Stop Using a 1995 Playbook to Solve 2016 Problems. Jay Baer on the Future of Customer Success.

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In his new book, Hug Your Haters, Jay Baer reveals some surprising realities about customer service. “The hard thing about writing a customer service book,” he says, “is that everybody thinks they’re already good at it.” However, a pivotal study from Bain & Company showed that while 80% of companies believe they deliver a superior customer experience, only 8% of their customers agree. Talk about a disconnect.

“Customer service is being disrupted in the exact same way that marketing has been disrupted, and for the same reasons: mobile, social media, and Millennial behavior.” Baer explains. “The trouble is that everybody is using a 1995 playbook to solve 2016 problems.”

As a business strategist with twenty-three years of experience, Baer knows what he’s talking about. A renowned expert on marketing and customer service, he has worked with more than 700 companies (including 32 of the Fortune 500), presented hundreds of keynotes, authored five books, and founded Convince & Convert, a consulting firm and its #1 content marketing blog.

While Baer’s client roster spans almost every industry from retail to manufacturing and financial services to healthcare, his insights about customer service are particularly relevant for SaaS companies. “We all agree that in the SaaS business, churn is the most important number,” Baer says. “So why would you ever value marketing over customer success? It doesn’t make any sense.” And yet, that seems to be exactly what most companies do.
According to research Baer did for his book, the annual global spend on marketing is about $500 billion while the corresponding spend on customer service is only about $9 billion.

Survey Says: You Just Need to Show Up

Baer was inspired to write Hug Your Haters when he recognized a trend in the questions on the consulting side of his practice. “Increasingly, the questions companies asked were about social media customer care, how to balance marketing with customer care, and how to balance social media customer care with traditional customer service,” he says. “There’s a lot of confusion in the market.”

Rather than compile a collection of expert anecdotes and advice, Baer partnered with Edison Research to conduct a massive research project about the “science of complaint.” The intensive, full-blown study surveyed more than 2,000 Americans about not only whether they complained, but also where, why, and how they complained. Baer went into the exercise with a hypothesis, “My thesis was that speed is the killer app – that you have less than an hour to respond to a customer on the phone, email, Twitter, Facebook, or via skywriting. What we discovered, however, is that while speed is important, it’s not the most important factor. The most important thing companies can do right now – the differentiator – is just show up.”

A Colossal Opportunity

“The reality is most companies are, at best, only adequate at customer service,” Baer says. “They don’t put enough time, money, or emphasis into it. They think of it as a necessary evil in the truest sense of that phrase.” The good news is that the prevalence of this half-hearted, mediocre approach to customer service creates an opportunity for companies who are willing to go the extra mile. “The competition can have similar products and similar pricing and similar everything else,” explains Baer, “but if you are genuinely better at customer service and care more about your customers, that’s a competitive advantage that can stay with you for a long time.”

How big is this opportunity?

The research Baer and Edison did for Hug Your Haters indicates a full third of complaints go unanswered.

“And almost all those unanswered complaints are made online via social media, discussion boards, review sites, etc.,” Baer says, “So, we’re spending all this time and money to answer all the private conversations, but we willingly and even purposely ignore many of the public conversations? That’s probably backwards.”

This situation is especially relevant for SaaS companies because of the additional consideration that goes into a software purchase. “The more expensive the purchase, the more considered the purchase, the more important good customer service is,” says Baer. He explains that someone shopping for a SaaS product will research not only features and cost but also what kind of customer service experience to expect. Anticipating future issues, prospective buyers will, he says, wonder what the customer service experience will be like. “Buyers start poking around, looking at the company’s Twitter account and Facebook page, researching on G2 Crowd, TrustRadius, discussion boards, and forums for evidence that when something goes wrong, you’re going to take care of them.”

“It’s a colossal opportunity,” says Baer. “If somebody has a criticism, answer it on the record. Go out in public and say, ‘Look, we give a shit what people think about us.’ No response says, ‘We don’t care about you or what you think.’.”

