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Does poor customer service pay?

March 4, 2014

It's generally held in retailing circles that poor customer service has a correlation to sales. If you tick customers off enough, they'll go elsewhere to shop. That's what makes findings from the latest American Customer Satisfaction Index (ACSI) so interesting. Because even as consumers say they hate shopping at certain retailers, those very same chains are among the most successful in the U.S.

Here's the ACSI list of the 10 worst retailers when it comes to satisfying customers.

1. Walmart
2. Rite Aid
3. CVS
4. Walgreens
5. Macy's
6. Safeway
7. Best Buy
8. Gap
9. Supervalu
10. Winn-Dixie

Interestingly, customer satisfaction at retail actually improved for the third consecutive year, according to ACSI. The increase resulted from higher marks given by consumers to specialty retail stores, supermarkets and drugstores. The rating for department and discount stores remain unchanged.

Another interesting part of the research was that satisfaction with online retailers fell. ACSI put the blame on late orders not being delivered in time for Christmas. Here too, consumers continue to increase what they buy online even though retailers and package carriers may not be fully up to meeting those demands during peak periods as seen during the holidays.

Discussion Questions:

Why do Americans continue to shop with retailers to which they assign low customer satisfaction ratings? Is improved customer service enough to convince consumers to shop in brick and mortar stores rather than buying online?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

Do you agree or disagree that improved customer service is enough to convince consumers to shop in brick and mortar stores rather than buying online?

Comments:

People will often keep going back to drug stores and certain supermarkets because they have their prescription files there and with insurance, cost is not an issue. With stores like Walmart or Best Buy, poor customer service is a given and we know it's a trade off for low prices. Even with McDonald's, none of us looks forward to going there, however, in a time crunch, we know that we are able to tolerate their worst case scenario. We know it's bad at some of these places, but going to someplace else often has the element of the unknown. Perhaps another place is worse, but we don't have time to experiment. The the above retailers on the list have a record of consistently poor customer service. At least they are consistent.

David Livingston, Principal, DJL Research

Maybe a rating of 72 for Walmart, which is lower than other places, isn't really low? It's unclear (a) how customer satisfaction is measured and (b) whether this measure has any relationship to a decision to shop the store. I may not love my Walmart, but I like the prices, so I keep on shopping there.

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Dr. Stephen Needel, Managing Partner, Advanced Simulations

Why is this a surprise? Service is just one of many relevant attributes -- and it is rarely a "must have" one (such as safety). Customers are clearly willing to make trade-offs between it and other relevant attributes such as selection, quality, convenience, and price. And of course the relative importance of these attributes varies greatly from customer to customer.

This is a good thing. We wouldn't want any of these discretionary attributes to be a "must have." It's much better to see a diverse set of customers that balance these attributes differently -- that leads to a much healthier retail ecosystem.

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Peter Fader, Professor of Marketing, The Wharton School of the Univ. of Pennsylvania

People shop at Walmart because they believe Walmart has the lowest prices. That's not a very loyal or necessarily happy customer. The next 3 retailers are all drug chains. They're pretty much the only game in town, aren't they? So unless consumers start shopping for drugs and prescriptions at mass merchants and grocery stores, they'll continue to do well.

However, none of these retailers should feel sanguine over this situation. Dollar stores are nipping at the edges of Walmart's basket, supermarkets ARE carrying more HBA and prescriptions, and current apparel fashions are just not sexy enough to keep customers coming back.

I think as long as retailers like Amazon can demonstrate that the Christmas problem was a one-time thing, it'll be a small blip on the radar screen.

But with all that said, people do like to shop in stores. A decent customer experience will bring people in.

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Paula Rosenblum, Managing Partner, RSR Research

These retailers may have low customer satisfaction scores, but they are not so low that consumers switch or they have lower prices that offset some of the customer dissatisfaction. The major drug chains all have low scores, so why switch from one to the other?

Consumers know when they visit Walmart that it will be virtually impossible to find someone to help locate an item or check to see if an item is truly out of stock, but they love WM's lower prices.

As the press release said, consumer dissatisfaction with online customer service was skewed by botched holiday deliveries, so a true comparison is not possible. Online still offers consumers convenience and in many instances, lower prices.

