CUSTOMER SERVICE IS MAKING A COMEBACK AND IT'S GOOD FOR INVESTORS

I don't think a day goes by when I speak with someone living in Italy who cannot recount a story of just about the worst customer service they have experienced. 



Admittedly, a lot of that is directed at public administration offices and I think that would be justified, in Italy and also in many other countries around the world, so I will leave them out of this discussion. I am writing about the companies, restaurants, small businesses and even big businesses that should know better.

Firstly, let me tell you about my experience with customer service at Vodafone, why I think they excelled in my case, and why I have been a client ever since.  

About 8 years ago, when I lived in a different apartment, I noticed that Vodafone were putting flyers on car windscreens informing residents in the area that 'Fibra' had arrived - much quicker and having the possibility of connecting with online services through the TV - I wanted in! I was already a client of Vodafone, so I called and asked to be subscribed to it. I was taken through an application on the phone and signed up there and then. Happy to pay the cost, I was told that they would be in touch within 2 weeks to arrange for an engineer to come and set me up at home. Two months passed and nothing happened (I was busy with work so didn't chase it up). In the meantime, I was receiving sms and email messages asking me if I wanted to sign up for Fibra. Why were they sending these when I had already said yes?

I eventually rang to find out what the problem was and was told an engineer would be in touch...nothing.

So then I decided to take matters into my own hands. I went online and found the name and office address of the head of sales and marketing for Italy, his name and office address in Milan. I then wrote a lengthy letter to him, in English, (his profile had shown that he had worked extensively abroad and spent years in Canada). The letter was to the point: I said that as a stock holder in Vodafone (I wasn't but my mother was) I was dismayed at not having received the service that I had signed up for whilst still being prospected for the same service. I explained that it is well known in the sales and marketing business that it takes approximately 10 times the cost to acquire a new customer as it does to sell services to an existing customer. So why were they spending 10 times as much on me, an existing customer, who had already agreed to their new service? 

It worked! I was contacted within a week and given my own personal English speaking representative, who I now have a personal email address for and who I contact if there are any problems. Success. I am a loyal customer of Vodafone; they have served me well. They are not the cheapest, but I have tried Wind and 3 (cheaper options) and had terrible coverage and service so I am happy to stay with Vodafone even if they come at a premium.

ADAPT OR DIE

I am telling this story because it feeds nicely into my theme for this blog. Personal customer service is making a comeback. You may think that I have finally lost my marbles, because with the juggernaut of online services most companies are downsizing and taking their services online to try and compete with the likes of Amazon.

Well you would be wrong...

DIGITAL STRATEGIES

At our annual conference this year we had some great speakers, one of whom spoke about digital strategies. A digital strategy is the length to which a company is going to go to compete against the threat of online services. If you talk to most companies you will hear them say that they are downsizing, cutting costs, reducing staff numbers and investing in updating their tech. Well, you may be interested to know that there are companies whose digital strategy is to do quite the opposite and I want to give you a couple of examples of those that were presented at our conference. They make the point that in the ever changing world in which we live in (there is a song title in there somewhere), sometimes running against the crowd will make the difference between adapting and dying.  

WHERE AMERICA LEADS...

America leads in commerce! Europe (and the UK) will follow eventually, even if we are historically sluggish to adopt new ideas in the world of commerce. The drive for change often comes from America, where they challenge the established norms and experiment with new ideas. What succeeds then undergoes a slow adoption process in Europe. So these things are likely to come our way, but don't hold your breath! 

B&Q AND HOME DEPOT

For those of you who are not familiar with these store names, they are large out of town stores specialising in do-it-yourself goods. The equivalent in Italy would be Leroy Merlin.

However, the difference between the 2 stores is remarkable. B&Q in the UK is going through very difficult times. It has not responded to changes in customer behaviour and is currently classified as a 'struggling retailer'.

Home Depot, on the other hand, has exactly the same business model but is doing somewhat better, for a number of reasons.

A few years ago, their profits had collapsed with the onslaught of online retailers. Why do I need to go and buy a screwdriver in an out of town shopping centre when I can buy it online and have it delivered at home?

Home Depot did some research and found that their average client was a male in their mid 40s; someone who grew up in an age of consumerism, not needing to ‘fix’ things, as perhaps their parents had done, but used to the purchase, dispose and repurchase lifestyle. However, concerns about the impact on the environment from this consumerist behaviour had meant that these customers, typically dads, were coming to the store looking for materials and tools to ‘fix’ things in and around the house, but who were completely unequipped to do so (I find myself in this category).

Home Depot saw an opportunity. Instead of driving their business online, reducing staff members and trying to compete with the other online retailers to merely ‘sell’ goods, their digital strategy worked in reverse. 

They realized that they needed to improve their customer service to win market share and consequently they took 3 important steps:

1. They hired retired ex-tradespeople as key customer service staff in store. These people were encouraged to engage in detailed conversations with the customers, help them choose materials and tools, and give them advice.
2. Home Depot also armed the same staff members with business cards with a cell phone number, which they gave to customers and which the customer could call that person for advice, without charge. Just in case the customer got home and didn’t know what do to do with their purchases. It sounds all too familiar to me.   
3. They went further. The customer could call the same person and book an appointment for a home visit to ‘help’ them to complete the job. Not do it for them, but teach the customer how to do it. The customers wanted to learn, not have it done for them. And, of course, a knowledgeable customer is likely to purchase more from your store for the next job. 

They won back market share and their share price has been rising steadily for the last 5 years.

BEST BUY

Best Buy (Unieuro equivalent) in the US fought back market share by taking a similar strategy. Instead of only being an outlet to buy your latest tech, they hired hardware specialists and offered a home connection service. Whatever you purchased you could have an expert come to your home, hook it up to the internet and configure all the hardware to work with existing devices. Best Buy won back market share as a result and their share price has also been increasing

AMERICAN BANKS

American banks are another example. They are hiring staff, not laying them off. They are finding that the millennial generation (those raised with computers) are less trusting of the internet when it comes to making important financial decisions. They want to speak with someone in person and sit and talk to a person before committing to financial decisions which will change their lives. American banks are hiring! 

THE SPECTRUM IFA GROUP

I also remember the conversation with my very own CEO, Michael Lodhi at The Spectrum IFA Group, when I first started working with them. He said "customer service is key. We are discussing important cross border tax and financial planning matters for our clients. No matter how many online services spring up, people will still want to speak with a person when making these important financial decisions". It looks like he was right.    

And my last experience was just last weekend. I was in an independent Lego store in Rome with my son. I saw a couple looking at a Lego set and discussing it. They seemed undecided and I heard the word Amazon mentioned a couple of times. An assistant was working nearby and he must have also heard the same conversation. He walked over to the couple to ask if they needed any help, and before they could say anything he whipped out his tablet and said, "let me just do a price comparison for you with Amazon". It was €5 more expensive in the shop, but he showed them the Amazon price and explained that although more expensive, they could have it right away and they don't have to try to organise a delivery. They bought the Lego set there and then. Great service in action. That store is always full of people.

So there you have it. The internet is blamed for the destruction of social interaction and personal contact, but it might just be the very thing that brings us back together again. Through experience and innovation we can see that there is a longing for good customer service. In reality it never really went away. It just needed to be thought of in a different way.

It might take some time for this approach to reach Europe, but where America leads Europe (including the UK) normally follows.

Customer service is making a comeback and it could set up some great investment opportunities in the near future. Thankfully the investment managers that we work with are on top of these trends and are constantly researching new sectors and ideas. It's not only tech firms that will drive future growth in your portfolio. Knowing where to look is key!