Beware! Customers Are Watching These Private Moments

I really enjoy The Profit on CNBC.

It's a reality show where entrepreneur Marcus Lemonis invests in struggling businesses. In each episode, Lemonis investigates a business and then tries to make a deal with the current owners to help them turn things around. 

A recent episode featured a gourmet marshmallow company called 240sweet. Lemonis invested $100,000 in the business, but his relationship with the owners dissolved when he realized they were being dishonest with him. 

One owner in particular came across as abrasive, egotistical, and unethical. I won't spoil the ending, but you can watch the full episode on CNBC.com for a limited time.

The fallout after the show aired was amazing. 

Viewer Backlash

The Profit takes viewers behind the scenes to see how businesses really work. Lemonis goes through the company's financials, their operations, and even their customer service.

If an ordinary investor was doing due diligence on a potential business acquisition, most of those moments would be private. On The Profit, everything is on camera. 

What was shown on television was very unflattering.

240sweet was hit with an avalanche of 1-star reviews on Yelp and Google. Most of these viewers had never done business with 240sweet. They simply wanted to punish the company for what they had seen on television.

You may not have any plans to appear on a reality show, but you still need to beware of private moments when customers are watching.

The World is Watching

240sweet isn't the first business to look bad after their appearance on reality television. (Remember Amy's Baking Company?)

Your actions may still be recorded even when you aren't appearing on a reality show. Who could forget the FedEx package tosser or the sleeping Comcast technician?

You may not recognize the name Anjali Ramkissoon, but you probably remember seeing this video of the Miami doctor going nuts on an Uber driver. Her employer certainly noticed as she was placed on administrative leave after the video went public.

Customers may still be watching even when employees aren't being recorded. Here are just a few examples:

• Employee break areas that are visible to the public

• Employees who commute to work in uniform

• Employees having private conversations in customer-facing areas

Be Careful

A friend of mine recently had an embarrassing moment on her way to work. She was annoyed by another driver and laid on her horn to share her displeasure.

The other driver turned out to be her boss.

These incidents are a reminder to all of us that we never know when a customer, a boss, or anyone with a camera might be watching. 

Introducing a New Course on Innovative Customer Service Techniques

People often ask me what's new in customer service.

They're looking for advanced techniques, cutting-edge research, and frankly, short-cuts. Everyone wants to find a faster, smarter, better way to serve their customers.

If you subscribe to this blog, you know I publish a lot of that research here.

Now, I'm excited to announce that I've just created a new training video on LinkedIn Learning called Innovative Customer Service Techniques.

This post will give you an overview of the course, a preview of the content, and I'll let you know how to watch the training video for free.

Jeff Toister on the set at lynda.com

Overview

Companies often want their employees to think outside the box when it comes to great customer service. Managers and frontline employees, in turn, often want to learn new techniques to boost customer service ratings. 

The Innovative Customer Service Techniques course delivers new and cutting-edge research that can be used to take customer service to new levels.

Topics include:

• Influencing customer perceptions

• Enhancing service senses

• Building teamwork

Sneak Preview

This course was a lot of fun to create because it allowed me to share some of my favorite customer service lessons. I've included links to blog posts that detail the research behind a few examples:

• Jedi mind tricks for reducing customer wait time 

• Why customers should always know your name

• How detoxing our brains can improve customer service

Here's a short video from the course. It provides some tips for improving your powers of observation:

Improving your powers of observation from Innovative Customer Service Techniques by Jeff Toister

Watch It For Free

You generally need a LinkedIn Learning subscription to view these training videos. However, you can get a free 30-day trial account.

Your trial account will allow you to watch all of my training videos. You'll also be able to check-out LinkedIn Learning’s entire library of courses. They offer a wide range of topics including business skills, computer skills, and creative skills like photography.

Five Ways Weekly Customer Service Tips Can Boost Your Team

You can get a lot of great ideas from listening to customers.

