Customer service is not cost of sales. It’s a marketing expense

We had a horrible experience with Airtel, our Internet provider, today. Our Internet line hasn’t been working since morning, I registered a complaint and was promised it would be fixed by 6:30 pm in the evening. The time passed and when I checked the complaint status, it was marked closed. Asked for an explanation, a customer service representative put me on hold for — drumroll, please — full 15 minutes before I gave up. Their IVRS system is impossible to navigate and you are actually asked to dial a gazzilion numbers before. Internet is full of complaints about Airtel and they recently ranked as worst customer service company in India. I’m surprised how the highly paid bosses don’t realize this or don’t do anything to do this. Baffled, surprised and makes me punch myself.

Sadly, Airtel is not an exception. Many large companies have impossible customer service processes. What’s even more sad is that this poor customer service experience has become a norm and there are even funny (but true) comics based on this reality. Why can’t be world full of Zappos like companies who believe in delighting the customers?

Customer service is not cost of sales

I think the primary reason for endemic poor customer service is because management typically includes it under the cost of sales head. Unfortunately, cost of sales is something organizations see as an unwelcome item on their balance sheet. They want to reduce it or better still eliminate it completely. Having more staff in customer service centers means more cost, so they come up with (unintelligent and ultimately frustrating) ways to automate the customer service. They fail at this automation miserably and end up annoying the customers. All this is because customer service is seen as cost of sales, which is wrong in my opinion.

Customer service is marketing expense

Ironically, just because poor customer service is endemic, a company can get huge competitive advantage just by having a good customer service. Each customer service interaction leads to either a happy-and-satisfied customer or a frustrated-and-angry customer. Research shows that buying decisions are heavily influenced by peers, friends and family. Advertisements and marketing just creates awareness. It’s ultimately the recommendations that cause people to purchase stuff. And guess what drives recommendations? Product quality and features is one part. The other big part is customer service. No frustrated customer will EVER recommend a service, no matter how many features you cram into it or no matter if you run never ending national TV advertisements.

The right way to look at customer service is to see it as a form of marketing expense. If every customer service interaction creates a happy customer, it should be seen as an alternative to advertising or marketing. In fact, even if most organizations spend even 10% of their billions of dollars of advertisement budget on customer service, world will be a much better place.

Humble plea: if any of the big bosses are reading this post, please do your bit to make the organization embrace customer service!

8 comments

  1. Paras, I don’t see a problem with accounting for customer service expenses under the “Cost of Sales” head. In my opinion, the real problem arises when managers overlook the “fact” that, everything else remaining the same, as the Cost of Sales goes down, sales too go down [(dissatisfied customers -> poor word-of-mouth -> reduced sales) is only one of the many effects that can be fitted in this generalization].

    Again, just an opinion.

  2. Agreed – Customer Service is the New Marketing. (See Zappos)

    Great ppt here – http://www.slideshare.net/Thor/customer-service-is-the-new-marketing-web2expo

    And also I’m a big fan of using Customer Effort as a metric. I think organizations have measured the wrong things wrt customer service. They view Issue Resolved in <1 hr as a success. But if I'm on the phone for 55 minutes with JetBlue – I'm pissed off. Ask me instead:

    "How much effort did you need to spend to resolve your problem?"

    There's a great HBS case study on it – should check it out.
    -Josh

  3. Nice! Completely agree with the airtel part. They suck. Loved the oatmeal cartoon πŸ™‚

  4. it is interesting how fairly arbitrary accounting rules have shaped our perception of reality. this is true with respect to taking care of your customers as you say. it is also true with respect to valuing our people, customer advocates and community, all of which are assets to any well run business but are not valued anywhere on our balance sheet. as consumers, most of us would say great customer care creates brand value while invasive marketing spend diminishes it.

  5. Paras,

    In the case of Airtel-Internet connection, you/we are mostly a ‘hostage customer’. You cannot switch to another service provider as they are even more pathetic.

    Yeah, I agree 100% with ‘Customer service is marketing expense’

  6. Its ironic that India has taken on so much of the call centre work that used to be handled in the UK, and that one of the worst customer service experiences happens to be with an ISP there.

  7. It can always shorten our fuse with some customer service that would just say yes and nothing hasn’t been implemented. They are just workers and has no concern to what negative effect it could do or have to companies whom resources is very important.

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