Beyond Customer Delight: Being of Maximal Service
How can a company best serve its customers? This is the third article in a series on Service to All Stakeholders.
Many companies say they put customers first. Amazon, the largest e-commerce company in the US, has provided a blueprint for how to do this, while not always without controversy. Jeff Bezos, founder and CEO of Amazon, likes to say that they are “obsessed” with customers. And from personal experience as an Amazon customer since 2005, they are. We can buy whatever we want, whenever we want and get it within a couple of days, at incredibly low prices. That’s because Amazon optimizes for its customers. It isn’t trying to make as much money as it can on each transaction. It believes it can best serve its customers by making everything available at as low a price as possible. And it has worked, thanks to their first-mover advantage on the internet and a few other key tactics that are customer-delighting.
By obsessing over customers, Amazon believes that all other stakeholders will be served. And, to some extent, that is true. Amazon’s value as of today in May, 2021 is about $1.7 trillion, among the highest of all US companies. And Amazon is only about 25 years old, with just 4% of the total retail market in the US.
Customers are such an obsession for Amazon that margins, something conventional public companies care a lot about, are purposely kept low. For a time, this depressed Amazon’s stock price. But eventually Jeff Bezos convinced Wall St. that he knew what he was doing and the market makers got on board with his long-term vision of dominating all retail and whatever else Amazon decided to do. (Amazon Web Services [AWS] scaling up with large profit margins didn’t hurt either!)
While it is easy to see why companies like Amazon are successful in building loyal customer bases, it is surprising how many businesses try to squeeze as much as they can from their customers and find other ways to create adversarial relationships. Think of any company that is distasteful and you will find one that isn’t being of service to its customers, likely overcharging for something that you need. Take cable television providers, for example. In this highly-regulated US industry, we have limited choices for cable TV and thus are forced to pay huge fees if we want their poor service. Try not to get mad thinking about the last time you waited around for the cable guy to show up for an installation appointment.
Evolutionary Businesses would never operate this way. The mindset is to be of service to customers and to make them not just content with their purchase but loyal and excited to promote your company to their friends and family. And you don’t even have to pay them for this--they feel like they are being of service in doing so!
A great way to turn customers into cheerleaders and evangelists is to charge only what you need to, not what you can get away with. Amazon does this to an extreme. Large retailers Walmart and Costco follow suit and have earned loyal followings. In some cases, like with Patagonia, this might be more than your competitor charges because you are using more expensive components. But given Patagonia’s vocal commitments to the planet and people, customers don’t think they are getting screwed by a greedy corporation when they are charged $150 for a recycled fleece pullover. They believe Patagonia is charging a fair price.
Our belief is that all companies--not just huge retailers--should follow this practice and charge as little as necessary. It is a far more complex calculation to determine what that might look like, but is a valuable means to building a long-term sustainably successful business. Of course you will need to take into account not just current operating costs but also planned investments and cushion for market downturns, among other things. By doing so with essential transparency (a concept we will discuss in more detail later), customers will feel trust in your business and feel like partners in their decision to purchase from you.
A company that could evolve in this way is Apple. Apple has amassed massive profits and a cash hoard. Much of this cash has been used for stock buybacks, in which the company buys its own stock to drive up its price, helping shareholders but doing little or nothing for all other stakeholders. Imagine the goodwill that Apple would engender from its customers by electing to decrease the costs of its phones. Clearly it doesn’t have to--it’s legions of fans continue to buy up every new phone and other product it makes. And surely such an action would scare Wall Street, causing the stock to decline in the short-term. But over the long-term, the company would only further solidify its position among its customers and continue to dominate the market. It would most likely win back market share from its competitors like Samsung and LG who are using Google’s Android operating system. This would then likely lead to not only more loyal customers, but loyal shareholders, and an increase in shareholder value.
A company that works hard to create maximal service to its customers is Slack. Slack created what they call a fair billing policy that ensures customers are not charged when subscribers do not use their software platform in a given month. Conventional businesses will charge whatever they can get away with, especially when there is no cost to the company. Gyms are notorious for signing up members for annual contracts with the hope and expectation that they will only come a few times and the gym will never be overcrowded except the first two weeks of January.
Slack doesn’t need to create and follow a policy like this. They do because they believe in fairness and want to serve their customers in the way they would like to be treated themselves. This is only extraordinary because corporations have moved away from this kind of positive behavior over the past half-century in the name of profit maximization. The policy costs Slack every month--and many customers probably wouldn’t even notice if they were being charged for non-use--but to the company, it’s well worth it. And for the users who notice, it helps drive loyalty.
Beyond charging less than possible, there are many other ways companies can be of service to their customers. An obvious example is simply providing excellent customer support through easily accessible staff and information. As with pricing, most large companies have made it harder and harder to access a live person as a way to save money on such costs. There’s no quicker way to irritate a customer than by asking them to go through an exhaustive automated phone menu only to have the call unceremoniously dropped. This has happened to me too many times to be a coincidence.
For a conventional business, the customer is always right is just a bunch of meaningless words. In their worldview, the customer is a means to a profit, a number in a database with metrics to be squeezed for the ultimate goal of more profit. This is a short-sighted policy. Evolutionary Businesses look to the long term and recognize the value of serving their customers (along with all other stakeholders), even at the short-term cost of a smaller bottom line.
There is plenty more we could explore here, but for now we will move on to the next stakeholder group, partners.
