Evidence: Customers Won’t Pay For Better Service

Evidence That Customers DO NOT Pay LESS For Less Customer Service

(Continued from Customers Are NOT Paying More For Service)

Over the last decade, many industries and niches have successfully moved away from providing quality customer service, to a model that is based on price. In fact, in many cases, despite what customers say, they sacrifice customer service for price. Companies have been profiting from this by branding themselves as the lower cost alternative, and making NO customer service a “feature” rather than a drawback.

The No Frills Grocery And Bulk Food Stores Movement

Remove many of the customer service amenities, such as bagging, supplying bags for free and so on and announce to customers that in exchange for less customer service, they will save money on their groceries. Brand and market accordingly. What do you get? A success.

New Jersey, Oregon Populated By Aliens

There are two U.S. States that do not permit customers to pump their own gas, New Jersey and Oregon. In surveys conducted in those two states, gas consumers were asked their opinions on self service vs. full service. The two independently conducted surveys yielded almost identical results. About two-thirds of respondents “preferred” being served at the pumps. Oddly enough, research conducted in the rest of the USA, ended up with almost identical numbers, except preferences went in the other direction. Two thirds of respondents who were legally allowed to pump their own gas stated that self-service was preferable.

It’s a bit strange, when you come to think about it. Is there something genetically or otherwise different in New Jersey and Oregon. Could those two states be populated by some alien species that values full service and IS willing to pay more? What do these weird results say?

Presumably the residents of New Jersey and Oregon aren’t genetically different, although if you ever visit New Jersey you might wonder. What IS different is varying experiences for customers in those states versus the rest of the country.

It’s likely that the odd survey results are a result of one group having experienced self-service, and the other not, or habit. Or, perhaps to the point, it suggests that survey research is so flawed that it often means nothing.

Care to bet that if New Jersey and Oregon eventually allow self-service, that within say a few years, their aberrant survey responses would completely shift to match those of their fellow customers in other states? I’d take that bet.

The first branded No_Frills Grocery Store in Canada was established in 1978 in Toronto, Ontario. It presented itself as offering limited choices, lower prices, and a lot of discounted specials. Shortly after opening, it introduced a new line of generic self-branded products, essentially “no-name” items that sold a much lower cost, and packaged very plainly. The original store presented its goods in a warehouse type environment. Products were displayed in their original shipping cartons, fresh produce was displayed unwashed, as it came off the truck, and the store lacked a number of other amenities, like a fresh meat department.

It took off like crazy. Opening day crowds overwhelmed the store’s ability to handle all of the people who were quite comfortable saving a few dollars on each food order and willing to sacrifice all the conveniences and customer service perks offered by competing stores.

No Frills stores still operate some thirty five years later, and the chain has expanded its locations. Yes, things have changed, and they no longer have that wearhouse feel, and they do wash their produce. Their “branding” though continues to focus on “no frills” service, even though they aren’t really much behind their competitors present day, and they successfully cater to people who like to feel they are getting “good deals”. Simply put, the company capitalized on the idea that one could provide less customer service, and turn it into a feature. Customers are still quite happy paying a bit less, for less service.

Self Serve (No Serve) Vs. Full Service Gas Stations

There’s probably no industry that has been completely changed by the “no service” approach than the gas station. For those of you younger folks that don’t know this the process of buying gas for a car involved driving into the station, where you’d be attended by a gas jockey, who would ask you how much gas you wanted, pump the gas, clean your windshields and windows, and even check your oil and other fluid levels. Then you’d pay the person, usually adding a tip for the service. Of course, consumers had to pay for this service somehow, so companies simply increases the price of gas. With gas prices so low, it was hardly much of an increase, and it was invisible anyway.

There is some disagreement as to whether the first self-serve gas station opened in the 1940’s or 1950’s and who was the very first, but it’s clear that sometime in the 1970’s a drastic shift started away from providing service at service stations, to offering self-serve options at a lower per gallon/litre price. The transition started with the same stations offering both options, until the present day. Gas stations eventually phased out this dual service model, though it still exists in some rare cases, so that now, the majority of gas sold in North America is done via self-service. According to research self-service gas stations, in 1974 held a market share of about 22 percent. By 1992, that number increased to 86 percent. Current day, it’s hard to find a gas station that offers any kind of service at the pump that features a human being.

This shift actually allows us some extra insight into customer behavior, because of the transition phase where many gas stations offered both options. If customers really were willing to pay more for customer service, you’d expect that their behavior would reflect that, and that oil companies would continue to cater to those customers by offering choice. Clearly that’s not what happened. Customers spoke with their wallets, and chose self-service over full service, choosing to save a few cents per gallon or litre.

It’s also interesting that this “shift” to “no service” is an example, rare indeed, where advances in technology actually improved the customer experience. As “pay at the pump” models emerged, and humans were no longer necessary for any part of the gas purchasing process, the process became faster for customers, because in essence, there was no “wait” for a human being. As you’ll see in Chapter xx when we discuss technology’s role in customer service this WIN-WIN situation is exceedingly rare. Usually technology doesn’t improve customer service. In this case it did.

In any event, it’s pretty clear that when we look at behavior, we see that customers do NOT pay more for gas in exchange for customer service. In fact, it’s the exact opposite.

More sectors where customers are clearly refusing to pay more for service

Author: Robert Bacal

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