The phone in my house rings every morning at about 8:50 a.m., just as I'm herding my kids out the door. I rarely answer it because it's not for me. It's for David S., the previous owner of my phone number. We've never met, but through the hundreds of calls he gets, I've learned some very personal things about him -- primarily that he owes money to a lot of companies, including Verizon, whose robocalls I enjoy every morning.
On a recent snow day, I decided to answer in hopes of finally stopping the calls. A computerized voice asked for David and then instructed, "If you are not David S., stay on the line to speak to a representative." When a real person picked up, I explained the situation, expecting her to apologize and correct her records. Which she either could not or would not do. Not even after I pointed out that it was Verizon itself that assigned me the phone number in the first place. I begged her to just look up my file. I offered to fax a copy of my bill. No dice.
The problem? She worked for Verizon Wireless, but I was assigned my number by the FiOS division. And never the twain shall meet. So the calls continue.
Can you hear me now?
It just so happens that the same week, I called Lands' End about a box of returns that had gone missing. Within 48 hours, I was issued a full refund for the lost items ... based solely on what I told them I had returned. I've always had good experiences with Lands' End, but I was still blown away by how quickly and painlessly they addressed the problem. And I've told everyone I know about it.
Of course, I've also told quite a few people about my Verizon debacle as well, and despite this week's iPhone frenzy, many of them had their own complaints about the company.
Customer compliments and complaints have always had a way of getting around, but with the near-ubiquity of Twitter, Facebook, blogs, and online reviews, that process now happens instantly. So instead of telling a handful of people about your experience with a company or product, you can now tell hundreds of friends (or via a review, hundreds of thousands of potential buyers) all at once.
I know I read reviews for almost every purchase I make, from books and movies to furniture and cars, as do most of my friends and colleagues, and comments about quality and customer service figure prominently in those decisions. All those purchases must add up, which made me wonder ... does good customer service have any correlation with a company's stock performance?
Happy customers = happy investors
According to at least one study, yes. It found that over the past five years, "companies with leading reputations ... outperformed the S&P by over 100 percent." The author adds, "customers are twice as likely to purchase, four times more likely to pay a premium, and almost ten times more likely to recommend products and services" from these companies.
The names of the businesses on the "leading reputations" list won't come as a shock: companies such as Amazon
Who's failing? Again, no surprises here ... surely you've heard friends griping about Comcast
So how have the winners' and losers' stocks performed? Well, over the past 12 months, my winners have averaged a return of nearly 80%, while my losers have only managed a 34% average return.
Admittedly, this is a random sampling of the companies on the full list, chosen based on anecdotal experience with these companies and selected before I looked at their stock performance (if I had considered that, I'd have picked second-to-last-place Fannie Mae over Comcast!). But it does support the finding that a reputation for good service and good products is worth paying attention to when considering an investment.
So next time you encounter an unusually pleasant or helpful salesperson or customer service rep, check out the company's stock for your portfolio. And all you CEOs out there who cavalierly dismiss concerns about rude clerks, sneaky fees, impossible return policies, and just plain bad service? It might be your own wallet that takes the ultimate hit.
Robyn Gearey reluctantly admits to liking her Verizon FiOS service, if only because it replaced the much-hated Comcast. She does not own shares in any company mentioned here. Apple, Amazon.com, and Whole Foods are Motley Fool Stock Advisor picks. The Fool has written puts on Apple. The Fool owns shares of Apple and Bank of America, and through a separate account in its Rising Star portfolios also holds a short position on Bank of America. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.