comments because now and again I will rail in my blog, as in this post, http://www.lemonzestmarketing.com/zestyourlifeblog.php?s=do-you-walk-your-brand-walk-or-just-talk it’s not really about the money. It is about making me feel value, and fairly treated. Wonderful is better, but I would gladly take fairly and be happy.
Customer service is a component of your brand, which is an extension of your marketing and your strategy. I am pretty sure most companies don’t set out with at strategy of “We’re going to piss off our customers routinely” as the highlight of their branding. But sadly, this happens often. If management isn’t paying attention it will be devastating.
I actually do let some things slide now, and vote with my debit card, but as my blog points out, occasionally I dig in for the principle.
Oh, by the way, I like that you do take on things that merit discussion. If every blogger wrote roses and sunshine all the time, no one would help push us along!
Joan