Can Bad Service Spell Disaster?

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Photo courtesy of Stu Pendousmat

Photo courtesy of Stu Pendousmat

Is customer service THAT important? Could poor customer service bring down a well-known brand that had worked so hard to establish itself? Could one customer-service snafu lead to bankruptcy?

The answer to all three questions is, “yes.” And all three questions are answered by examining the demise of what was once America’s largest video-rental store, Blockbuster.

Blockbuster didn’t die because of the advent of online content, it died from poor customer service. When companies like Netflix burst on the scene, promising mailed DVDs with no time limit, Blockbuster’s response was to counter with enhanced customer-service promises. It launched its now infamous, “No Late Fees!” campaign, to counter what it thought was the reason for Netflix’s popularity.

By doing so, it showed that the wellspring of a customer-service disaster is not understanding your customers. Blockbuster clearly thought that the reason for Netflix’s popularity was the fact that you could keep a DVD for a couple weeks, when in fact the reason for Netflix’s popularity was the convenience of content being delivered right to your home.

But still, the “No Late Fees!” campaign seemed really nice. What a nice touch for customers! They could keep a movie at their home and not have to worry about pesky fees upon a tardy return. So far, so good. Except not. As the program unfurled, Blockbuster violated one of the cardinal rules of customer service: don’t make promises that you can’t keep. In other words, Blockbuster over-promised and under-delivered.

You see, Blockbuster found out after it offered this seemingly great gesture to its customers that it was a huge money pit. It would be kind of like any modern company that conducts business over the phone stating that, “if you are on hold with our customer-service department for longer than one minute, just tell us, and we’ll credit your account $50.” Such a company would probably see its lines overloaded with customers trying to claim their $50! Blockbuster discovered that everyone wanted to take advantage of this program; that this resulted in most of its content not being available for other customers; and that the loss of late fees coupled with the inability to rent its content was quickly draining profits to an untenable degree.

So instead of admitting it was wrong, shifting gears, and making it up to its customers in another way (for example, offering different methods of content delivery on a trial basis for free), it made things worse. To make up for the lost revenue, Blockbuster started charging customers for the video itself, as if they bought it or lost it! In other words, there were no late fees; customers just had to pay for the whole video.

This customer-service bait-and-switch triggered investigations by the attorney generals of just about every state in the union. And shortly thereafter, one of the biggest names in content delivery — still a household name today — was filing for bankruptcy.

The morals of this saga are simple: to service your customers, you need to know them. It is better to under-promise than to make bold commitments that you can’t keep. And a company makes outright lies in its customer-service claims, it can result in legal consequences that can be disastrous for a company.

Do the basics well, be honest and candid with your customers, and work to expand the pie when faced with a seemingly difficult market. Then and only then will you be offering “blockbuster” customer service — except with a small B!

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