Speaking to a customer service representative can, at times, feel like a hassle. According to recent research from the University of Minnesota’s Carlson School of Management, that frustration is by design.
Published in the journal Marketing Science, researchers found many customer service organizations operate on a tiered organization structure that imposes a “hassle cost” for customers who attempt to escalate their complaints.
“If you have a complaint, often the first person you speak with at a company’s customer service operation is limited in how they can help you,” said Yi Zhu, an associate professor of marketing at the Carlson School. “However, to get to the next level – such as a manager – you have to jump through additional hoops to get your complaints addressed. That hassle cost can include both time and frustration.”
The study’s findings suggest:
- the more the hassle, the less likely a customer would escalate a less severe claim and the more likely it would mitigate illegitimate claims;
- additional hassles may help companies better control costs tied to customer complaints, such as reimbursements or repairs;
- there may be a hidden layer of discrimination: because women, African Americans or Latinos maybe more likely to experience higher hassle cost, it may affect prices and product quality from companies who market to those groups.
“From a company’s perspective, if their target market is less likely to make or escalate claims if they are unhappy, they could take multiple paths to increase profits,” said Zhu. “This includes further limiting the ability of their tier one customer service employees – the first person you reach at a call center – in offering solutions to customer complaints, as well as raising prices and lowering product quality.”
Even with indications that some companies might exploit hassles created in customer service operations to increase profits, researchers state it is important to remember that companies must also consider a customer’s goodwill and retention in the long run.
“Especially for companies that rely on customers sticking with them for years, creating frustration among their customers isn’t ideal,” said Zhu. “In these types of situations, customer service operations become less tiered and provide more opportunities for customer redress. However, to make up for those costs, companies likely increase the price of their products.”
Funding for this research was provided by the Marketing Science Institute and 3M. Zhu’s expertise is in industrial organization, quantitative marketing, advertising, e-commerce and online auctions.