Why Customer Service is an Underrated Intangible Moat

Written by

Jae Jun

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In my mind, customer service has always been overrated.

Every company claims to have awesome customer service. It’s so easy to duplicate, doesn’t seem to require that much extra effort and cost is low to implement. Wrong.

More precisely, I was wrong.

A New Perspective of Moat

When I think of moat, I tend to think on the side related to the actual business and its survival against competitors.

E.g. intangible assets such as strong branding, switching effect or cost advantages over competitors and how it can outlast them.

But I was reading a comment on valuefolio and it hit me that a moat can be built around customers. This is true for both B2C and B2B customers.

In many cases, customer service makes or breaks a deal. Customer service has the ability to create a lasting moat.

Customer Service is a Long Lasting Effect

The best lessons come from personal reflection. Thinking back through all my past experiences, my spending habits, loyalty to certain companies and brands, it all points towards customer service.

Not the product. But the customer service.

There is a Vietnamese restaurant right across the street from where I live and although it’s convenient and the food isn’t bad, I vowed to my wife, never to visit there again. Their horrible service and their “you are only a $10 customer” attitude completely put me off. I rarely post reviews, but had to for this place.

Here’s the screenshot of my review. One person found it funny 🙂

I’m sure you have had plenty of experiences like this or maybe worse.

In the end, a company like Apple could have the best product, but if their customer service does not match it, it wouldn’t be trading at $700 today.

Where am I going with all this?

Customer Service Should Not be Taken Lightly

Company moats have been reduced over the decade. Not from competition, but because of the transparency and power given to customers thanks to the internet. Countries have fallen because of the internet and the same can happen with companies.

Reviews are powerful and is one of the reasons why Amazon is so successful.

The consumer power is why most big brands now constantly monitor social media to see what customers say about them and then react to it quickly by resolving issues before it becomes a headline.

How is Customer Service a Moat Though?

Customer service needs all of the following:

  • understands and relate to you
  • a personal experience
  • painless for the customer
  • easily and quickly reachable

This is what is referred to as sticky. Once you get into this happy safe zone and pampered environment where you are understood and taken care of, a discount of $10 from a competitor to convert over to them is not worth it.

So next time you research a company, look up some reviews and see what their customer service is like. A company like Zappos.com didn’t become a multi million dollar company just for selling shoes. They became what it is today because of their customer service.

Sounds simple but extremely difficult to do right as companies get bigger and the focus easily turns to revenue instead of their customers.


Why I Believe Old School Value is so Awesome

The way I go about my business goes against what most marketing books and product launch seminars teach you.

These books and lectures say you have to be loud, build hype and network like crazy to promote your business and product. But I’m Old School and I’m a value investor. I make sure OSV is run conservatively and differently.

My business metric is not based on EV/EBITDA or meeting next year sales target.

Who wouldn’t want 1,000 customers a month?

But, my number one business metric is customer awesomeness, happiness and stickiness (whether you are a customer or not).

As a customer of many things myself, I understand your needs and what you are going through. That’s why you have my direct number.

I answer close to 100% of my emails. Before I started writing this, I realized I didn’t reply to an email from July 31st so I made sure that got answered.

I make it personal. I know most of you by name/email and my role is to serve you.

Some people have taken advantage of the way I run things but that’s ok because I will try to treat you just like how I would like to be treated. And that is with patience, honor, respect and honesty. Your loyalty is honored, rewarded and valued.

The bottom line? This was a long winded way of saying, lock in the limited time Beta pricing for the stock valuation spreadsheets because my service rocks and you will swear by it!

Have an awesome weekend.

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