Every small business makes compromises on a daily basis. Adding something here means subtracting something there. But does it ever make sense to cut back on the customer experience? Can bad service be good business?

Bill Taylor, writing at the HBR Blog Network, asked this question after reading a New York Times article in which securities analyst Richard Bove trashed Wells Fargo for its lousy service and upgraded the bank's stock to a buy.

It sounds counterintuitive, but Taylor says bad service can be good business for two reasons:

  • Customers understand they're not paying for service. Consider Irish airline Ryanair, renowned for cheap fares and a service so parsimonious the carrier once considered changing passengers to use the lavatory. "The company, by definition, is not for everybody," notes Taylor. "Customers who value pillows and blankets, cheerful flight attendants, and apologies for late arrivals will take their business elsewhere—and pay more for the privilege. That's the deal."
  • Investment in customer service cannot be justified. Social media juggernauts like LinkedIn and Twitter do their best to be unreachable by phone. It frustrates users, but these companies offer a compelling service, have a vast reach, and don't suffer for their lack of an 800 number.

And this is why Taylor doubts the wisdom of Wells Fargo's approach—Bove very easily moved his business to another bank, and so could anyone else.

The Po!nt: Unless you offer a product or service unlike any other, your long-term strategy can't afford bad service—no matter how profitable it seems in the short term.

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