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Customer Service Hook

February 26, 2007

Every company not operating in a pure monopoly environment spends some time and effort creating an articulable promise of value.   A clear message to it’s customers.  The best companies can and do demonstrate this promise of value so well, that their customers carry on the advertising effort for them.   Several such examples are L.L. Bean and Craftsman tools, both of which have a “no questions” policy on returned defective items.

David Churbuck posts  eloquently on these perennial examples.   These are all examples of what I would call a “Customer Service Hook”.  But, now that these examples have been pointed out, and we’ve discussed the benefits to the business reputation, and to customer loyalty, we need to consider how a business could come to embrace and support such a policy.  How does a business go about developing behind the scenes contractual support with it’s suppliers to underwrite such an operational policy?

In the early 90’s, I ran a retail computer service and support business.   It was the age of building “white box” PCs out of commodity parts, purchased through wholesale distribution.   What could a business offer a customer, that would create this unique promise of value?   I chose to offer a Lifetime Labor Warranty for every machine we sold.  I reasoned with customers, that though we also provided 1 year warranty on parts, that the labor was going to be a higher value to them over time.  I pointed out that bench labor rates at the time were $50, and that the average memory module or I/O card was less, and that as technology moved so quickly, it would be to the customers advantage to replace a failing component with a newer technology alternative in a couple years time anyway.  Further, we would apply the labor warranty toward the installation of any upgrades purchased from our store.  This helped to ensure that customers would be more inclined to purchase upgrade parts from us, even if we didn’t have the absolute lowest cost, because when you added a competitor’s labor costs to a lower part cost, the total costs were then higher.    This strategy worked rather well – I was essentially giving away the proverbial “sleeves out of the vest”.   Customers would come back for out of warranty repair, as the labor was free to them, I kept my part warranty period in-line with what my suppliers offered me, so I carried no real warranty expense.  And, the free labor, created a marketplace advantage for me for all post sale opportunities.  It was a win-win scenario.

So, I’d like to understand the back end equation that allows L.L. Bean to do what they do.  It’s also a prompt for all of us to consider what our customer service hook should be.  What can our business uniquely offer, that costs us little to nothing, but creates customer value, AND potentially creates a cost barrier for our competition? 

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