A few years ago, I met a client for coffee. She had sent her entire team through my customer service training program and the results were looking good. Still, my client was worried.

"I want to keep my team sharp by continuously reinforcing the skills they learned in training," she said. "My challenge is I don't always know how to do that. I wish I had an easy way to remind them... and to remind me."

We brainstormed a little until we hit upon a simple solution. 

I created an automated system that emailed one customer service tip per week to each person on her team. My client would get the email too so she could follow-up with them.

My Customer Service Tip of the Week email is now available to anyone. Here are five ways you can use it to boost your team's customer service:

#1 Team Meeting Topics

Many customer service teams have regular meetings. You can use the Customer Service Tip of the Week to generate discussion topics to share with the team.

Let's say the current tip was Use Positive Body Language.

You could lead a discussion with your team to brainstorm ways that body language can positively impact your customers. Then, at the next team meeting, you could ask for people to share success stories and challenges they experienced when being mindful of the body language they displayed.

#2 Address A Specific Need

You can also use the tips to address a specific need. It might be something you’re working on personally or something your entire team is working to improve.

Let’s say you’re working on building rapport with customers. You might keep an eye out for weekly tips that are most applicable to rapport and try to implement each one.

You might not want to wait for an applicable tip to come along. That’s why I created the Customer Service Tip of the Week book.

It puts more than 52 of my favorite tips in one collection and organizes them by category. There’s also a chart on pages 12-13 that shows common customer service challenges and tips for addressing them.

#3 Generate New Ideas

The tips are designed to be reminders, but many of the tips contain helpful new ideas that your team can use to elevate their service.

For instance, the Five Question Technique is a terrific way to build rapport with customers while simultaneously identifying additional ways to serve. Best of all, even introverts can use this technique to become skilled conversationalists.

#4 Reinforce Training

The tips were originally designed to reinforce concepts taught in my customer service training programs. The reminders help participants retain what they learn long after they attend the training.

These reminders can also be used to reinforce other training programs because many are so general in nature.

#5 Feed Your Curiosity

Some people just want to know the most cutting edge ideas in customer service. That's why most of my weekly tips contain a link to a blog post or a helpful resource.

One of my recent tips was Tell The Truth. The email contained a link to a bonus blog post that detailed how a service failure and a lie created a customer service uproar that briefly grabbed national headlines.

Sign-up

Anyone can sign-up for the Customer Service Tip of the Week email here. Or pass this blog post on to your team and have them sign-up, too.

What Gift Baskets Taught Me About Customer Service Trade-Offs

When I was in college, I worked for the Boston chapter of a nonprofit organization called AIESEC. Our mission was to foster international and cultural understanding by finding short-term jobs in our local area for members from other countries. 

One of my responsibilities was running a fundraiser. We sold gift baskets to parents of undergraduate students at Boston University. The parents gave these baskets full of fruit and snacks to their kids as an encouraging care package right before Spring finals. 

I was only 18 and very inexperienced the first time I ran it. Through a combination of hustle and luck, the fundraiser was a huge success. 

I was much smarter the second year. We made much less money, but the program was far more successful. We scrapped the program entirely by my third year, and we were happy to do it.

Why step away from a successful program? It's all about trade-offs.

Year 1: Financial Success and Operational Pain

The gift basket program was pretty simple on the surface. 

We sent a direct mail letter to the parents of all undergraduate students at Boston University. The parents were offered a chance to buy a gift basket for their student right before Spring finals. We fulfilled the orders and kept the profit.

Operationally, it was a lot for a college freshman to manage. Keep in mind this happened prior to the internet's rise in popularity. Most people didn't even have email yet.

The direct mail piece had to be written, copied, and sent to the post office so it could be mailed out to more than 10,000 recipients. We had to buy address labels from the University, which required a mountain of red tape.