Finally, it's important to note that overall customer service scores have gone up for the past three years. Retailers are putting more emphasis on customer service.

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Max Goldberg, President, Max Goldberg & Associates

Just like "motivation" everything boils down to cost/benefit. We do what we do because it's better than any other option...in that moment.

You may think the sales people in that store are uncaring idiots BUT you're going to save $200 on the flatscreen. That store feels and looks like a dump BUT you're already parked at the mall, it's right there, it's starting to rain and all you need is paper towels.

While in these examples the benefits outweigh the cost, it doesn't take long before that ratio is reversed and then the store dies. RadioShack is closing 1,100 locations because people in those communities think the cost of shopping there is greater than any benefits (of convenience or selection for example) that they receive.

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Ian Percy, President, The Ian Percy Corporation

The narrative and research here seems to speak for itself. Retailers that focus less on customer experience and more on other factors like price, are more likely to continue receiving patronage despite poor customer service. The customer simply cares more about access/selection/the deal than whether someone helps them in the store, resulting in a positive outcome. Long term, that's a dangerous strategy because as companies like Amazon become as good at delivering access/selection/price, it becomes a lowest cost business model war.

Retailers succeeding despite poor customer service scores are foolish to think they can continue down that path. Brick/mortar retailers needs to collaborate with their long-term supplier partners also getting pressure from channels like Amazon to provide true omni-channel shopping experiences.

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Gib Bassett, Global Program Director for Consumer Goods, Teradata Corp.

First, not seeing Sears in the bottom ten (maybe Penney's too) makes me question the report.

There's no way that an argument can be made that CS is an unimportant factor for shoppers. It would go against a big part of the success of places like Amazon, Trader Joe's, or Nordstrom. For some of the brands listed above, price and/or convenience may have created a level of tolerance for bad CS, but to dismiss the need for proper - make that exceptional servicing of consumers, is to create fantasy among retailers that will bring them crashing back to earth quickly.

The known exception on the list is Macy's. I've heard for years about their broken/dirty dressing rooms and dirty bathrooms, yet they continue to do well in-store and online. They must have something right in their pricing strategy and brand awareness that people put up with the negatives.

Given all the competitive factors these days, improving CS is not enough to bring customers in, but it's not an option either.

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Ken Lonyai, Digital Innovation Strategist, co-founder, ScreenPlay InterActive

Customers who shop discounters understand that they are being paid to service themselves with discounts. Further, customers carry the mindset; if they provide service, I must be paying too much.

Aligning the service offering with the advertised corporate identity will keep customers; discount = no/self service, full retail = service. The only time a retailer is going to get into trouble is when they've advertised themselves and are perceived as a full service retailer and then don't deliver.

Customers may not like the lack of service that the discount provides, but the pain it causes is not enough to turn them away.

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Marge Laney, President, Alert Technologies, Inc.

It is all about expectation. If I go to Walmart and get poor customer service, I don't care. I didn't go to Walmart for customer service. I went for price. If I go to Bloomingdale's and get poor customer service, I am outraged. That is part of what I am paying for. It is part of the product.

With regard to online buying, this discussion is apples and oranges. People don't shop online because they want customer service (though they want customer centricity), they shop online for convenience. It makes their lives easier. Unless brick and mortar customer service includes sending a sales person to someone's home with an infinite number of samples and an ability to sell the product right there, customer service will make no difference.

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Gene Detroyer, Professor, Independent

It's a matter of convenience. Maybe the customer service isn't great at your neighborhood grocery or drug store, but when you need something now, they have what you need fast and generally at a competitive price.

'RetailRetell'

Perhaps our satisfaction expectations are more realistic and that would explain why some scores have gone up. At the same time it demonstrates that consumers are settling for less. It doesn't seem counter intuitive anymore and that may serve as a gap for some innovative marketer to fill.

By the way, many abused wives stay with their abusive husbands in part because they know what to expect and the knowing serves some need. And we shoppers stay with unsatisfactory retailers, even though we have much to complain about.

