Is a ‘hassle cost’ justified in resolving customer service issues?

Discussion
Getty Images/fizkes
Jan 22, 2020
Tom Ryan

A university study concludes that many businesses purposefully make customer service complainers deal with unnecessary obstacles to avoid providing them with refunds, replacements, repairs or other compensation.

The study found many businesses employ a tiered organizational 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,” Yi Zhu, an associate marketing professor at the Carlson School of Management at the University of Minnesota and study co-author, said in a statement. “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 be to escalate a less severe claim and the more likely to mitigate illegitimate claims;
  • Additional hassles may help companies better control costs tied to customer complaints, such as reimbursements or repairs.

The researchers develop a mathematical model around “unit hassle cost,” which they define as “the level of annoyance or frustration that an individual experiences should she be inconvenienced.”

Researchers said companies have the opportunity to exploit hassles created in customer service operations to increase profits. But the downside is the risk to customer 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 Mr. Zhu. In these situations, researchers believe a business may resort to raising prices to maintain profitability.

Speaking to the Minneapolis Star Tribune, Mr. Zhi said businesses in market share battles often put a premium on customer service. He suspects, however, that even Amazon.com may reduce its shipping and Prime perks should competition lessen.

“Amazon is trying to dominate and build up leverage in the online world,” he said. “Once they have this leverage, once they’re focused on profit, we believe customer service will sadly go down.”

DISCUSSION QUESTIONS: Do the benefits of adding hassles to the customer service resolution process outweigh the drawbacks for business? Do you believe that many retailers purposely add obstacles to the resolution process?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"[A hassle cost] might save the company money, but as a consumer I will only do business with that company once. A consumer in 2020 has endless choices and a loud voice online."
"The people being hurt by these unnecessary layers are the everyday customers with busy lives, just trying to check off a nagging item on their to-do list."
"The moment a customer finds out that companies are making it purposely difficult to get customer service issues resolved is the beginning of the end of that relationship."

Join the Discussion!

19 Comments on "Is a ‘hassle cost’ justified in resolving customer service issues?"


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Dave Nixon
BrainTrust

This approach could easily backfire as a negative word spreads 5x faster than a positive word.

Also, brands need to understand that consumers have other methods for resolving poor customer service, like disputing credit card transactions, if you give your customers the runaround. I believe human nature does interject some form of “bias” for those tough customers.

But wouldn’t the effort be better invested in addressing the areas of the CX that cause the need for customer service? Let’s focus on the root cause and this becomes a non-issue.

Dave Bruno
BrainTrust

In today’s choice-laden market, any “hassle cost” is too high a cost. This is antiquated thinking fraught with risk. One need simply look to Costco for an example of a highly successful retailer with limited competitive pressure that uses truly “hassle-free” service to build trust, encourage purchases and keep shoppers coming back.

Bob Amster
BrainTrust

I must be living on a different planet. That has never happened to me and there have been plenty of opportunities. Retailers have come to realize that goodwill is worth a great deal and, if they want to, they can hide the cost of good will in one or two points in gross margin. Now, when it comes to medical insurance claims…

Evan Snively
BrainTrust

There are people who will try to game every system and, unfortunately, a subset of these people don’t distinguish the lines between “gaming” and “cheating.” A degree of friction can be useful in deterring these illegitimate claims but, more often than not, if cheating your brand with a false claim is a person’s end goal, they won’t be stopped by simple frustration tactics.

The people being hurt by these unnecessary layers are the everyday customers with busy lives, just trying to check off a nagging item on their to-do list. And it is with that vast majority in mind that the sentence “benefits of adding hassles to customer service resolution” pains my soul.

Steve Montgomery
BrainTrust

While it seems hard to believe in this day of customer focus, I am sure we have all faced this when trying to resolve an issue. For a retailer to deploy this tactic to reduce returns they would have to have done some serious thinking about the value of a customer versus the cost of resolving the issue.

Can you imagine being an employee in a conference room working on weighing the elements involved? I would have to ask myself if this a company that I want to work for. For me the answer is no.

Suresh Chaganti
BrainTrust
Suresh Chaganti
Co-Founder and Executive Partner, VectorScient
8 months 7 days ago

Deliberate obfuscation and frustrating customers is never going to work. But the sad reality is companies in monopoly and duopoly situations — utilities, internet providers, cable, cell phone, insurance, etc. are able to get away with it without any consequences.

For all discretionary spending type companies including Amazon, they can ill afford to follow this path. There will be someone else to disrupt them.