We saved a ton of money by making the gift baskets ourselves. I bought all the supplies in bulk at Sam's Club and then gathered volunteers to assemble the baskets.

When an order came in, we sent the student a post card letting them know their parents had purchased a gift basket for them. We had an on-campus office, so we set-up pick up dates and times when students could pick up their gift. This was a lot cheaper than mailing gift baskets to each recipient.

Financially, it was a huge success. The fundraiser paid for our entire annual operating budget.

Operationally, there were a few drawbacks. First, it took a ton of time. I spent untold hours on the project, but I also had to get other people to volunteer their time to help me out. This time commitment took us all away from our core mission of getting local companies to hire our members from other countries for short-term job assignments (up to 18 months).

Second, I had to deal with a lot of customer service headaches. Some students didn't bother to come pick up their gift baskets. We instituted a calling campaign to remind students to pick up their gift baskets, but that took up a lot of extra time. 

There were still plenty of students who didn't pick theirs up. This led to a lot of calls from upset parents. They didn't understand (or care) that it was their kid's responsibility to pick up the gift basket. They didn't understand (or care) that we couldn't deliver it and we also couldn't hold pick-up hours indefinitely because we all had finals too. 

These parents were really angry to hear we didn't offer refunds because it was a nonprofit fundraiser. Our direct mail piece stated this explicitly, but it didn't matter. This was my first lesson in the old axiom, "Customers don't read the fine print."

Year 2: Smart Trade-Offs

The fundraiser was an important source of revenue, but I wanted a solution to our biggest challenges for year 2:

• Too much time spent on the fundraiser

• Students were inconvenienced

• Parents weren't happy if their student didn't pick up the gift basket

I realized I could solve all of these problems by outsourcing the entire program. There were companies that specialized in this sort of thing, and they handled everything from sending the direct mail piece to order fulfillment.

Best of all, they shipped the orders directly to each student so there would be no issues with delivery.

The trade-off was there was no way that we'd make as much money. The margin we got running it ourselves was significantly better than we got from the outsourcer.

Here's why those trade-offs still made sense:

The time spent on running the fundraiser could be re-directed towards fulfilling our mission. In fact, we used our time wisely and wound up among the Top 10% of US Chapters in terms of jobs raised that year.

We also avoided a significant risk. You see, if enough parents complained to the University about poor customer service from our in-house gift basket program, the University would shut the program down. So, by improving service through a professionally-run program, we mitigated the risk of losing the program entirely.

The outsourcing plan worked beautifully. Parents and students were happy and complaints fell to almost zero. (The outsourcer handled the handful of tiny issues that did happen.) And, we still made some money, though not as much as the year before.

Year 3: No More Gift baskets

Redirecting saved time towards our core mission worked really well in Year 2. So well, in fact, that we no longer needed the fundraiser by Year 3. 

We had raised more than enough money to cover our operating budget through a combination of raising jobs (companies paid us a fee) and corporate sponsorships. These activities were all a core part of our mission while the gift baskets never were.

Learning

Frances Frei and Anne Morriss wrote an outstanding book called Uncommon Service in 2012. The book details how businesses must choose to do poorly in some areas so they can excel in areas their customers really care about. 

I could immediately relate to the trade-offs discussed in the book. It reminded me that revenue isn't everything, especially if that revenue comes with an opportunity cost.

13 Ways To Calculate The True Cost of Customer Service

Poor customer service is costing your company money.

You’ve probably seen one of those articles with “39 customer service stats you can’t ignore” or something similar. They all share some scary numbers:

• Poor customer service costs billions

• People tell lots of other people about service failures

• Don’t even get me started on social media

Unfortunately, your executives aren't as excited. 

They like the idea of good customer service. They're just reluctant to invest in improving it. Things like creating a customer service vision, implementing a more useful survey, or training employees cost time, money, and resources.

Three things executives don't like spending are time, money, and resources.

So how can you get your executives' attention?