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Joan Treistman, President, The Treistman Group LLC

And the answer is PRICE. Customer service in many of the larger chains has been subpar for years. Remember when people were saying that food stores were the most boring shopping experience? Supermarkets got away with this for years as everyone was the same so the customer accepted it. Consumers now accept great customer service, when they can find it, with higher prices. Some will pay for it and others will not.

The real issue is how do you blend self service shopping with great customer service? Improving brick and mortar customer service may not tip the scale in their favor. The online purchase, while also being driven by price, is also driven by when the customer expect to use the product.

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W. Frank Dell II, CMC, President, Dellmart & Company

Price and location still play very important roles in where people shop. Many consumers will give up a little service to pay or drive less. As far as improved service convincing people to visit stores more and more people like to shop while in their pajamas with a cup of coffee when it is zero or 90 degrees outside. Brick & Mortar has to have exceptional service to pry people's fingers off their PC, tablets or phones.

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J. Peter Deeb, Managing Partner, Deeb MacDonald & Associates, L.L.C.

If you look at the top 5 on the list: 

1. Walmart: perceived low price and locations.
2., 3., and 4.Drug stores. Not a lot of real choices for consumers.
5. Macy's: Well they are better then Penney's and they keep sending discount cards.

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Mel Kleiman, President, Humetrics

I wonder what was measured. Convenience, selection, and price are probably more important to most consumers than friendly service and clean bathrooms.

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Peter J. Charness, SVP America, Global CMO, TXT Group

Customers make tradeoffs constantly. They shop at this location and knowingly pay more because it is convenient, or they go out to a less convenient retailer because they perceive the pricing to be better. There are numerous considerations made each time a customer selects where to make a purchase.

I don't think it should be a surprise that CS is not the only basis upon which a customer selects where to shop. However, all other factors being equal, a customer will select a retailer that provides better CS, but then again, all other things are never equal.

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Steve Montgomery, President, b2b Solutions, LLC

Some consumers will shop based on price, not service. Walmart prides itself on being friendly, but that doesn't mean you're going to find sales associates walking through the aisles looking for customers to help. That's not their business model. They aren't competing with Nordstrom. They are competing with other low priced retailers. And they do quite well.

Then there are retailers like Ace Hardware, who compete against box stores who focus on price. They survive and thrive on helpful customer service. More than nice, they have knowledgeable people who deliver amazing and helpful customer service. That's their weapon of choice in the competitive home improvement industry.

Southwest Airlines offers competitive pricing, free checked bags, no seat assignments and a bag of peanuts. American Airlines charges for bags, gives you seat assignments and an option to sit in first class. Some customers love AA and wouldn't fly on Southwest. Others love Southwest and wouldn't fly on AA. Both have business models that work for the right customer.

For the retailer, it is important to realize that you can't be everything to everyone. Choose the type of customer you want, cater to their needs and stay in that lane.

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Shep Hyken, Chief Amazement Officer, Shepard Presentations, LLC

I don't think these articles make it overly clear what the criteria is for customer satisfaction but in any case these surveys were not able to match what actually matters to customers with regards to their shopping habits. It's also strange that "Supervalu" would be on the list since very few stores actually carry the "Supervalu" banner, and those that do, are independent stores.

All that said, customer service is important, but consumers will tolerate certain lower levels of customer service for other trade-offs such as price, convenience, location, and available product assortment.

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David Biernbaum, Senior Marketing and Business Development Consultant, David Biernbaum Associates LLC

Americans shop in stores because they love to shop in stores...that is, if you're older than 30 (this from a study we did last year). Older than 30, not the same allegiance. The same study showed though that "poor associate performance" actually drove people to online shopping, again, especially if they were younger. So stores definitely need to step up in terms of service in order to stay relevant to new customers.

Here's the thing about service; there's plenty of proof of its merits. How good is the service at Nordstrom? Apple? Whole Foods? Starbucks? Sephora? And how is their business? Right.

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Lee Peterson, EVP Creative Services, WD Partners

I find it interesting that drug chains are ranked two through four. That has to do with the hiring and training practices or lack of the same. With Walmart, you can't argue that customer service is weak to poor. But here is where price tops anything else.

