Harvard Business review

When CEOs Engage Directly with Customers

Customer expectation in the United States has held steady for the last decade, while customer satisfaction has deteriorated. To reverse this trend, many companies are now strategically leveraging all parts of their organizations to offer customer-centric approaches to increase customer satisfaction. CEOs can potentially serve as important customer service reps in complementary roles to frontline customer service, sales, and customer experience management personnel. But do the potential benefits of the CEO as customer service rep outweigh the potential drawbacks?

Elon Musk thinks so. He often replies to individual Tesla and Twitter customer inquiries, complaints, and requests on Twitter. John Legere, former CEO of T-Mobile, once stepped in to solve a Wi-Fi issue that allowed thousands of people to continue following the details of an in-flight romance unfolding on social media. Richard Branson, founder of the Virgin Group, regularly solicits feedback from airline passengers on Virgin flights. Jeff Bezos, founder of Amazon, publicly shared on Instagram his response to a customer who complained that Amazon sold #BlackLivesMatter t-shirts.

There are a lot of potential benefits, both strategic and operational, that can result from the CEO being engaged directly with customers. But the heavyweight response of a CEO to individual customers, especially in an open forum like social media, can also result in strategic drawbacks.

The Benefits of Direct CEO Engagement

In the last decade, roughly 12.8% of U.S. customers, across all industries and product categories, complained to companies about something, per data from the American Customer Satisfaction Index (ACSI). A customer who complains is five times as likely to purchase from a different company in the future. ACSI data also indicate that it takes almost a perfect “10” on complaint-handling by a company (on a 1-10 scale) for customers to be as satisfied and loyal to a company as they were before they complained.

The benefits of direct CEO engagement can include the following:

Cost Reduction

A CEO’s direct engagement with customers can lead to cost reductions for the company in various ways. For example, if the CEO takes the lead in being “the face of” interactions with customers, it could decrease the design and production costs of marketing programs, and especially complaint handling and service recovery programs. There is no doubt that Elon Musk is the marketing flagbearer for Tesla, SpaceX, and most recently Twitter. Musk acts as the sole advertiser for Tesla and SpaceX, since those companies famously have no concrete advertising budget (although they do some marketing).

Customers appreciate personalized engagements from leaders like Musk, but they also want companies to show a culture of commitment to their wants and needs (and complaints). Having the CEO at the front of this customer-centric approach can save costs and improve customer satisfaction and loyalty at the same time. But the CEO as a customer service rep must be effectively integrated with the roles of the frontline customer service/sales personnel and the customer experience management personnel who have very specific positives to add to the cost reduction equations.

Product Improvements

The CEO is often the person who has the best opportunity to leverage good ideas from customers for new or refined products and services, and because of the CEO’s role, these ideas are often given credibility and priority.

But improving the quality of products and services at the pace expected by customers in most industries is a difficult and nuanced task. What an engineer or chief marketing officer designates as an improvement may not be enough for the customer — who is ultimately the most important arbiter in a market economy. In this spirit, the CEO’s can also step in to manage expectations by engaging with individual customers but doing so in a public forum, such as social media, that gets the attention of a mass audience.

Increased Customer Satisfaction

The CEO serving as customer service rep is a strategic opportunity for the company to reinforce marketing messages and the company’s unique value proposition in the marketplace. Such a culture of commitment, driven publicly by the CEO, is crucial for the next few years, given the unsettling trend of customer satisfaction being in steep decline. While John Legere’s (then CEO of T-Mobile) engagement with a couple’s courting efforts on a flight and the need for Wi-Fi is a bit farfetched, the story resonated publicly and may be a template for certain CEO engagements that drive positive goodwill. As we find in millions of customer datapoints at the American Customer Satisfaction Index (ACSI), such “reservoir of goodwill” has a direct influence on customer satisfaction.

Competitive Leverage

The CEO can create leverage from unique, fruitful interactions with individual customers — as warranted and advantageous to the company — by magnifying resources, creating immediate strategic options that otherwise may need chain-of-command approval, and ultimately leveraging attack and defense marketing strategies. It can be as simple as the CEO signaling the company’s position on a social topic in his or her interactions with an individual customer on a public platform, or encouraging product or marketing implementation of customer feedback.

One example is Jeff Bezos’ direct engagement with a customer about the significance of the Black Lives Matter movement. Such social activism by the CEO can have direct implications for customer satisfaction. In ongoing, unreleased research, consisting of a sample of 9,603 customers of 67 large U.S. firms, the ACSI team found that when there is alignment between a CEO’s and company’s political activity and the partisan composition of its customer base, customers are much more satisfied with the company’s products and services.