General statistics won't do it. You need to put some real numbers on how customer service is affecting your business.

Here are 13 ways you can calculate the true cost of customer service.

How does customer service affect revenue?

Your executives are much more likely to listen if you can connect customer service to revenue. Try to demonstrate a clear link between investing in better customer service and generating more revenue.

These examples won't apply to every situation, so try to find one that works for yours:

1. Repeat Business. Start by identifying your churn rate (the percent of customers who leave). Use your Voice of Customer Program to estimate how many leave due to poor service. Calculate the lost revenue.

2. Average Order Value (AOV). This statistic works great in environments like retail where service has a direct impact on sales. Determine the average value of a single order. Identify specific ways that improved service could increase that number. Calculate the additional revenue you could gain.

3. Sales Per Hour. I like this metric even better than AOV for situations where hourly employees are generating sales. You pay employees by the hour, so why not calculate how much revenue they generate per hour? Determine the current rate, identify factors that will improve it, and calculate the potential revenue gain.

4. Lifetime Value. A customer who spends an average of $50 may not be impressive. But, what if they spent $50 every week and could reasonably be expected to remain a customer for ten years? That customer is suddenly worth $26,000 to your business ($50 x 52 weeks x 10 years = $26,000). Calculate the average lifetime value for your customers and you'll see exactly how important they are.

5. Returns. Customer service can prevent products from being returned due to customer error. Better customer education can lead to better customer satisfaction with your product. Estimate the percentage of your returns that could have been prevented. Multiple this percentage by the dollar value of your annual returns. This calculation, known as preventable returns, represents the potential saved revenue due to improved service.

6. Lost Sales. Poor customer service can cost you sales in a number of ways. Rude employees and long lines might cause customers to abandon a planned purchases. A phantom stockout (where the item is in stock, but can't be found) can also cause customers to leave empty-handed. Calculate the revenue lost to these problems and you might have a case for investing in service.

What does it cost to service customers?

It stands to reason that better service will reduce costs. The trick is showing your executives exactly how this happens in your business.

Here are a few examples. Try to see if any are relevant to your business.

7. Service Discounts. Companies often give customers freebies or discounts to compensate for poor service. For example, a restaurant might offer a free dessert when a meal is poorly cooked. Calculate the cost of these discounts and estimate the potential savings you could achieve by reducing the problems that cause them.

8. Employee Attrition. Customer service employees don't like to play for a losing team. Turnover often improves when employees feel they are empowered to help their customers. Calculate the cost of turnover (including recruitment, training, and lost productivity costs). Estimate the savings you could achieve from reducing turnover by a reasonable amount. You can use this worksheet or this guide to help you.

You'll need to know your labor cost per contact for the next few examples.

This is your employees' fully loaded salaries (including taxes and benefits) divided by their average contacts per hour. For example, if you pay a customer service agent $15 per hour (including taxes and benefits) and they handle an average of 10 calls per hour, then your cost per contact is $1.50.

9. Contact Reduction. Identify the top reasons why customers contact you. Determine whether there's a problem you can solve that would prevent customers from needing help. Estimate the number of contacts that could be reduced by solving that problem and calculate the potential savings by multiplying the number of contacts saved by your cost per contact.

10. First Contact Resolution (FCR). Determine the percentage of issues that are resolved on the first contact. (Here's a handy guide from Oracle.) Improving FCR means reducing wasteful contacts. Set a target for FCR improvement and use your cost per contact to calculate the projected savings.

11. Escalation Rate. Complex contacts often get escalated from a less expensive source to a more expensive source. For example, escalating an issue from chat to phone costs extra money. Start by identifying the number of escalations for a specific time period (week, month, quarter, etc.). Next, multiply this figure times your cost per contact for the more expensive channel. Finally, estimate the potential savings you could achieve from reducing escalations by a reasonable amount.

How does customer service affect word-of-mouth marketing?

