Three businesses that failed for lack of customer service - Inside Tucson Business: On Guard

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ON GUARD Three businesses that failed for lack of customer service

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Posted: Friday, September 2, 2011 8:00 am | Updated: 11:53 am, Thu Oct 6, 2011.

Consumers come to Better Business Bureau with unique complaints against companies in many different industries. Of course we review each complaint on a case-by-case basis - and the severity of complaints varies considerably - but a huge number of the complaints we receive have a common root: customer service.

The vast majority of businesses strive to maintain a core focus on customer service, whether they're a brick-and-mortar retail shop, an e-commerce business or engage in primarily business-to-business sales. The idea that stellar customer service is one of the golden rules of business is widely acknowledged.

Despite the focus businesses place on it, customer service can be a tricky art to master. On some occasions there is nothing a business can do to appease an angry customer, but the majority of consumers are reasonable, and businesses that practice top-notch customer service can find a way to leave them feeling satisfied.

A business must listen to its customers, engage them to find out what they want and how they can adapt their services or products to meet those demands. It can be extremely difficult for a business to create an effective customer service policy, and learn how to listen to its customers when they're not screaming in someone's ear.

Consumer advocate Christopher Elliot offers three examples of companies that exhibited poor customer service, didn't listen to their customers, and paid the ultimate price:

Marginalizing customer service

Before US Airways was purchased by America West in 2005, the airline slashed its customer service budget, and outsourced many of those functions. As a result, the company mishandled or failed to address numerous complaints, angering customers to the point that no amount of cost-cutting could make up for the fact that passengers didn't want to do business with with the airline, eventually forcing it to file bankruptcy.

Thinking customers are wrong

W.T. Grant was an American retail institution for 70 years until 1976 when the company filed bankruptcy. During the 1960s and 70s, the company failed to recognize that middle-class Americans were moving to the suburbs, which posed a huge challenge to the company because most of its stores were in downtown locations.

According to Elliot, W.T. Grant responded to the challenge with marketing gimmicks, such as offering free store credit to "anyone that breathed." The plan backfired. Grant's customers didn't want free merchandise; they wanted to be able to shop in comfort, closer to their suburban homes. W.T. Grant failed to adapt, effectively telling customers they were wrong. At the time, the W.T. Grant bankruptcy was the second largest in U.S. history.

A customer-hostile model

For his third example, Elliot highlights Blockbuster, the once dominant video rental chain that shut down half of its stores and was auctioned off to the Dish Network in bankruptcy court. The common reason given by analysts for Blockbuster's demise is that technology - namely online video streaming - rendered Blockbuster's business model obsolete, and the company wasn't able to adapt.

However, Elliot sees it differently. He writes that Blockbuster came to be seen as a giant corporation that charged outrageous sums for late fees and cared little for what its customers wanted the most. Even after Blockbuster attempted to compete directly with newer competitors like Netflix, consumers still decided they didn't want to give Blockbuster their business.

During tough economic times customer service and engagement is more important than ever. Smart businesses understand that while demand for products or services may drop, the demand for customer service never does - and it's these companies that are likely to fare better than their competitors.

Contact Kim States, CEO of the Better Business Bureau of Southern Arizona, at kstates@tucson.bbb.org or (520) 888-6161. The BBB website is www.tucson.bbb.org. On Guard appears the first week of each month in Inside Tucson Business.

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