Building the Subscription Relationship: The Case for Customer Service

Research shows that customer service is improving in America, and that in the last year, subscribers have become more likely to punish poor service and reward good experiences. What does that mean for your business?

Source: Bigstock

The great strength of the subscription business model is the steady income that recurring revenue provides. The ongoing relationship that companies form with clients becomes comfortable and, when the subscription becomes a part of the client’s life, effortless. Well, usually effortless. When the newspaper ends up in the bushes one too many times, when the prescription by mail comes late and mutilated, when the fresh food box is leaking, when the website goes down … then customers get uncomfortable, and the relationship needs fixing. Then you need to rely on customer service, and you need excellent customer service to make the client happy again.

That applies not just to fixing mistakes, but to every interaction your client has with your company. The main goal of customer service is to maintain good relationships. And it pays off over the lifetime of the subscription.

According to a report at Helpscout, “Research shows winning a new customer costs five times more than keeping an existing customer. … For subscription businesses, that loyalty is even more critical as customers regularly face a decision on whether to continue paying.” Retaining subscribers includes providing a satisfying resolution when they reach out to you to get help or to complain. That means good customer service.

And that’s important in a competitive environment, reports Forbes. “There are over 2,000 subscription box services on the market right now, but only a fraction of those will stay in operation for years to come. Their success will come down to a number of factors: product market fit, pricing, marketing-but the differentiator will be customer service.”

The good news is that fewer Americans are reaching out to obtain customer service, suggesting overall customer satisfaction is rising. In an ongoing survey of 1,000 Americans age 18 to 65, the question was asked: “Have you contacted customer service (by phone, online, live chat, text, etc.) for ANY reason in the past month?” The percentage is going down, showing that fewer customers even need service:

(Source: Aspect; Conversion Research, via Statista)

One possible interpretation of this data: fewer people are reaching out to customer service because satisfaction is rising and complaints are down. In any case, if customers are happier in general with their products and services, they are also happier with the quality of customer service overall.

Consumer opinion towards customer service is on the upswing. Polled in 2017, 62 percent of American respondents say that customer service is improving:

(Source: Microsoft Global State of Customer Service Report 2017, via Statista)

What does that mean for a particular business? Your customer service needs to continue to improve to keep pace; the alternative is that other companies will begin to provide better customer service than you deliver. Maybe that’s okay by you. Maybe your business model includes de-emphasizing customer service. Maybe you are Amazon.

If you live off the grid, as you read this print-out faxed to you by your staff, you may not know that Amazon, the juggernaut online retailer, recently created its own retail holiday, “Prime Day,” to celebrate its membership service. Held on July 15, the day Amazon was founded, the event seeks to encourage users to subscribe to the Prime service, by dangling great deals and a free month with no obligation.

But with a compelling argument at TheNextWeb.com, this report suggests that even a perfectly executed Prime Day hurts Amazon’s subscription business.

  • Something we often see with one-day shopping holidays, like Black Friday, is mediocre products, massive discounts, and a false sense of urgency or call to action. These factors of course drive sales but not customer engagement or loyalty overall.

Moreover, this year’s Prime Day was far from perfectly executed. Traffic brought the site down for hours. It was supposed to be a day to celebrate Amazon; instead, per AdWeek, it was a fiasco.

  • The site was hit with outages, looping pages and deals that only some customers were able to see. As of this writing, Amazon was still looping its deals page back to the homepage, the app wouldn’t load deals and Prime Now also didn’t load any products related to Prime Day. “This is the online equivalent of a bad Black Friday promotion,” said Bob Phibbs, CEO of The Retail Doctor, a retail consultancy firm.”It is the ultimate in bad customer service.”

The ginormous retailer’s customer response was to put an automated message on its phone lines, saying, basically, “sorry, try again later.” Even media inquiries could advance no farther. Does Amazon care?

Clark Howard of Clark.com makes the negative case. He explained “why Amazon doesn’t care it crashed on Prime Day 2018”:

  • It’s all about creating a frenzy. You trying to get on to buy and clicking again and again – refreshing your phone and computer and not being able to get into it – is part of the psychology of making Amazon feel like a place you must use, must need and must have. Amazon isn’t unhappy that people had so many problems, Amazon is thrilled because it feeds right into the whole psychology that you just gotta, gotta, gotta have it.

Which are the companies that rank poorly for their customer service? Oftentimes, they are companies that offer services by subscription:

(Source: 24/7 Wall St.; Zogby Customer service hall of shame 2017, via Statista)

What ticks off customers? Being locked into a subscription relationship with a monopolistic or near-monopolistic company that provides poor service because customers have no other options. The ill will that creates may well carry over to taint other recurring payment relationships — yes, the reason we can’t have nice things is that the bad actors are spoiling it for the rest of us. Therefore, it is doubly important that subscribers come away from customer service interactions with a happy feeling, especially when they CAN choose to cancel if they are unhappy.

Let’s assume that most subscription businesses are not Amazon Prime, and do not enjoy the monopolistic power to lock in customers. The bulk of companies offering subscription services cannot so easily get away with poor customer service. After all, the flip side of good customer service is losing subscribers:

(Source: Aspect; Conversion Research, via Statista)

In 2016, 49% of poll respondents said they had quit a company because of poor customer service; in 2017, that had risen to 54%. And if customer service is getting better overall, as the other data suggests, then perhaps customers are getting less tolerant of bad service when they do encounter it.

On the other hand, what happens when you do provide good customer service? You get satisfied customers who continue to use your service. However, in an interesting twist, the younger the customer, the more likely they are going to stay loyal. Millenials are not fickle — rather, they are a generation that is more likely to enjoy subscription services (as I discuss in other columns, see here and here). And when they have positive customer service interactions, they are more likely to increase their business.

(Source: Aspect; Conversion Research, via Statista)

Even among the consumers most inured to the value of customer service, the Boomers, 62% say that they reward providers of good customer service with more business. For Millennials, that jumps to 78%. However, the takeaway is not that you should only give good support to the kids. Obviously, there is great value in offering a high-quality interaction to all customers. The Millennials will reward you more, though.

In future columns, I’ll be taking a deeper dive into customer service, including topics such as tips on how to deliver the best customer service, the role of outsourcing and automation, different channels for reaching customers, common KPIs, managing your customer service reputation, and customer service nightmares. If you have questions on these topics, or anecdotes or data to share, please contact me at [email protected].

Insider Take 

Research reveals that customers are increasingly likely to drop their subscription when they face a bad customer experience, and also more likely to grow in loyalty to those who have good customer service experiences. So it is no wonder that the level of quality customer service in America is on the rise.

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