Why Does Customer Service Stink?

If you are managing your firm’s customer service, you most likely believe that you are providing your customers with good service.

In fact, the statistics show that 80% of businesses think they provide a superior customer service experience. 

However, since the word customer is included in the term ‘customer service’, it's probably a good idea to ask the customers. Unfortunately, the results are not very encouraging. When asked about their experience, customers said that only 8% of businesses offer superior customer services. 

The disparity between what a business thinks the customer experiences and what the customer actually experiences raises two questions: 

1) Where is this discrepancy coming from? 

2) What is customer service lacking?

Let me start with a recent, personal story that triggered the perennial question I alluded to in the title of this post.

Several months ago, I booked a hotel via Expedia for a trip in January. About a week ago, I needed to add one more person to a room that could accommodate the addition (a third person to a three-person room). When I tried to do it online, I was presented with the following screen:

Trying to make the change several times landed me back on the same page, again and again, and after feeling like living Groundhog Day, I realized that this is the feature. If I am redirected here, it means that I can’t make the change online. 

There are so many things wrong here, but the main problem is that being redirected to the same page, as an indicator of whether a change is possible or not, is so uncommon that I needed to figure out, myself, that this was not a bug in their website, but rather something I should view as normal: If I see the same screen, it means this reservation cannot be changed. To take it a step further, not only is it not possible to make the change, but I have to cancel my existing reservation completely!

Who thought this was a good way to communicate information to customers? Was this just poor design or was it a deliberate function to prevent people from making certain changes? A seemingly malfunctioning website as an indicator of what can or cannot be altered online? Can’t I avoid the needless wait and confusion? And why would my need to change something have to result in completely canceling what I have booked so far? 

But let’s continue with the story: I call Expedia and the IVR (Interactive Voice Response) asks me to enter the 16 digit confirmation number. They have my name, they know which phone number I called from, I’ve been an Expedia customer since the early 2000s, and I’m quite sure they can find the few reservations I have in place. But no... 

While trying to understand what makes this service encounter problematic (and not me just being overly entitled), it is important to point out that a few years ago, requesting a customer’s confirmation number would have been completely acceptable. But this is no longer the case. For example, when you call American Airlines or United, (neither of which are known as bastions of good customer service), they make an effort to identify your phone number, confirm your identity, and then ask whether you are calling regarding a specific reservation (for example, the most recent one, or your upcoming flight). This doesn’t seem like “asking too much” when today’s technology allows a firm to do so.

One person who understands the ever-changing service standard is Amazon’s Jeff Bezos. In his letter to shareholders in 1999, he coined the term divinely discontent :

“One thing I love about customers is that they are divinely discontent. Their expectations are never static – they go up.”

In other words, a customer’s service experience will not stay static in a world where other firms in that industry are improving it. In almost all other travel platforms I use, I can make changes via just the website or mobile app, and if not, the service interaction with an agent is (usually) quick, especially if you know what you want. But not with Expedia. As a customer, I am not concerned with the technological and organizational hurdles Expedia has to overcome to match other firms that offer similar services. I do, however, expect Expedia to learn from other firms and offer the same level of service (or better), especially if they intend to survive the competition and continue in this industry. 

Back to my story: I finally managed to talk with an agent and explain the problem. I was told that not only do I have to cancel my reservation (as opposed to adding a person), but once I cancel, the room I had reserved would no longer be available. I was trying to understand how that could be possible. I explained to the agent that I still have the reservations for the room, so it must be available. But my arguments were to no avail. As the agent said, “There is a process”, and the system showed that the room is no longer available. To save you from the misery of going through every detail, I finally managed to make new reservations, adding the third guest, but I had to settle for a different room. Not a great outcome, plus I had to lose more than an hour to find a solution, including waiting and call time. 

End of rant.

Is my Experience Unique?

What do you do after a poor service experience? I usually vent on social media, so I tweeted about the incident. More than hoping someone from Expedia notices and responds (which of course they have not), I was trying to see whether my experience is unique. And indeed, the responses I received showed, exactly, that this is not an outlier. 

Looking at review websites such as Trustpilot, it was evident that my experience is actually quite common. “Do NOT use this website!” was used repeatedly, and they had an overall grade of 1.1 (out of 5). Now, I know people do not go to these review websites to praise firms, but you can find several firms with extremely high scores. 

