Is a ‘hassle cost’ justified in resolving customer service issues?
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.”
- Research Brief: Customer service is frustrating by design – University of Minnesota
- Why Customer Service Frustrates Consumers: Using a Tiered Organizational Structure to Exploit Hassle Costs – Carlson School of Management
- Your call is important to us’: Not really, University of Minnesota study shows – Minneapolis Star Tribune
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?