The NSI Partners Blog

While one of our vendors (hint: telecommunications) wants to charge an Early Termination Fee for service that malfunctioned for five straight weeks until we were forced back to their competitor, I am issuing a four-figure credit to a client for work they contracted before later changing their minds. Billing for “early termination” is easy work when you get it, but it leaves a bad taste in your mouth which is why I’m issuing this credit with a smile. And it’s a no-brainer to waive the fee for something a client doesn’t want, even if they decide later — it’s an opportunity to earn loyalty which is far more valuable.

Well, maybe not a no-brainer in the customer service carnival of telecommunications churn, which apparently costs $10 billion per year, according to CGI–so much, it’s developed a “Churn Management” program. That’s where “Customer Justice”–that is Customer Service from a macroeconomic point of view–comes in. When things get so bad that you need “churn management,” it becomes a matter of justice.

Going on 30 years now, I have taken an interest in Customer Justice because it’s one of the greatest marketing levers that far too many businesses fail to value. It’s actually a comparative advantage in international trade and will be a major factor as services continue to be globally outsourced.

“But, look–it gets a whole department in our org chart,” I’m told. Yes, but it’s rarely a rung in the corporate ladder’s fast track or among the required classes in business school. It seems too simple to warrant being considered a “discipline,” like the more sexy Finance or Business Development. And Stanford or Wharton grads don’t ”study” Customer Service–it’s too vocational.

Of course, one Harvard Business School grad, Fred Reichheld, did. In 1989 he pioneered Loyalty Marketing at Bain and developed the statistic that the cost of acquiring new customers was five times the cost of servicing established ones. First widely published in 1996’s The Loyalty Effect: The Hidden Force Behind Growth, Profits and Lasting Value, it’s quoted every recession when customers get hard to find. In fact, it’s been elevated to a mantra so often that it rarely includes a citation, and it’s now been inflation-adjusted to six or seven times depending on who’s doing the chanting.

But many businesses don’t believe it. They think customer service boils down to how well you write your call script and how many calls need to be escalated to Supervisor “Bill,” part of the staff of our former telecommunications vendor who was unwilling to provide me with his last name, even though he had all my information. I told Bill that if that Early Termination Fee did in fact appear on our final bill, I’d have to recoup our losses by developing this incident into a case study.

We have a lot of great vendors — how would they have treated this? Why do telecommunications and financial services come up in churn discussions more than, say, manufacturing? (Regulation, anyone?) How often is churn associated with this particular vendor, who, out of fairness, shall remain nameless pending that final bill? If, however, that bill reflects Bill’s heightened emotional state during our call, then this will be a matter for Customer Justice, and I can share with you what I learn. After all, if you have to pay a fee, you should get something in return, don’t you think?