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Ed Rosenbaum, CEO, The Customer Service Rainmaker, Rainmaker Solutions

I find Joan's comments rather sobering. Who among us wants to have our customers thinking of us as an abusive spouse? Having shoppers shop with us through oppression or other force is no place to be. Even if one thinks of the comparison as hyperbole - it is a very clear indicator that it is not always a relationship one would clamor to have.

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David Zahn, Owner, ZAHN Consulting, LLC

Satisfaction is a summary construct (as researchers like to say). If you ask people to identify their least favorite or most favorite retailers based on satisfaction, the resultant lists will very likely reflect the retailers they interact with most. That means some retailers will appear on both lists.

How is this possible? Service quality is just one element of overall satisfaction, alongside price, value, product selection, policies, ambiance, convenience, safety, cleanliness, etc. Each of these may be divided into component practices. Retailers may perform well or poorly on those practices on a given interaction. For the shopper, the last moment of truth will likely define the overall impression.

With so many factors behind satisfaction, it becomes quite difficult for a retailer to move the needle by addressing any specific practice. Even perfect, attentive human interactions in the store may have little to no impact on a shopper's decision to make an online purchase.

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James Tenser, Principal, VSN Strategies

Price is the reason, plain and simple. No need to do any more research, and consumers will take the lousy service at Walmart all day long if they believe they are saving a ton of money, which of course is not true, but it is tough to change their minds. I deal with it everyday, and have to work some incredible deals to get customers to drive by Walmart to get to my store.

There is simply not enough of the niche business in our town to make any significant dent in our growth anymore, so getting in the trenches is what I need to do to compete, and I am working some hot deals on the phones as I am writing this.

I love a good battle, and anyone else who does will survive, and who knows...maybe even thrive.

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Tony Orlando, Owner, Tony O's Supermarket & Catering

As others have commented, it is all about customer expectations and tradeoffs. While Macy's being on the list is curious, the remaining brands reflect the type of locations where convenience and low prices generally trump any expectation of service quality.

It is also challenging to understand retailer standings within the context of customer satisfaction, in the absence of knowing which specific sentiment attributes are included in the ACSI findings.

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Jeff Hall, President, Second To None

In an era where the customer is informed and increasingly able to service themselves via mobile devices it makes a lot of sense for retailers to focus on price point rather than more knowledgeable employees (Good luck finding someone more knowledgeable than the internet) or trying to develop an easy to use mobile app.

Mobile devices, mobile web browsers, and the websites you'd use for quick product research in store likely see more traffic and thus have a higher standard for functionality and more user input than the app team of any given retailer. I'd much rather see say, target try to improve on the product metrics they can succesfully influence like price and availability rather than to try and design software more functionally worthwhile and more accessable than Google.

Joseph Cox, ASM HCM, ASM

Questionable poll results aside, perhaps the people who shop at these stores feel they *are* getting good or satisfactory customer service. Just because someone who lives in Madison (for example) has bad experiences there and rates the store as poor does not mean that the customers who shop that same chain in Boise get bad customer service. We all know what a difference local management can make both in terms of cleanliness and training as well as stocking.

Also, those of us who live in big cities often forget that in many areas of the country there may be no other comparable place to shop within reasonable driving distance. Finally, as others here have pointed out, price is a big component of "customer service" for many of us. At lunch I recently listened to someone decry the awfulness of the W store for ten minutes. Then we found out she had never actually shopped there -- but boy had she read some terrible things about that mega chain. Maybe people like her took the poll?

'Liatt'

Customer satisfaction can mean different things to different people. Here's my list:

  • Out of stocks - simply not tolerable.
  • No staff available - depends on what I'm shopping for.
  • High prices - dilutes overall satisfaction.
  • Clean bathrooms - this may be a big deal. :)
  • Checkout experience - make or break for me, personally.
  • Price accuracy - again, a deal breaker for me.
  • Convenience - should be on top my list.

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Dave Wendland, Vice President, Hamacher Resource Group

With, what, 3 national department store chains, 2 discounters, 3-4 drug stores, etc., it isn't very hard to be on a "Bottom 10" AND a "Top 10" at the same time. I don't place too much faith in headline grabbing stories like this...particularly when the placeholders are separated by only a few points and the criteria are poorly understood.