The Benefits of Hugging Your Haters

There are two primary benefits to investing in better customer service. The first is about translating advocacy and loyalty into profits. It may seem obvious that better customer service makes for happier customers, and happier customers tend to stick around (and recommend your product), but there’s a flip side to that coin. “Answering a customer complaint increases customer advocacy by as much as 25%,” Baer says. “Not answering a customer complaint decreases customer advocacy by as much as 50%.” It’s up to you if you’re going to make a bad situation better by responding, or make a bad situation (much) worse by failing to respond.

The second benefit to building a better customer service experience is the opportunity to improve your product. “The most overrated thing in business is praise,” Baer says. “Praise doesn’t teach you anything. What actually makes you better is negative feedback and criticism. That’s the petri dish for operational improvement.” While Baer acknowledges that it can be frustrating and expensive to deal with customer complaints, the truth is there aren’t enough of them.

“Research from Fred Reichheld found that only 5% of unhappy customers ever complain via channels (phone, email, Facebook, etc.) that allow a business to find the complaint,” Baer says.

“That 5% – the haters, if you will – are not your biggest problem. Your biggest problem is the mass of dissatisfied customers who never tell you they’re dissatisfied. They just don’t renew.”

This “meh in the middle,” as Jay calls it can kill a SaaS company. Silently unhappy customers leave you with a high churn rate that you can’t explain, putting your company in a vulnerable position. The solution: solicit more complaints.

Baer illustrates this strategy with a favorite anecdote about Belgium-based restaurant chain Le Pain Quotidien. When Erin Pepper signed on as the company’s Director of Customer Experience, she set a goal to triple the number of complaints. “It may seem crazy,” Baer says, “but she understands the principle of complaints being the petri dish of improvements. She knows that if you can increase the percentage of accessible complaints from 5% to 10, 15, or 20%, it gives you a lot of raw material for making your company better.”

Pepper’s strategy had two parts. To start, she analyzed all the customer service interaction points and found ways to use those “marketing moments” to nudge customers into providing honest input. She trained cashiers and wait staff to solicit feedback, produced table tents and window signage that invited comments, and added requests for reviews to bills. The message was simple: if anything was less than 100% perfect, Le Pain Quotidien wanted to hear about it via whatever communication channel the customer preferred. The result was an influx of valuable data that empowered Le Pain Quotidien to make critical changes to their operations.

The other piece of the strategy is something Baer says is particularly applicable for software companies. “Le Pain Quotidien answers all negative comments, like a one- or two-star review, in public. As I recommend in Hug Your Haters – every complaint in every channel every time. That’s the formula.” In addition, Pepper takes the conversation further. “She waits about two hours and messages the customer again via private message,” Baer explains. “She says, ‘Hey, I just answered you in public over here. Hopefully you saw it, but I’ve been thinking. You’re a particularly perceptive customer. You see things other customers miss. What I’d like to do (with your permission) is send you two gift cards each month and invite you to visit a different Le Pain Quotidien location and then fill out this detailed survey of your experience. You really understand what we’re trying to achieve and we can get to where we want to go with your assistance. Will you to that for me?’ and now she has about 200 people doing really detailed secret-shopper exercises. Total cost of the program: gift cards.”

Customer Service For the Win

With Hug Your Haters, Baer hopes to convince readers that customer service is much more than a necessary evil. He wants to show companies how it can be a game-changer. “Customer service can be, and frankly should be, one of the most important differentiators you have,” he says. “This requires putting additional resources and emphasis on customer care. Don’t tell me you don’t have the resources. That’s bull@$%. You have the resources, you just choose not to deploy them that way.”

“If there’s any industry in the world where this principle makes the most sense, it’s SaaS,” he adds. “Without retention, you literally have no company. So, next time you’re thinking about spending money on a podcast sponsorship, tradeshow booth, or f!$*%@ golf balls, stop. Don’t spend another nickel on marketing until you’re sure you’re best of breed at customer service. Otherwise, you’re just filling a leaking bucket. And, I say that as a marketing consultant.”