Invest in Trends: Customer Experience

A recent story has emerged about the investing app Robinhood where hackers gained access to some users’ accounts and logged them out, sold their shares, and transferred the money to an external account, all before the owners of the accounts could react.

These hacks may have been the result of a lack of proper cyber-hygiene on the users’ part, such as using a simple to guess password across multiple platforms. The hacks may also have been the result of a sophisticated attack using man-in-the-middle or spear-phishing tactics.

In either case, once the victims realized they’d been hacked, a second wave of dread washed over them as they realized Robinhood doesn’t have a Customer Service department to contact. There isn’t even a phone number, by design, according to a Robinhood spokesperson.

Not to mention all the negative publicity recently when brokerages like Robinhood limited trading on certain meme stocks like Gamestop and AMC because they weren’t prepared for the capital necessary to cover the trades.

Which brings me to a trend I think is under-appreciated but increasingly important in an age of digital automation: investing in the customer experience.

The ability to pick up a phone, dial a number, and speak to a person at a company has almost become extinct these days. There are a few companies continuing this tradition (using it to their competitive advantage), and I’ll highlight the companies below, but the fact remains that very few companies seem to invest in a robust customer experience.

And why should they?

I’m constantly told that Millenials and Gen-Z are scared of the phone. They’d rather text, snap or tok each other. (I don’t actually know if TikTok even has a messaging feature, but if it does, I am hereby coining the phrase “Tok to me, baby”. You’re welcome, ByteDance.)

I’d disagree that it is age-related, but they are correct in the preference of most people these days, at least as a matter of personal communication. In fact, I call a lot of people during my day job, and most of them are in their 40s and 50s due to the industry I work in. Often times they hurriedly rush me off the phone asking me to send them an email with the details instead.

Most people I interact with on a personal basis also overwhelmingly prefer a text to a phone call unless it is absolutely urgent. I actually think this is entirely contextual, and is also easy to over-generalize.

For example, I’m not going to text someone to invite them to dinner, but I’m also not going to call them just to give them the address to my apartment when I could text it which is more convenient for both parties. Similarly, I don’t expect many letters or telegrams these days, because as technology changes, so do our communication habits.

But when it comes to a company, especially one holding tens or hundreds of thousands of dollars of people’s hard earned money, they had better have a damn phone number that gets answered by a real person within a few seconds. At a minimum, they need to have a chat option with 24/7/365 responsiveness.

This isn’t only about whether or not the company has a good customer hotline either. However, I would argue a good customer hotline is indicative of a company that prioritizes the entire customer experience all the way down to (gasp) the customer.

How to Invest in the Trend of Customer Experience

What do companies like Amazon, Chewy, Delta, StitchFix and Apple have in common? They are obsessed with their customers. They are accessible. They make things easy. They prioritize and personalize the experience.

This dedication to the customer combined with an omni-channel approach to selling everyday products like phone chargers, pet food, plane tickets, and phones has given them an edge over their competitors, and therefore has seen their stock prices rise steadily for years.

• Amazon has 24/7/365 customer service via phone or chat. They invested in data analytics earlier than most to give personalized recommendations based on browsing and purchase history. They bundled many services + free 2-day shipping into a single, annual subscription.
• Chewy has a single phone number that you can call and be immediately connected to a live person that looks up your order while simultaneously asking you about your dog or cat. Whether or not they truly care is irrelevant because you can’t tell the difference. They look for this type of person in the hiring process.
• Delta is notoriously good at righting wrongs (such as a late arrival) with generous miles as part of their SkyMiles program. Their plane tickets cost a bit more and they know it, so they deliver on that price tag and give excellent customer service.
• StitchFix literally hooks you up with a personal shopper that picks out clothes and outfits based on your preferences from their app. I tried it out once before investing in the company and found the service to be great, but a bit expensive. That’s the price you pay sometimes for confidence, convenience, and customer service. Also, free shipping. Notice a trend?
• Walk into any Apple store and you’ll be greeted by a knowledgeable and helpful employee ready to hang out with you to answer questions, leave you alone to browse, or even let you checkout using remote credit card readers so you don’t have to wait in line. Their products constantly update with User Experience (UX) design features, and they put security of their users above all else (sometimes even to the detriment of law enforcement).

It’s not as if the only thing they do well is customer service and experience. These companies also deliver some of the best products and services in the world. But you’ve got to have both in an era of social media, where bad publicity through word of mouth can spread like wildfire. Similarly, good experiences spread that much faster, too.

Whatever you think of these companies, you can’t deny that they offer some of the best experiences which will keep buyers happily subscribed for years. According to Forbes Senior Contributor, Blake Morgan, “…now we face a new selling world, one where personalization can can increase overall consumer spending up to 500%.”

The Takeaway

Everyone has heard the old business school rule of thumb, “It costs 5x more to gain a new customer than to keep an existing one.” This is relevant if you want to increase profitability year over year to continue to reward your long term shareholders. But it’s not the only game in town anymore.

This is why how well a particular company treats the entire customer experience is important to investigate while choosing to invest or not. Add it to this list of fundamentals you should check prior to buying a piece of any company.

Disclaimer: I am not an investment professional and these are my opinions. Nothing on this website constitutes investment advice, performance data or any recommendation that any particular investment is suitable for any specific person.

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