That having been said, as most commenters here noted, service is only one of the variables on which companies compete: would people still shop at a business that offered poor location, quality, price AND service? Hopefully not.

'notcom'

It is no surprise that Walmart is #1, is it? In addition, their sales continue to be flat or slightly negative year over year and have been for too many consecutive quarters to count. What does that tell you?

Rite Aid and CVS are really no surprise either. They are certainly second tier to Walgreens. However, many don't have a choice as their health program dictates where they can fill their prescriptions. I've not had a bad experience at Walgreens that I can even think of or remember. Nevertheless, in their case, convenience may outweigh the service level concerns of the consumer. Personally, I don't see it.

The three supermarket companies on the list are really no surprise. All three have had financial issues and have struggled. Winn-Dixie, I would suspect, is moving down on the list and likely wouldn't be found in the top ten in the next round.

It is surprising to see Macy's on the list as we consistently have a great experience at both of our locations. In fact, their service at the holidays was stellar!

The GAP isn't a surprise and their "check-out" style mass-merchant approach by poorly trained teens isn't helping them. Not knocking the teens, and most of our experiences show they are capable but poorly trained and worse, poorly led. That matters!

Best Buy is a consistent disappointment whether bricks or clicks. When I just don't care about experience and am just going for a rock bottom price, I try them and then my memory gets whacked in the head with a 2x4 yet again wondering: "Why did I do that?"

Customers shop for many reasons: price, convenience, selection, service, items in stock, cleanliness, and the list goes on. Service is just one element in the choice equation.

Sure, Walmart is big. However, as stated, their sales are challenging them. So, does service matter? Yes. Does price matter? Yes. Does experience matter? They are being challenged on all fronts. Notice that Target is NOT in the top ten even with their security breach issues of the holiday season.

The second question is a distinction that can no longer be made. It doesn't what channel it is today. The lines are blurred, but the consumer relationship is not. It doesn't matter which channel the consumers use today, they make the same connection with the experience and expectation of what it would be, either way.

As lines blur further, retailers that can translate both into one consistent impression with the customer will have distinct advantages, as most consumers will go through both channels with the same retailers.

Same, same. Win, win. Lose, lose.

'Scanner'

Let's look at the list and see if we we can see strong correlation between poor customer acceptance and strong retail performance.

1. Walmart's fourth quarter income fell 21%. Fourth quarter S3 fell .4%. their decision to increase small store openings is only going to exacerbate their problems. Within two remodeling cycles (15 years) their future will be as bleak as Detroit's.

2. Rite Aid projecting S3 of .35-.85% in an inflating economy. We will see.

3&4. CVS & Walgreens have good locations with an aging population popping their pills. S3 somewhat covered up with the addition of more grocery with freezers and coolers.One must also remember that the RX wait is often with the stress of a sick person. It is a line in which no one wants to be.

5. Macy's has little class of trade competition. With Dillards, Sears and J.C. Penney as competitors it is like competing in the retail Jr. Varsity.

6. Safeway is for sale.

7. Best Buy's sales are collapsing. S3 down 3.5% in 13.

8. GAP is the David Letterman of retail.

9. SuperValu disposed of some stores and is waiting to see what Hy-Vee's entry into Minneapolis will do to its bag your own Cub stores.

10. Winn-Dixie competes with Publix. Nuff said?

'DrCellmor'

Usually, when comparing two sources to buy from and all things are equal in the consumer's eyes, the consumer will resort to the lowest price.

With online vs local retail, value can be increased by offering an easier replacement or return policy. For example when buying a sump pump from Lowe's Home Improvement just last weekend, we found out it was the wrong size. It was simple enough to take it back and get the right one.

We didn't care about a better price we needed and wanted it to work right now!

Tom Borg, Business Expert, Tom Borg Consulting, LLC

Service improvements are a must for improving customer retention and engagement. However, it is just one of the factors that determine a customer's choice. We can never simplify the customer retention puzzle to one factor. Price, convenience, peer pressure, and more impact our decision in the moment.

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Mike Osorio, Senior VP Organizational Change Management, DFS Group

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