The Drawbacks of Direct CEO Engagement

The CEO as customer service rep can sometimes backfire, and in less obvious ways than one might expect. The CEO’s involvement creates the expectation that any complaint will be handled perfectly and immediately, which can be difficult for companies handling hundreds or thousands of daily requests.

Elevating Some Customers at the Expense of Others

What makes a select few customer issues most important for a CEO to respond to, potentially solve, and publicize to the marketplace? Customers who are not afforded this interaction may be even more unhappy with the company. The CEO’s response to a customer may be viewed as priority setting for the company, which may have adverse effects on the customer base if those priorities are not aligned with the market’s needs and wants.

Such CEO elevation also may not be effective in handling all other complaints and issues brought by the full set of the company’s customers. Elon Musk, by most accounts, has been a positive customer service rep for Tesla and SpaceX, but his early-on struggles after privatizing Twitter resulted in about a million lost customers in the first week after the $44 billion purchase and increased negativity around the company (especially with massive employee layoffs).

Going Outside Traditional Customer Service Channels

The CEO as the customer service rep also distances the complaint-handling activities from the frontline customer service, sales, and/or customer experience management personnel trained to handle these matters.

At the basic level, the CEO engaging in selective complaint-handling efforts with individual customers can be a way to manage customer expectations and give the company a better opportunity to handle a complaint with a positive outcome. Domenico Dolce – one half of the famous Dolce & Gabbana – received a stiletto with a snapped wafer-thin heel from a customer who requested repair assistance, and he had the shoe repaired and returned in 36 hours to that customer, from Italy to the United States.

But the Dolce & Gabbana complaint in the end had to be handled by the personnel who received the stiletto from Mr. Dolce to repair and return. It may be that one shoe complaint can be facilitated by a CEO but there is no formal channel for the CEO to engage with potentially millions of customers to facilitate such repairs and returns. Reverse logistics is a multi-billion dollar industry in itself and companies rely on the infrastructure of frontline customer service, and/or sales, and/or customer experience management personnel to facilitate customers’ expectations and drive higher satisfaction.

Managing customer expectations is critically important. Customers’ receptiveness to companies’ complaint-handling efforts is significantly influenced by their prior expectations. If customers expect a better experience going in, they are also more receptive to a company’s complaint-handling efforts, but the same holds in the opposite; if expectations are low, the company gets virtually no leeway to handle a complaint positively. If the CEO can leverage his or her goodwill in the marketplace at the right time by increasing what can be called the company’s “reservoir of customer satisfaction goodwill,” then the CEO as a customer service rep has potential to increase the company’s reservoir of customer satisfaction goodwill. But consistently going outside traditional customer service channels by the CEO is not a sustainable business model.

Timing of CEO Engagement

Customer satisfaction-driven loyalty is not static. Satisfaction achievements that led to customer loyalty in the past may be higher (or lower) depending on the goodwill built up by the company as well as the current dynamics in the marketplace. In fact, contrary to conventional wisdom, high-quality service (and by extension the ability to recover from service failures) is more important in good economic times. Unfortunately, good economic times is also when many CEOs opt to not directly engage with customers as much as they do in bad economic times, which research and ACSI data show is not as beneficial. The underlying forces of good economic times represent the ideal scenario for CEOs to engage as customer service reps to also hedge for the future of customer complaints.

In good economic times, extra care needs to be taken to ensure that legitimate customer complaints are resolved to the company’s best ability. This is a great opportunity for the CEO to engage with, for example, frontline customer service/sales and customer experience management personnel. In down economic times, when many CEOs opt to engage with customers, leveraging primarily frontline customer service personnel in complaint-handling efforts is preferred. CEOs are unlikely to increase the company’s “reservoir of customer satisfaction goodwill” in bad economic times and, likely, would negatively affect satisfaction and loyalty.

. . .

If a CEO becomes part of the customer service equation, he or she needs to be thoroughly in the know on when to “go” and when to “let go.” Strategically, a CEO can help “fill” the reservoir of customer satisfaction goodwill by engaging directly, positively, and publicly with customers. He or she can also have a better pulse of the internal workings of the company and the external dynamics of the marketplace by taking on select customer service-rep activities. But the potential drawbacks are plentiful, often viral, and need to be weighed carefully.

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