You can acquire more new customers through better customer service. Happy customers will tell friends and family members about your business. This is known as word-of-mouth marketing.

See if either of these examples will work for your business.

12. Referrals. Track the number of new customers you gain via referrals from existing customers. (You can also use a Net Promoter Score survey to gauge your customers' likelihood to refer.) Calculate the value of these new customers using Average Lifetime Value or a similar statistic. Estimate the revenue gain from improving your referral rate.

13. Online Rating. Your business's ratings on online review sites like Yelp and Trip Advisor directly correlate to new customers. One study estimated that a one-star increase in a restaurant's Yelp rating leads to increased revenue of 5 to 9 percent. You can put together a business case for improvement by making some reasonable assumptions about the value of enhancing your company's online reputation.

Resources for reducing customer service costs

I realized I've covered these metrics at a very high level. You might be looking for some additional guidance. Here are a few resources to help you out:

• Listen to the legendary Jeanne Bliss share a fantastic approach.

• Check out this case study on sharing KPIs with executives.

• You may also contact me directly with your questions about performing these calculations.

Finally, this post is part of an on-going series about the connection between operational excellence and customer service. You can read the other posts here.

What To Do When Your Service Hits the Fan

The 36-room hotel faced a perfect storm of problems.

It was normally a stopover for cross country travelers, but a winter storm had shut down the interstate. Many people altered their plans and decided to wait out the storm at the hotel.

The little hotel was suddenly sold out.

To make matters worse, the hotel's reservation system went down. This meant the front desk agent didn't know which rooms were vacant and which were not.

She felt completely stuck when she checked some guests into a room that was already occupied and it looked like every other room in the hotel was reserved.

She couldn't send these guests back out in the storm, but she didn't think she could accommodate them. Meanwhile, there was a growing line of restless and weary guests waiting to check-in.

Almost any business faces a moment like this when operations go haywire and cause big customer service headaches. It's crucial that you know what to do in these situations.

Step 1: Get a Grip On What's Important

Imagine you're the front desk agent at this hotel.

You're trying to accommodate an angry couple you inadvertently checked-in to an occupied room. There's a growing line of restless guests behind them waiting for service. The phone's ringing off the hook. 

What is the most important thing for you to do in that moment?

The front desk agent's number one task should have been to do a room check. She needed to get an accurate list of which rooms were occupied and which were not.

Here's why:

• She needed to find a vacant room for her guests.

• She risked checking more people into occupied rooms without that list.

• She need to know whether the hotel was truly sold out or had vacant rooms.

It's imperative that you get a grip on the most important thing when service hits the fan. It doesn't do any good to panic and spin your wheels.

Here are a few more examples:

In a retail store with a huge line, the most important thing might be taking a moment to organize a line so people aren't crowding the registers. You can even use a few secret tricks to make the line feel shorter.

A contact center facing a huge spike in contacts due to a service outage might update it's hold message, automated email responses, website, and social media accounts to advise customers about the delay. This will give customers information they need and possibly prevent a lot of phone calls.

I was once dining at a restaurant when the power went out. The most important thing at that moment was safety. The staff cleverly deployed extra candles throughout the restaurant and made sure all of the walkways were clear. Servers escorted guests to the restrooms and supplied them with flashlights.

Lines get long. Emergencies happen. You need to get a grip or it will get worse.

Step 2: Conduct An After-Action Review

It's amazing how many companies deal with the same issues over and over again, but don't learn from them.

This wasn't the first time that bad weather had shut down the interstate and unexpectedly filled up the hotel. It would likely happen again.

So, what could the hotel learn from this experience so they could be better prepared the next time?

For example, they needed a procedure for manually keeping track of rooms when their reservation system went down. (This isn't difficult in a 36-room hotel.) The employee could have remained cool, calm, and collected if she had a good handle on the operations.

Think about other situations where a problem is likely to happen again.

