Customer Service Trumps Price
May 17, 2009 19 Comments
In a recently published research report called “Customer Service Trumps Price,” we asked nearly 4,600 US consumers how they choose the companies they do business with across 12 industries: airlines, banks, cell phone service providers, credit card providers, hotels, insurance firms, Internet service providers, investment firms, medical insurance companies, PC manufacturers, retailers, and TV service providers.
In particular, we asked consumers to rate the importance of two criteria: good customer service and low prices. Here’s some of what we found when we analyzed the data across five generations of consumers:
- Across all 12 industries (and every generation of consumers), good customer service was selected more frequently than low prices as being important.
- Good customer service was most important for banks and insurers, where it was selected by 89% and 87% of the respondents respectively.
- Low prices was most important for retailers, credit card providers and airlines, where it was selected by 78%, 75%, and 75% of the respondents respectively.
- When it comes to the gap between good customer service and low prices, seven industries have double-digit spreads, led by banks (31%), investment firms (26%), and health insurance plans (18%).
- Across all 12 industries, Younger Boomers (43 to 52 year-olds) were the group that most frequently viewed low prices as being important.
- Across all 12 industries, Gen Yers (18 to 28 year-olds) were the group that least frequently viewed good customer service as being important.
The bottom line: Good customer service is a critical component of customer experience.
About Bruce Temkin, CCXP
Customer Experience Matters® 
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I don’t know why people bother to conduct such surveys. What’s clear is that nobody wants to pay for something that doesn’t work, or doesn’t arrive. To say that this is more important than price is not news.
It is much more interesting to discover what factors give the required peace of mind before customers consider price. Our solution is to provide ‘eBay-style’ feedback – we ask every customer for public feedback on an independent site, then make this infomation available to potential customers. Once you know that the supplier behaves properly, of course price is important.
Bill
Good customer service isn’t just supplying a product or service that works and arrives on time it’s everything, from how a company approaches their customer in the first place all the way through to providing a decent level of support while the customer uses your products or service.
Good customer service will generally beat low prices after all you wouldnt mind paying an extra 5 pounds a month for your contract if it meant whenever you had a problem you could speak to a person directly without having to wait an hour on hold.
Good post Bruce
Ben: Customer service is definitely broader than just getting the product to arrive on time. Thanks for commenting.
Bill: There’s a threshold for everything. SO if there’s a great price, you can always find some people to go for it. Hopefully your approacj works well for Feefo.
ThinkWiki: The analysis only looked at B2C environments. And there are definitely many situations (especially in B2B) where price is king.
Bruce
In the end, it’s a question of whether we like to gamble. Whenever we see a particularly good bargain, we are thinking ‘What’s the catch?’. Those of us who are happy with risk go for the bargain, but know that we may pay the penalty in terms of poor service. Most of us need some evidence of good service before we take the risk.
Feefo invites all customers to leave a comment – ‘Tell us what you think’, which gives plenty of opportunity to comment about every aspect of the customer service. We hope that’ll make a big difference to the odds in favour of expecting good customer service. Then we hope that our suppliers will compete on price too
I’m not sure it is that clear in my experience that customer service trumps price, especially in a B2B environment. Most organizations are cash strapped and also have set budgetary amounts for the goods and services they are buying. If I tell you I have a server for $4,000 and 24/7 tech support just like HP has for $6,000 and you have budgeted $5,000 with a directive from your CFO not to exceed then the decision is practically made for you.
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I would agree that “customer service” is meant to convey the experience across the board and along the entire customer path. If it is a first time customer they may be tempted to go just by price, but there is also the tendency to ask friends, family, colleagues, “blogmates” about their experiences not only with the product itself, but the whole realm of customer support and service and these comments influence the purchase, even B2B ones. Of course the entire process from research on the company web site, to follow up on the phone or in the store, to “as promised” delivery, and follow up service all meld into the question of do I go with this company again? Rewarding experiences across all customer touch points can certainly strongly influence the answer to that question, even above relatively small price differences.
James: Nicely put. Thanks for commenting.
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Bruce,
interesting post, tks.
Do you know if this is peculiar to services or would you find the same results if you asked the questions about Product Quality V’s Price. It may be that this is a natural breakdown of those who will pay more for quality, irrespective of whether it is a service or product.
Aidan
Aidan: Good question. I’ve looked at a broader set of criteria (including product quality) in previous studies, but I only looked at service and price in this analysis.
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