There is too much stuff! The world is totally oversupplied. Too many frozen yogurt stores, too many houses for sale, too many Cash4Gold schemes. Only in a world so over inundated with stuff could a company like Groupon be so wildly successful. If you ask old school deli owners they will tell you the first rule is “never discount your food.” Yet businesses are lining up to offer 50 to 90% discounts, because there isn’t enough demand to meet supply. Now in the ultimate irony, there are too many deal of the day websites!
In a world that is so wildly oversupplied an entrepreneur wonders, what can I sell that will actually make a profit? What can I do to differentiate my product from the rest. It all comes down to building a defensible brand. You can build a brand through superior advertising – see Dos Equis. You can build a brand through a simpler product – see Apple. Most recently, we have witnessed the rise of brands built on the back of superior customer service. These fascinate me.
There are thousands of websites that sell shoes. The end product – shoes – is no different from one website to the next. So Tony Hsieh’s decision to start a shoe website puzzled everyone. After all this was the tech entrepreneur who sold his first company to Microsoft for $265 million. What Hseih realized was that a brand could be built by delivering better customer service than anyone else selling shoes online. Free shipping, free returns, free shipping when returning and quirky, happy customer service reps available 24/7. The result: Hseih sold Zappo’s to Amazon for $1.2 billion.
Compute is now as much of a commodity as electricity. But unlike electricity there are thousands of website hosting services. Every host promises 99.999999% up time and best in class speed, so how do you differentiate such a commodity? Customer service. Rackspace is renowned for having the most fanatical customer service team in the industry. They are available by phone or chat at all times. They are all American based, well educated and happy. This is why I choose Rackspace for all my hosting.
The purpose of building a brand is being able to charge a premium for your product or service. Brands have bigger profit margins because of their perceived quality in the mind of consumers. Investing in superior customer service enables Zappos and Rackspace to charge more for what would otherwise be commodities.
Decomodization through customer service has a lot of big companies questioning their customer service practice. Some of which are reconsidering their long held practice of outsourcing customer service. Which begs a, personally relevant question, how can outsourcing company decomoditize itself through customer service?