Perhaps all “intangible” products delivered as “services” suffer from a common problem: consumers have a hard time evaluating the quality of the provided services. And that might easily lead to lower satisfaction ratings.
Intangible product customer acquisition is one matter, but customer retention arguably is quite a bit harder, as the customer experience is everything for an intangible product (education, legal or financial advice, connectivity services, public transportation, temporary lodging).
Perhaps that is why “service” industries have lower customer satisfaction ratings than “product” industries. Though particular scores might vary from study to study, the general pattern is clear enough: product satisfaction tends to be higher than “service” satisfaction.
Intangible products tend to be highly people-intensive in their production and delivery, which means consistency is a challenge.
The more people-intensive a product, the more room there is for personal discretion, idiosyncrasy, error, delay or other “experience” problems.
Colloquially, customers have no way of knowing whether the service they are buying represents high value, compared to cost, or not.
In many cases, the context is essentially binary: one has a cell phone signal or not; internet access is working, or not; electrical power is available or not. At the margin, customer service becomes crucial, especially when services are degraded and a fix is required.
Consumer service customer attrition can be quite high, as much as 10 percent per month for streaming video subscription services, for example. At rates that high, half of the members of a cohort have abandoned service after about six months.
In decades past, churn rates for many consumer connectivity services was as high as three percent a month, representing nearly 100 percent turnover of a single cohort over three years.
At the same time, customer satisfaction scores for most connectivity products is quite low. And customer satisfaction scores for virtually all industries fell significantly during the Covid pandemic.
But connectivity service customer satisfaction scores, as measured by the American Customer Satisfaction Index, have been at the bottom end of scores for all industries, for many decades, despite significant improvements on many metrics of network reliability, availability, billing accuracy and customer service.
And you might think satisfaction scores would be highest for internet service (since it is, as we tend to agree, an “essential” service), compared to voice services or subscription video. In fact, ISPs tend to score the lowest on ACSI surveys of any industry, just below subscription video services, which historically have ranked at the very bottom of ACSI surveys.
To be sure, mobility service ranked highest of the connectivity services, but still in the bottom 20 percent of all products and industries.
So one wonders whether all subscription services will tend to suffer from lowish evaluations, either because customers dislike the feeling of being “locked in” to a supplier; because some subscription services are inherently more complex, in terms of availability; or because customers are simply reminded every billing period that they still are paying for a product.
Also, some subscriptions are more expensive than one-time purchases of the same products. And many subscriptions also seem to come with predictable annual price increases as well.
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