When WILL Customers Pay More For Better Service (It’s Rare)

The Exceptions: When DO Customers Pay More For Customer Service?

Go back to previous secton: Customers refuse to pay more for service

As with most myths, there’s a kernel of truth to the idea that customers do pay more for customer service, sometimes, under some circumstances. It’s just not a general valid rule. So, when DO customers pony up?

It would seem there’s a potential business gold mine here, an opportunity for companies to take advantage of a willingness to pay more for better service/experience. If companies improve their service, they can charge more — apparently up to 25% more for some customers, and provided the costs of providing better service are less than what customers will pay, there’s an instant profit increase — a significant return on investment.

Maybe it’s not that simple. Business don’t seem to have capitalized on the “opportunities”. Maybe it’s because the cost of improving service to the level that it will actually separate customers from their money is actually higher than what customers are willing to pay. We don’t know how MUCH companies have to invest to get to that level of service, because the reports don’t give us specific enough information about what specifically, customers need to do to tap into the customer service pot of gold. In fact, the research findings don’t actually tell us SPECIFICALLY what companies need to do to hit that customer sweet spot where they’ll pay more for better service.

Then again, maybe the survey results are misleading. Or even flat out wrong. In this chapter we’re going to look at the myth expressed in these “research results”. In fact, customers very often DO NOT pay extra for customer service. Their spending behavior is often at odds with what they say they are willing to do. We’ll also look at a secondary myth and that is that customer service is most important determinent of how and where customers spend their money.

Looking At The Evidence – What Customers DO

If it’s true that customers WILL pay more for customer service, as is suggested in the survey research, we should be able to find consistent trends in customer behavior — about what they ARE doing. The best predictor of future behavior is current and past behavior.

I don’t think there can be any doubt that some customers, sometimes, and in some contexts DO pay more for customer service. For example, who wants a wedding to be ruined by poor customer service? Or any other special one in a life time event. It’s probably fair to say that most people WILL pay more if they could be guaranteed stellar service for special occasions. At least, if it’s within their means, and they can be guaranteed all will go smoothly.

Travellers DO pay for higher levels of service on airlines, although it’s a relative few people on each flight that spring for the superior service and comfort of executive or business class. Those few are paying up to twice the amount more economically minded passengers pay to get from one place to another.

Some restaurant and hotel customers DO pay more for better service, and that accounts for why we have different “tiered” establishments, from the McDonalds through to the priciest eateries and fine dining establishments, or the Comfort Inn though to the Ritz-Carlton.

If you look at these contexts, you find that:

  • Customers do pay more for the entire package of experience, and that package includes better customer service, but often it includes luxury features of what is being purchased. Someone who stays at the Ritz-Carlton in a suite with a jacuzzi IS probably paying for the better service, but is ALSO paying for the “features” of the product being purchased — in this case a suite with a jacuzzi. It’s not possible to tease out the customer service aspect from the service/product being purchased.
  • Customers who will pay more for better service are actually already paying more though their choice of luxury high-end establishments.

Conclusion So Far On Paying For Better Service

Despite the “research” findings about what customers say they will do, there’s no goldmine out there for improving customer service. The exceptions lie in the areas of high end industry, primarily in the hospitality industry, but also in other niches that cater to the well off. And, in those industries, customers are already paying for the high end service.

So why is the research saying one thing, but customers aren’t moving to pay more for service?

Author: Robert Bacal

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