Art Suriano
Guest
I don’t believe that many retailers add obstacles to get customers who have a complaint discouraged and to make them give up. Frankly, most of them don’t have to because, in many retail chains, there is little or no customer service at all. Unfortunately, today we have several companies that are so big they no longer worry about the customer because they realize the customer has no choice but to use them. If I walk into Lowe’s and have a terrible experience, I can indeed go to Home Depot, but if I have a worse experience at Home Depot, where else can I go? Back to Lowe’s. The list goes on and on. Most businesses have an adopted one need, “pay me.” That’s really all they care about. And the service businesses like AT&T and Verizon are even worse. It’s sad because many of these companies talk about the importance of customer service when, in reality, they have none. They don’t train their people well, and I am convinced the bean counters have figured out… Read more »
Chris Buecker
BrainTrust

Intentionally added obstacles or any obstacle along the customer service chain will be a boomerang for retailers. The customer paid the full price for a product or service and this needs to be respected and fulfilled. I would even turn the argument around and say: Retailers who offer an easy complaint service will be rewarded by having loyal customers and by achieving a high NPS over the long run.

Georganne Bender
BrainTrust

Shades of John Grisham’s The Rainmaker! If you read the book or saw the movie then you are familiar with this technique.

What’s the point of screaming about how great the customer experience is (like every company does) when you hit them in the back end when a product fails or the customer wants to do a simple return? It might save the company money, but as a consumer I will only do business with that company once. A consumer in 2020 has endless choices. And a loud voice online.

Jeff Weidauer
BrainTrust

Customer complaints are an opportunity for a business to create a stronger bond with the customer, and get actionable feedback about its products or service. Forcing the customer to jump through hoops to resolve a concern might work in the short term, but it’s a long-term route to failure.

Carol Spieckerman
BrainTrust

We often weigh in on “product reviews” but many are actually service reviews that impact product sales. How many times have you seen one-star service reviews peppered in with five-star product reviews? This alone is reason enough to show the hand to hassle costs and customer service escalation games.

Peter Charness
BrainTrust

Sounds like retailers are taking a page from health insurance claims adjusters. This doesn’t belong in retail. The time it takes to resolve an issue is a better measurement.

Richard J. George, Ph.D.
BrainTrust

Even using the term “hassle cost” is demeaning to customers. Customers are the lifeblood of any business and need to be treated with respect, not hassled. In my book, Winning Customer Rules, I direct complaining customers to use the terrific company contacts link on Elliott.org. This site provides the names and email addresses of key executives in many industries who have the ultimate responsibility for treating customers with respect. Personally, I have complained via this medium with great success.

Shep Hyken
BrainTrust

The moment a customer finds out that companies are making it purposely difficult to get customer service issues resolved is the beginning of the end of that relationship. Frustration only goes so far. Every study shows customers are willing to pay more for customer service. They pay even more for convenience. On the flip-side, customers are walking away faster than ever before. All that said, recent articles have revealed some companies in certain industries don’t make the effort to provide better customer service because it doesn’t pay off they way it does in other industries. (I believe that was also shared in RetailWire.) But a bad service experience doesn’t compare to purposeful “hassle.”

Ralph Jacobson
BrainTrust

This is not a black-and-white issue. There are retailers with very poor/non-existent customer service and there are ones that have the best, hassle-free customer service. It can be very costly to give every customer what they want, and customers also tend to abuse that great customer service. So, there is definitely a happy medium that retailers can employ by tracking the major concerns customers have, addressing systemic corporate issues that may be the root causes of those issues, and allocating resources and budget to support the “cost-of-doing-good-business” customer service that will build brand value.

Jeffrey McNulty
Guest

This type of strategy is myopic and outdated with the plethora of options that consumers have to choose from. “An ounce of prevention is worth a pound of cure.” Organizations that implement and encourage this behavior risk damaging their brand recognition. Today’s consumer is savvy, informed, and empowered and they will not tolerate this methodology.

Craig Sundstrom
Guest

An interesting topic — maybe even a provocative one if we accept “unnecessary obstacles to avoid providing them with refunds…” Unfortunately the brief news articles here don’t really provide enough detail about the study to evaluate it. How, for example, did it differentiate a “necessary” obstacle from one that’s “necessary”? (Indeed do we even define a process such as providing information as an “obstacle”?)

Ultimately, I guess the big question here — which doesn’t seem to be answered — is what do these authors recommend?

James Tenser
BrainTrust

The cold hard facts are that if even a small percentage of problems and returns are never resolved, the savings can benefit the bottom line. So in the short run, frustrating customers can pay off. As Peter observes, this is not uncommon in the healthcare insurance industry. I’ve also encountered it in the processing of promotional rebates.

It’s unfortunate that some businesses (airlines?) reason that it’s financially prudent to test the limits of customer tolerance. I would offer the hopeful counter-argument that positive brand reputation and loyalty will ultimately add more to shareholder value.

Andrew Casey
Guest

Possibly the single stupidest idea I’ve ever heard. Good customer service is hard enough with out trying to make it difficult.

wpDiscuz
Braintrust
"[A hassle cost] might save the company money, but as a consumer I will only do business with that company once. A consumer in 2020 has endless choices and a loud voice online."
"The people being hurt by these unnecessary layers are the everyday customers with busy lives, just trying to check off a nagging item on their to-do list."
"The moment a customer finds out that companies are making it purposely difficult to get customer service issues resolved is the beginning of the end of that relationship."

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