If you feel that this is just confirmation bias, in an effort to validate my own experience, you are not wrong. So, I checked how the competition is doing. Booking.com had a slightly better service rating, but only by a bit. 

Realizing that my experience is common and somewhat indicative of an industry-wide phenomenon, I started searching whether their poor customer service was impacting their financial performance.

But this was not the case. Expedia’s stock reached its lowest levels since 2013 as COVID “reached” the US and travel restrictions hit the entire travel sector. However, the stock recovered and has tripled to an all-time high over the last 12 months, fueled by businesses reopening and people traveling again.  

When I teach Operations Management, I say that a change in a process is an improvement only if it results in improvements regarding financial performance. So, the fact that Expedia is doing well financially means that its poor customer service is probably fully aligned with its strategy, and appreciated by the financial market as such.  

What Explains Poor Service in a Competitive Environment?

So, where is this difference in perception coming from? To be able to understand this paradox, we need to understand why people (including myself) continue to use Expedia (and Booking.com) even with such poor customer service. 

One explanation can be inertia. This is an industry with a certain level of switching costs. Once you have added your preferences and your credit card information in the system, you may be reluctant to switch to other platforms. Staying is just too convenient. 

But another explanation might be that customer service is not a source of competition in this industry. 

I use Airbnb frequently, and while I like their experience and variety, customer service is not a dimension they care about. When needed, any attempt to contact them results in long waits and no response. 

When it comes to hotel reservations, it's either Expedia or Booking.com, both of which also own most of the competition. Vrbo, Hotels.com, Hotwire.com, Orbitz, Travelocity, and Trivago are all owned by Expedia, while Booking Holdings owns Priceline, Agoda, and Kayak. So as a customer, while you may feel you have a choice, this is actually not true. 

On the other hand, over the last few years, hotel chains have been trying to keep their customers on their websites. I am, somewhat, a loyal Marriott customer (since the SPG days) so most of my hotel bookings are with them. Their website is not great, but their customer service is good. 

For example, after a recent stay in one of their hotels, and a minor incident involving miscommunication on room availability that resulted in a tweet (you may see a pattern here), I got a call from the hotel manager trying to see whether things could be resolved. I am not an important customer. Not even close! But responding matters and these chains realize that they need to protect their brands, otherwise, platforms will commoditize them. 

So is this the equilibrium? On one end of the spectrum, platforms which offer low prices and high variety, but poor customer service, since these are volume players. On the other end, the hotel chains themselves, which limit your options in variety, are usually pricey, but offer better customer service, for the most part. 

It is possible that while we like to complain about poor service, most of us are just unwilling to pay for it. In the cases where we are willing to accept more expensive services, we indeed get better service. Firms learned that we like to complain, but not pay. 

But I have no doubt that this equilibrium will eventually be disrupted by a firm that has an Amazon-like focus on customer service. A firm that understands that customer service goes well beyond just being another dimension. It’s an opportunity to really understand your customers’ needs. As a software developer in my early days, I spent a few hours a week responding to customer calls. The interaction with the real customer was extremely valuable in learning the pain of the technical issues and accelerated my learning curve as a developer.

Can we do better?

Returning to the second question: what customer service seems to be lacking. What can and should firms do to improve their customer service in this day and age of technology? 

The first step is to realize that the customer is not YOUR customer anymore. Customers are now continuously comparing across many other firms and expect things to work seamlessly. Customers are divinely discontented.

The second and more important point is that the customer expects privacy, but not while they are interacting with the service, and here is what I mean by that: When I call customer support, I expect you to know who I am and I expect you to use this knowledge to offer me efficient service. 

Over the last few years, we have become much more sensitive to non-value-added work. When I teach Lean operations, I describe an ideal process as one where you call the firm, a person answers almost immediately (if a representative is actually needed), they know why you’ve called, they have the necessary information on hand, and you don’t have to call again (did I mention that I had to call Expedia again?). Anything short of that is waste. Waste. WASTE. 

This is not about entitlement. It’s about the fact that once a firm innovates and removes the friction, we, as customers, expect all its competitors to adopt a similar set of features. If not, this friction is only amplified in its wastefulness.  

And note that I absolutely expect to not have to speak with a person if I don't need to. Your product is the best customer service. But it's not possible to cover everything, so it is necessary to leave room for human interaction where the product (and/or technology) are amiss. It may not all be that scalable, but you can’t build a good product or service if you don’t really understand your customer.