If you’re a company that provides professional services, does it make sense to help your customers become more educated in the skills and abilities your organization provides? Wouldn’t doing this hinder your company?
In professional services industries, the conventional wisdom is that teaching customers tricks of the trade does not pay. If an organization improves its customers’ expertise, then it empowers its customers to shop around for better alternatives — increasing the likelihood that they’ll switch to another service provider.
However, a recent study suggests just the opposite. Andreas B. Eisingerich, a marketing professor at Imperial College Business School in London, and Simon J. Bell, a marketing professor at the University of Melbourne, surveyed more than 1,200 retail clients of Goldman Sachs JBWere Pty Ltd., a financial services company based in Melbourne, Australia. Their research indicates that improving customers’ service knowledge provides considerable advantages.
In financial services, educating customers can mean a variety of things. It could involve advisors taking time to explain the pros and cons of products, or it could entail interactive Web pages updated with information customized to clients’ needs. The bottom line, however, is that these initiatives increase customers’ knowledge of companies and their markets. It’s easy to see why this doesn’t seem intuitively like a good idea. Educating customers can be costly. And doing so does equip customers to switch to a competitor or a self-service option, such as E*Trade Financial Corp. Full-service financial services companies should, therefore, ask, “What’s in it for us?”
As it turns out, plenty. In Eisingerich and Bell’s study, customers who had higher service knowledge were more likely to trust a company. Some secondary effects also emerged. If service employees courteously and attentively explained information to customers, customers were even more likely to trust that company. In other words, the more customers know about the services or products, the more they appreciate good customer service and timely information.
In contrast, as companies educated customers more, their service’s outcome — high return rates on financial investments, for example — became less important in establishing customer trust. Perhaps, as they knew more about a market, customers grew to understand the difficulty in differentiating service aspects, as well as understanding how a market’s outcomes could lead to unpredictable outcomes. While this is particularly true in the investment industry, this finding would likely hold true in legal and medical services as well.
The researchers also concluded that for these very knowledgeable clients, attentive and courteous service played an even more important role in developing trust as the company increased its efforts to educate customers. These expert clients were also less concerned if these education initiatives revealed a lack of differentiation in regard to service outcomes. They were simply more likely to trust the company as a result of its attempts to educate them.
What does this mean for businesses? Educating customers can help companies build trust and develop lasting relationships with customers. This means that employees should explain concepts to customers. Service employees have heavy workloads; they operate in reward systems that encourage reducing time spent with customers. Companies should counteract these tendencies and provide employees with the time and resources to help them help customers build their overall competence levels. In doing so, organizations must take a long-term view of their customer relationships. Expertise is built slowly, over time. And finally, they must remember this basic point: Educating customers is an opportunity. A knowledgeable customer is a good customer.
This article is adapted from “Customer Education Increases Trust,” by Andreas B. Eisingerich and Simon J. Bell, which appeared in the Fall 2008 issue of MIT Sloan Management Review. The complete article is available at http://sloanreview.mit.edu/smr/.