No Such Thing as Savings When It Comes to Customer Service

Peter Weedfald, VP and Chief Marketing Officer at Circuit City, resigned last week after less than two years on the job. It seems he stepped down one March too late. Mr. Weedfald's fate was sealed in March 2007 when the company decided to fire more than 3,000 veteran store employees and replace them (or rehire those desperate enough to come back) with new hires at lower wages. This cost-saving measure backfired horribly as it gained Circuit City unwanted negative publicity. More importantly, the move did nothing to help customer service. Apparently, Circuit City forgot it was in the service business. Sales for the company were down almost 9% in 2007 despite it being a period of wildly popular electronics products such as HD televisions, video game consoles, and laptop computers. As far as the impact of the customer service "strategy" on stock price, Circuit City is trading at less than $4 per share compared to nearly $20 before the employee firings last March.

Let Circuit City's woes serve as a reminder that there is no such thing as "savings" when it comes to customer service. It should be viewed as an investment that can differentiate a brand from competitors, develop loyal customers, and build morale within the organization. The temptation to cut back will likely be even greater during weak economic condidtions. If service employees are considered a marketing vehicle more than an expense item the money spent can be worth every penny.