A series of blog articles about the bad customer service of HOT (the Israeli provider of cable TV, which provides also Internet and alternative telephony services) appearing in Dakar’s blog (the links are: http://www.dakars.info/general/hot-rumbling/ http://www.dakars.info/general/hot-the-story-continues-1/ http://www.dakars.info/general/hot-the-story-continues-2/ http://www.dakars.info/general/hot-the-story-continues-2-2/ – all in Hebrew) prompted me to think the general issue through. The problem is specific neither to HOT nor to Israel.
Essentially, what happens is that companies provide excellent service until the moment you sign over the dotted line. Once you are committeed to pay the monthly payments, they neglect to do proper installation, activation or maintenance/upgrades. When you want to disconnect from the service, they make you jump through hoops in their customer retention department.
Hundred years ago, this kind of problems did not exist due to the following reasons:
- Very few deals involved post-sale customer service. You simply bought something, forked over the money and went home whistling merrily.
- Service-oriented businesses catered to the Rich and Influential. They were not price-conscious. So companies were not under price competitive pressure to cut back in service quality.
- Managers were not subjected to the kind of pressure today’s managers are subjected to by investors, who expect steady growth in earnings each quarter.
On the other hand, hundred years ago employees suffered from horrible working conditions. This problem was ameliorated through the marxist approaches of laborers’ committees, labor unions, and employee part-ownership in the business. Those solutions were enforced by strikes and other means.
Let’s try to carry further the analogy between capitalist-laborer gap of hundred years ago and today’s provider-consumer gap.
One of the problems is that the service providers answer to their stock owners, who are typically pension funds – rather than their own customers. So their management is supposed to serve the owners’ interest by squeezing as much profits as possible – rather than by provision of great service to owners who are also customers. Therefore, one solution is for customers to own a part of the business and have enough influence in its board to get it to have the proper trade-off between service quality and stock dividends.
Other possible approaches:
- Customer representative committees, with which the companies have to negotiate acceptable service quality levels. Class action lawsuits, which already exist today, are a step in this direction.
- Customer boycotts – are analogous to laborer strikes.
One more aspect is that hundred years ago, companies formed cartels, which monopolized their respective industries. The monopolies typically fixed prices. Those practices were largely stopped thanks to legislation, which regulates and prohibits anti-competitive behavior. Customers were (and still are today) price-sensitive, so there was a lot of political support for this kind of regulation.
However, this kind of regulation does not seem to extend to service levels. So consumers are often faced by having to deal with one of few companies, which provide essentially the same product/service, and at very similar prices – AND with similarly horrible levels of service.
There may be a market failure lurking in this, because customers typically shop by prices alone. They would know and value the quality of customer service only if anything goes wrong – not the thought one entertains when ordering the product/service. If a company offers different levels of service at different prices, most of the customers would buy the lowest level of service and then demand the highest level of service… Maybe customer representative committees can help with this, by helping to adjust the expectations of both producer and customer from each other.
