Why customer service pays off most when the economy is positive

Let the good times roll
Let the good times roll
Image: AP Photo/Steven Senne
We may earn a commission from links on this page.

Whether it’s to complain about a flight or a hotel reservation, getting good customer service when you call can be a lottery. But from the business perspective, it’s not always a great investment to provide good customer service all the time.

According to researchers at Georgia State University, the returns of good customer service are greatest when the economy is doing well. When economic prospects are bleak, consumers tend to focus on price, but when the economy is flourishing, a customer’s priority shifts from price to other factors, “including how satisfied they were in the past and whether the firm made an effort to fix anything that went wrong,” says Dr. Nita Umashankar, an author of the study.

Umashankar and her colleagues studied 725 customers of an international airline over a three-year period and recorded each person’s purchase history and collected survey data (which included information on how often the customers bought tickets and at what prices, their satisfaction levels, and service experiences). Researchers also collected data published by Gallup-Healthways to measure people’s perception of the economy.

They found the airlines’ revenue growth “doubled when it improved customer experience during better economic times,” according to the study.

For managers looking to boost the company’s image and customer base, researchers suggest not to allocate resources to customer service in times of economic distress, despite lower consumer morale. Rather, do so when the economy looks positive and use these techniques:

  • Emphasize what makes  your business superior to others in areas such as comfort, speed, and reliability
  • Better train employees at the forefront of the business, to reduce failures
  • Make tangible differences in your products (for instance, nicer decor in hotels can help improve consumer sentiment)

This doesn’t mean that businesses should provide bad customer service in drearier economic times. But in those slumps, the greater emphasis should be on lower prices, and why those prices are cost-effective.