A contact center might get a huge spike in calls when marketing launches a new promotion without telling anyone. It's annoying to the contact center manager that nobody in marketing bothered to give her a heads-up. But, it's foolish to expect anything different the next time around unless the contact center manager has a better plan.

Here's how you should conduct your after-action-review.

1. Define the problem. (Ex: checking guests into occupied rooms)

2. Identify the root cause of the problem.

3. Determine what you can do to fix it.

Step 3: Be Proactive

You can save a lot of grief by being proactive at the first sign of trouble.

The challenge is recognizing that first sign. At the hotel, it wasn't the computer system going down, the sudden flood of reservations, or the road closures.

It was the weather forecast. 

They knew about the potential storm days in advance. They should have started making preparations for the possibility that they'd suddenly sell out, lose power, or worse. This might include proactively confirming reservations, testing emergency procedures, and scheduling extra staff.

Think about things that you can do to be proactive.

1. Identify a signal that trouble may lie ahead.

2. Create a procedure to handle it.

3. Test the procedure to make sure it works.

Assessing The Cost

That storm cost the hotel more than a few angry guests. The beauty of tying customer service to operations is you can attach real dollars to the situation. 

Here were some real impacts that could be measured:

• Service Discounts. Many rooms had to be discounted due to customer service issues.

• Lost Revenue. The hotel may have had vacant rooms that could have been sold to guests.

• Repeat Business. The hotel risked losing repeat guests due to the service failures.

---

One Thing Great Customer Service Managers Do Differently

Great customer service managers always seem cool, calm, and collected.

This flies in the face of reason. The typical manager spends most of their day putting out fires or running to the next meeting. There never seems to be enough time to get everything done. 

How can these elite managers remain calm? Where do they find the time to coach, train, and develop their employees?

Great managers do at least one thing very differently than everyone else.

Meet The Ever-Present Teddy

My wife, Sally, and I traveled in December to spend Christmas with family. We stopped for a night at a resort on our way back home.

That's where we met Teddy. He was a supervisor who seemed to be everywhere we went.

We first met Teddy when we arrived at our room. He and another associate had just dropped off some fruit as a welcome amenity. Teddy and his colleague took a moment to help bring our bags in and give us a brief orientation.

We later saw Teddy at dinner. Our server noticed that we enjoyed wine. She mentioned that Teddy was helping her learn more about wine too. Teddy was working in the restaurant, so he stopped by our table to chat about wine for a moment.

The next morning, we saw Teddy in the restaurant again at breakfast. He spotted us and came over to our table to say hello. We talked for a moment before he went off to show a server how to set up a table for a large group.

Every time we saw Teddy, he was doing one thing that great customer service leaders do differently. Did you spot it?

He was constantly training and coaching employees. 

Teddy showed an associate how to deliver an amenity to a room so the associate could do it himself. He helped a server learn about wine so she could serve her guests more confidently. He helped another server set up for a large party so she knew what to do the next time.

Teddy never did the work for them. He also didn't leave them to struggle by themselves. He did the task with them side-by-side so he could show them the right way to do things through hands-on instruction.

Show, Don't Take

Managers often make the mistake of doing their employees' work for them.

They take on a problem and fix it because they know how. It's an instinctive move that feels faster when the manager is pressed for time.

This causes two issues. 

First, the employee doesn't learn how to solve the problem or complete the task. This leads to the second problem - the manager has all but guaranteed that they're going to have to deal with the same issue again.

I call this the manager's paradox. You can either spend time you don't have developing your employees now, or spend twice as much time fixing problems later.

Managers like Teddy don't do their employees' work for them. They'll often do employees' work with them, but this is different. It's part of an ongoing process to delegate, empower, train, observe, and coach employee performance. 

It's hard work, but the reward is a motivated and capable team of employees.

Resources

There's a certain bravery involved when your plate is full, but you take a moment to develop yourself and your team. It causes short-term pain, but long-term gain.

