I recently had two very negative experiences with online transactions. In both cases, although there were additional factors, the real problem was poor customer service. With more and more businesses shifting some or all of their operations to the Internet from bricks-and-mortar locations, it is becoming increasingly important for CEOs to not lose sight of the importance of quality customer care.
As a touchstone for the shift from bricks and mortar and physical products to Internet-based businesses and virtual products, one need look no further than the largest online retailer — Amazon.com. Amazon began selling hardcover and paperback books in July 1995. Twelve years later, in November 2007, Amazon introduced the Kindle and began selling Kindle books. By July 2010, Kindle book sales had surpassed hardcover sales, and by the holiday season last year, Kindle books overtook paperbacks to become the most popular format on Amazon.com.
Today, less than four years after introducing Kindle books, Amazon.com customers are now purchasing more Kindle books than all print books — hardcover and paperback _ combined. Since April 1, for every 100 print books Amazon has sold, it has sold 105 Kindle books. (This includes sales of hardcover and paperback books by Amazon where there is no Kindle edition. Free Kindle books are excluded and if included would make the number even higher.) There is no doubt that the electronic book format is dominating sales and will eventually, very likely, make the hardcover and paperback things of the past.
What does this mean for retailers that want to do business through the Internet? It certainly opens up dramatic and potentially highly lucrative opportunities for thousands of businesses that only a few years ago would have had little or no chance of becoming anything more than a popular local market operation. It also means that many companies that previously depended on expensive storefronts to drive consistent traffic can now spend relatively little money and gain massive national and even international exposure for their wares.
With unprecedented growth, unfortunately, come unprecedented growing pains. Companies inexperienced with doing business over the Internet often do not anticipate the massive ramp-up in sales and as a consequence of those sales, a massive increase in customers served. With these new customers come customer service challenges. Often, companies are completely unprepared for dealing with these issues, and as a result, sometimes ignore their most basic customer service obligations.
Recently I bought something online and used PayPal for the transaction. PayPal is a great service in theory, allowing businesses to avoid establishing merchant accounts with credit-card companies that can be challenging, expensive and time-consuming to manage. I use PayPal for my business as well, since I do not process that many credit-card transactions and don’t want to hassle with a merchant account. The problem with PayPal is that it is absolutely horrible at handling money! There are delays after delays after delays. The Internet is rife with complaints about PayPal holding money from its customers and I have had the same experience. My sense is that sooner or later some industrious law firm is going to put together a massive class-action lawsuit against PayPal and force it to pay interest to everyone who has suffered these delays and holds on their funds.
My personal experience with PayPal resulted in multiple emails (which received automated and canned responses that did not address the real issue, which was that the company has held my money for no good reason), and calls to the customer service department, where I didn’t receive a satisfactory response and was then disconnected when I was supposed to be transferred to a “supervisor.”
Another company, Kennedy’s All-American Barber Club, claimed to have mailed my order twice over more than a month’s time. Nothing ever came, so the company finally FedEx’d the items, but when the package finally arrived (after more than five weeks), there were two items instead of three. When I emailed the company to let them know, instead of shipping me the item immediately, or at least refunding my money, they basically called me a liar, and claimed to have shipped all three.
I’m certain I am far from alone when it comes to these kinds of experiences. The bigger picture issue is that these companies, large and small, are not investing the required amount of money into personnel, training, equipment and technology, and supervision, to ensure that customers are receiving a satisfactory experience. A company can have the greatest product in the world, but if its customer service is terrible, it will suffer.
Many companies are hurting in the poor economy. However, one must wonder, in cases like Dell — which outsources its customer service to India like a lot of large tech companies have done, as well as companies across all industries — if their poor customer service has had a direct and significant impact on their poor performance. Shareholders of publicly traded companies should certainly take note of customer service issues before making any investments. (PayPal is owned by eBay, just in case you are wondering). I certainly do before I invest in any company for my clients!
— Craig Allen, CFA, CFP, CIMA, is president of Montecito Private Asset Management LLC and founder of Dump Your Debt. He has been managing assets for foundations, corporations and high-net worth individuals for more than 20 years and is a Chartered Financial Analyst (CFA charter holder), a Certified Financial Planner (CFP) and holds the Certified Investment Management Analyst (CIMA) certification. He blogs at Finance With Craig Allen and can be contacted at email@example.com or 805.898.1400. Click here for previous Craig Allen columns. Follow Craig on Twitter: @MPAMCraig.