What Have Your Customers Done for You Lately?

Customer goodwill is also difficult to measure — or even define.  But we know it matters.  Certainly, it makes a difference to the top line.  Customers who like you are more likely to buy things from you and tell their friends about it.  They’re also more likely to behave once they cross the operational boundaries of your organization, which can make a big difference to service companies.  Customers with “good will” are better customer operators, better partners in the sometimes complex project of joint value creation.

How much better?  We still don’t have good universal measures of customer goodwill, but one that comes close is the number of complaints you receive relative to your competitors.  Airline customers tend to complain at a relatively high rate.  One reason is that airline service routinely fails to meet expectations.  Another is that the service is mission-critical for both business and leisure travels.  If you lose my luggage on the way to my daughter’s wedding or delay me for an important meeting, I’m going to want you to feel my pain.

But not if your Southwest Airlines.  Customers file official complaints about Southwest far less frequently than they do about other airlines, even when Southwest has similar mishaps.  Their customers also go above and beyond the call of duty in helping Southwest succeed.  A favorite example of the value of this devotion is captured in an HBS case written by Jim Heskett.  Early in Southwest’s run, an airline called Braniff International offered a 60-day “sale” on tickets between Dallas and Houston — Southwest’s core market — for half the price of Southwest’s fare, $13 instead of $26.  Southwest countered with an ad proclaiming that “nobody’s going to shoot us out of the sky for a lousy $13.”  And the company gave its customers a choice:  pay either $13 or $26 for exactly the same seat on Southwest.  80% of Southwest customers chose to pay $26.

Would your customers stick around if your competitors cut their prices in half?  There are lots of reasons that Southwest has thrived in a difficult service environment, but one primary reason is their ability to answer yes.  Let’s call it customer goodwill for short.

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