I've compiled a list of 51 terrific resources - books, websites, blogs, and other tools.

The One Thing You Gotta Fix Before You Fix Service

The new year is a time to start new initiatives.

Perhaps improving customer service is on your radar. Maybe there have been a few complaints. You might think your team is good now but they could be better. Or, it could be that your boss added "improve customer service" to your objectives.

I want to save you some time and a lot of headaches. There's one thing you must do before you work on improving customer service.

You need to improve operations. Read on to see what I mean.

How Operations Impacts Service

Customer service expert John Goodman examined the source of service failures in his book, Strategic Customer Service. Here are his statistics:

• 20 - 30 percent are caused by the employee

• 20 - 30 percent are a result of customer errors

• 60 percent are caused by poor products, processes, and marketing messages

That last part is all operations.

Let's say you traveled over the holidays and rented a car. You arrive at the car rental counter after a long flight and are told that the car you rented isn't available.

Your experience suddenly turns sour. You might even be unhappy with the rental clerk's lack of helpfulness or empathy. But, it all started with your rental car not being there. If it was, the whole situation would have been avoided.

Cable companies are universally derided for their service quality, but most of their problems are operations. Technical issues are operational problems. You call for a repair technician and encounter another operational problem - the four hour service appointment window. (These happen because the company can't or won't manage to a tighter window.) When the repair technician still arrives late it's due once again to operations. 

Rude employees are a side effect of these poor operations, not the cause.

Here are just a few more ways that poor operations affect service:

• Employees spend less time engaging customers and more time fixing problems.

• Service failures continuously reoccur when the operational problem isn't fixed.

• Employees lose motivation when the solution is out of their control.

Customer service training won't fix problems caused by poor operations. In fact, my own calculations make employee training responsible for just one percent of service quality.

Why Having Fewer Options Leads to Better Service

Sheena Iyenger and Mark Lepper set up an experiment in 2000. They wanted to see how adding more choices affected consumer behavior.

Their experiment was conducted in an upscale grocery store called Draeger's Supermarket in Menlo Park, California. The store was known for having a large assortment of products such as 250 varieties of mustard.

Iyenger and Lepper experimented with an in-store sampling booth with two variations. One variation offered 6 different varieties of jam. The other offered 24.

The display with 24 varieties of jam attracted more customers with 60 percent of passers-by stopping at the display compared to only 40 percent of people stopping at the display with just 6 varieties.

Surprisingly, people who encountered the display with just 6 varieties of jam were five times more likely to make a purchase than people who encountered 24 varieties.

It turns out that offering fewer choices can be good for business. Here's how. 

Fewer Options = More Sales

A recent furniture shopping trip revealed how easy or complex a buying decision can be. 

My wife and I found two furniture stores that offered sofas we liked. One was Living Spaces. They really did service the right way and we ended up buying a sofa and a love seat from them. (A recent blog post described other ways that Living Spaces does service right.)

One of the biggest differentiators between the two stores was the number of options available.

Living Spaces had a much larger selection of sofas. However, their helpful salesperson narrowed it down to just a few choices once we described what we were looking for. Each choice had a simple one-page sales sheet that visually depicted the various size and configuration options. Making a choice was easy.

The other furniture store overwhelmed us with choices. One sofa that looked promising had a complex code book full of possible configurations. Even the salesperson struggled to decipher it all. There were six different options for the arms alone. It was too much.

Like the jam experiment, limiting options helps Living Spaces sell more.

Fewer Options = Lower Costs

Costco is famous for keeping its costs low and passing on those savings to its members. One of the ways it does this is by offering fewer options than its competitors.

The graph below shows the approximate number of individual items sold at Costo and its two major rivals, Sam's Club and BJ's.

Data Source: iStockAnalyst

Notice that Costco has 24 percent fewer items than Sam's and 46 percent fewer items than BJ's. Having fewer items allows Costco to rely on fewer employees to maintain inventory in it's stores. It also enables the chain to negotiate better deals from its vendors and offer lower prices to its customers.

