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University of Iowa News Release


Nov. 3, 2006

UI Business Professor Studies Lousy Customer Service

No, it's not just your imagination. Customer service really does stink.

"All measures of customer service and customer satisfaction have declined significantly, especially in the past 10 years," said Lopo Rego, an assistant professor of marketing in the University of Iowa's Tippie College of Business who studies customer service and customer satisfaction. He said dozens of studies confirm what we all have a feeling is true as we wait in the line that never moves, or try to return something without a receipt.

Americans' frustration with customer service will soon come into even sharper focus during the holiday shopping season that kicks off later this month, as customers flood stores and madly look for the perfect gift.

"The holidays is when it's worst," Rego said. "Stores bring in a few extra hands to help, but it doesn't match the increase in the number of shoppers. They might bring in five or six extra workers, but it doesn't help when the store has 1,000 more shoppers."

Rego said the slip in customer service dates back largely to the booming economy of the late 1990s, when the unemployment rate slipped so low that the country was, in economic terms, at full employment. Especially in lower-paying industries like retail or fast food, businesses were forced to hire workers who were often less than committed to their jobs, and many of those workers knew that treating customers poorly rarely resulted in being fired. On those occasions when someone did lose a job, there was always a store down the mall looking to hire.

"Today, relatively speaking, the economy is not as good and unemployment is higher, but the bad habits we learned in those days remain," Rego said.

At the same time, companies started looking for ways to increase profits by making cuts. More and more, they began to look at their customer service operations as places to cut, reducing the amount of money for hiring, training and paying employees. But Rego said this strategy has turned out to be short-sighted, as it has only left those businesses clients and customers frustrated, and likely chased many to their competitors.

However, there are still businesses that make customer service a priority.

"Smaller businesses that can't compete on price survive by offering great customer service," he said. "They know their best customers by name and greet them when they come in. They know what their customers want and they make them fell good when they shop there."

But in the end, Rego said shoppers need to know there's usually a correlation between prices and customer service: the lower the price the customer pays, he said, the lower level of service they'll receive.

What can businesses do to improve their customer service? Rego offered several suggestions:

--Make customer service an investment. Rego said businesses that hire better employees and train and reimburse them well will be rewarded with stronger employees who buy into the business' mission and provide the kind of customer service that brings customers back. "Every business says that providing outstanding customer service is their priority," Rego said. "Most of the time, it's just lip service."

--Get feedback from shoppers. Businesses that value customer service seek feedback right on the floor, or call shoppers later and ask them to rate their shopping experience. Rego said businesses can use the data to improve their service, fix what's broken, find out which employees are making customers happy and which aren't.

--Provide incentives to workers who provide good customer service. Make pay and bonuses dependent on good customer service, Rego said. Workers who consistently fail to provide good service see it in their pay.

--Educate and manage shoppers. Let shoppers know that stores will be packed at certain times, and they might be better off coming at non-rush times. Rego said some stores try to manage crowd size by offering special sales during non-rush hours, such as weekday mornings or afternoons.

Finally, Rego pointed out that those businesses that indeed make customer service and customer satisfaction a priority, are rewarded with superior shareholder value, higher profit margins, and increased and more stable cash flows, and are better positioned to weather bad times, since their customers are less likely to flee to competitors.

Lopo Rego teaches marketing principals in the Tippie School of Management to students in both the undergraduate and MBA programs. His research focuses on shareholder value, firm performance, marketing metrics, return on marketing and customer satisfaction.

STORY SOURCE: University of Iowa News Service, 300 Plaza Centre One, Suite 371, Iowa City, Iowa 52242-2500.

MEDIA CONTACT: Tom Snee, 319-384-0010,