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Customer Service, Pricing Strategy for a New Age

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With consumers increasingly empowered to gather product information from myriad channels, pricing and customer service strategies have been forced to change accordingly. In this month’s CRM Magazine, two columns address the new focuses companies should adopt for customer service and pricing strategies as a result of this new age.

Lior Arussy, the president of the global customer experience research firm Strativity Group, highlights customers’ changing perspective of sales staff from sources of information to providers of discounts. Accepting this paradigm shift simply reaffirms the customer’s perception of a product’s inferior value, according to Arussy. The strategy to combat this effect is to "enhance the experience enough to justify the price" through enhanced customer service.

William Band and Paul Hagen – both leading CRM analysts – add the axiom that the type of customer service one should focus on is dependant on the type of price strategy one has, though. Organizations framing themselves as low-cost leaders should focus on different channels than, say, an upscale retailer.

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With a recent American Express study finding that customers are increasingly willing to pay more for enhanced customer service, companies have a chance to use customer service and sales strategy to enhance and optimize its pricing strategy.

In Arussy’s opinion, the concept of traditional selling is dead, replaced by a new service process that should be defined by six tactics: educate, engage, empower, personalize, easy and authentic. A company representative must share true, relevant information with the customer (educate) while demonstrating an authentic understanding of a customer’s individual problem (engage). By giving the customer choices and abilities not offered before engaging the company (empower), the representative will help make the process feel individualized (personalize) and simpler (easy). Finally, the live interaction throughout will humanize the process (authentic). Arussy suggests applying the "memory test" to determine success:" How long will the buyer remember the experience he had?"

Band and Hagen add to this concept, suggesting an internal reflection of one’s pricing strategy before deciding where to concentrate on customer service. Are you a Southwest, Costco or Ikea in that you pursue a cost leadership strategy? To maintain this price strategy, the authors argue, it is necessary to drive down internal costs. Customers understand this and thus it is in the best interest of the company to focus on "optimizing customer self-service" – IVR systems, websites, mobile aps and in-store self-service.

Or are you an Apple or Sony in that your price structure is based on industry leadership in innovation and service? Customers in this case must feel that their new purchases offer high value due to both the products features and the accompanying customer service. Thus, it is imperative to offer a "proactive guidance" to ensure customers realize the product’s value proposition. Apple offers the Genius Bar in all of its stores. Sony offers free user training at store's with the purchase of a digital camera.

Similarly, if you appeal to a narrowly targeted customer segment, like Timbuk2’s messenger bags, the focus should be on "tailored intimacy." Pricing is often high in this market, but companies do not need broad-ranging customer service. Instead, the focus should tend toward "highly attuned, empathetic and personalized interactions."

Price strategy and customer service are inextricably linked. Maintaining a targeted pricing strategy is dependent on a staff that follows Arussy’s pattern of educating and personalizing. Band and Hagen suggest tweaks to the type of personalized service a company should provide based on the price strategy it is pursuing – convenience through self-service for cost leaders and convenience through proactive and personalized service for luxury items. Both lessons are germane to overall strategy in a modern market.


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