As the market turns for the better and industries look to a gradual recovery from some of the most challenging of times, keeping an eye on the customer has become more important than ever. While many articles have emphasized the importance of differentiating customer service, there is another fast-paced development hitting unaware companies. Recall the adage of how one unhappy customer can tell his or her friends, and they tell their friends? There was a ratio of the number of people that would hear about that one customer’s complaint, which added up to about 800 negative impressions.

The world has changed, and the old ratios no longer apply. Take, for example, Dave Carroll, a traveler on United Airlines whose $3,500 Taylor guitar was apparently damaged while it was loaded on the plane. In pursuing approximately $1,200 in compensation for the damages and after 10 exchanges, Carroll ended up getting the answer: “This is the last exchange we’ll have, and I’m sorry, but nothing’s going to transpire with this.” Short, sweet, to the point, and typical of the decisions made by the over-worked and rules-bound front-line service employees spread across most industries. Carroll, a songwriter and singer, did not let it drop. He wrote a song called “United Breaks Guitars,” which he put on YouTube. The video went “viral” as they say in today’s world of social networking, and more than four million people viewed it by July 2009. Talk about the impact of customer word-of-mouth.

Carroll’s YouTube video is not the only example—not by a long shot. Here’s another one of the many similarly interesting examples of leveraging social media to communicate a customer’s view of service problems:  A customer of an Internet support company that had been waiting (what he felt was too long for a callback) to set up a business account, sent out a frustrated tweet that included a curse word. The company responded by telling the customer his business was no longer wanted and that he had one week to find an alternative solution. The company’s position was that this customer was abusing staff members. Despite what would seem like the rather private nature of this exchange, it went online via blogging and created quite a stir of exchanges regarding the company, the customer and their actions. The company did eventually post a response that pointed out the account closure was due to this last in a series of issues and as a business, they should have the right to refuse service, just as a customer can change companies. What is interesting and relevant to all businesses about this exchange is the part of the company’s blogged response stating: “Businesses are now treading the double-edged sword that is social media. Due to respect for customers’ privacy, businesses defending themselves online is akin to standing in court with tape around your mouth without a defense lawyer.”

Thus, therein lays the challenge as we enter the age of customer-differentiated service combined with the power of social media. No longer is a simple customer transaction an event that is unlikely to damage a company’s reputation and brand. In the past, customers would express their dissatisfaction to their friends and perhaps even change companies, but business would go on as usual. With the advent of social media, the impact of customer voice has been amplified dramatically.  Today, the expression of dissatisfaction over a single, poorly handled transaction can go “viral” in blogs, tweets, YouTube videos, Facebook posts, or any number of related choices; exposing the customer’s dissatisfaction over the company’s service to tens of thousands, even millions. It's caveat venditor: let the seller beware!

Imagine . . . a single transaction is handled poorly out of the thousands to tens of thousands every day that are handled well, and the company gets publicly lambasted on the Internet to the point of potentially damaging their brand and reputation; all as a result of one now-dissatisfied customer. What an opportunity for the competition to step in and directly appeal to that same audience.

At the same time, social media represent a significant opportunity to involve and educate customers, and win over their loyalty, even as it provides a voice to all customers. Companies must recognize that through the power of the Internet, the tide has turned. Today, even the least significant customer can have an extended impact if they are dissatisfied with a company’s treatment or service. Unfortunately, the insurance industry is somewhat slow to move in addressing social networking opportunities and challenges. A recent Insurance Marketing and Communications Association survey indicated that only one in 10 insurance companies had integrated social media into their strategy. Fortunately, according to the survey results, “many more had begun to study the issue.”

Social media truly is a double-edged sword, particularly in today’s age where service as a differentiating factor is more impactful than ever. The competitive advantage gained by those forward-thinking companies able to quickly and responsibly integrate social media into their strategic plans, particularly in our industry, will be felt across the market. There are already proven advantages in lead generation, customer satisfaction and retention, and consumer education. These advantages translate into enhanced brand awareness, satisfied customers, and greater market share. The takeaway is:  don’t get left behind—social media is here to stay, and its influence is powerful.

Steven Callahan, ChFC, CLU, FFSI, FLHC, FLMI/M is a senior consultant and practice development director for The Robert E. Nolan Co., a management consulting firm specializing in the insurance industry.

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