Fewer choices haven't hurt Costco's service. The chain leads the American Customer Satisfaction Index for specialty retailers with an 84 percent rating.

Fewer Options = Better Operations

Last year, I wrote a post called Why McDonald's Customer Service Sucks in Three Charts. 

One of those charts depicted the proliferation of menu items at the chain. The menu had grown 365 percent since 1980.

Data Source: Fortune

The staggering number of menu items causes a lot of operational problems as employees struggle to keep up with so many options. One study found that 12 percent of McDonald's drive-through orders contained an error.

Compare this to fast food champ In-N-Out. They're consistently rated extremely high in both customer service and food quality. One big difference? The In-N-Out menu contains just six items.

Solutions

One of my favorite customer service books is Uncommon Service. It describes the need for trade-offs. A business can only be really, really good at something if it's willing to be not so good at a few other things.

This book provides a great lesson in simplicity.

If you want to delight your customers, offer great prices, and make your operations run like a well-oiled machine, you need to sacrifice selection. 

Your customers, and your employees, will appreciate it in the long run.

The Magic Phrase That Will Get You Better Service

As customers, we sometimes run into a wall.

That wall is a customer service employee who either can't or won't solve our problem. It's clear they want us to just accept defeat and go away. They try to end the conversation by quoting policy, citing impossibilities, or simply saying "No."

I've discovered a magic phrase that cuts through this obstacle.

At a restaurant, it helped convince a server to remove an improperly prepared entree from the bill. I used it to get a cable company representative to credit my account after a service interruption. The phrase helped me talk a customer service agent into manually delaying an online order so a shipment wouldn't arrive while I was traveling.

Even when this phrase doesn't work, it still helps. More on that in a moment.

Here's the phrase:

Is that something you're empowered to do?

The phrase does two things. First, it requires you to be specific about what you want the employee to do for you.

If you're being tactical about it, you'll make sure your request is reasonable. Asking a restaurant to comp a poorly prepared meal that you can't eat is reasonable. Asking them to comp your dinner companion's meal too may not be.

The second thing this phrase does is it eliminates any confusion about empowerment. As I noted in a blog post earlier this year, one reason employees aren't empowered is they don't stop and think about what they really can and cannot do.

Asking this closed-ended question lets you know where you stand.

If an employee replies, "Yes, I am empowered," then the only reason they would refuse a reasonable request is because they don't want to do it. I've found that most try to help when they suddenly realize they can help.

If the employee replies, "No, I'm not empowered," then you're wasting your time arguing with the employee. In fact, it's a little unfair to continue badgering them about something they have no control over.

This is where the phrase works even when it doesn't. Here's a recent example:

I had purchased a couple of wine refrigerators. After completing the sale over the phone, I received an email from the sales rep asking me to sign a lengthy terms and conditions sheet. Many of the terms and conditions were contrary to the terms she had described to me when she booked the sale.

It felt like a classic bait and switch. For example, the sale rep told me the cost of shipping was included in the price of the refrigerators. The terms and conditions sheet clearly stated that shipping was not included.

I emailed and asked her to change the written terms and conditions. She replied and told me they couldn't be changed. So, I called the company and spoke to her manager. He told me the same thing -- the written terms of sale couldn't be changed.

That's when I asked him my magic question. "I'd like to purchase these refrigerators, but only if the written terms match what your sales rep quoted me over the phone. Is that something you're empowered to do?"

The sales manager told me no, he was not empowered to do that.

Further discussion was now pointless. The magic phrase had saved me the continued aggravation of getting stonewalled by a sales manager who couldn't help me. Instead of arguing, I politely ended the call and then called another company that sold the same products. 

This time, I encountered a sales rep who was able to sell me the same refrigerators under favorable terms for a lower price.