Analyst: Investors Underappreciate Apple’s Customer Service

| Apple Stock Watch

Apple Customer ServiceInvestors simply don't appreciate the competitive advantage of Apple's superior customer service experience, according to a new research note from Wells Fargo analyst Maynard Um. He told his clients that Apple' customer service is, "a key differentiator & value driver for the company" that investors don't properly understand.

"The ability to turn unhappy customers into happy ones is as strong a marketing tool as Apple's logo and commercials," the analyst wrote. "While innovation is a critical element to a product's success, CS, in our opinion, is critical to driving customer retention, lifetime value, and new customer acquisition."

He argued that new products and innovation are important, but that customer service, "will continue to play a critical role in Apple's repeat success & is vastly underappreciated."

He said that Apple's decision to keep support in the U.S., as well as its fleet of Genius Bars in the Apple Stores, gives Apple a significant edge over competitors in the U.S. He believes that is part of why Apple's customer satisfaction ratings are always head and shoulders above the competition's.

He said that his research has found that, "those unhappy with Apple's competitors note intentions to move to Apple more often than the reverse," and that, "the positive nature and tone of Apple customers far exceeded that of non-Apple customers."

The point of all this is that these factors will help Apple bring more customers to its ecosystem in a way that $AAPL investors don't properly value or understand.

Mr. Um reiterated his "Outperform" rating on $AAPL, and a price target (he calls it a "valuation") of US$710-$730.

Shares of $AAPL closed lower on Thursday, ending the day at $521.73, down $4.58 (-0.87 percent), on light volume of 17.2 million shares trading hands.

Image made with help from Shutterstock.

*In the interest of full disclosure, the author holds a tiny, almost insignificant share in AAPL stock that was not an influence in the creation of this article.

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7 Comments Leave Your Own

Constable Odo

It would appear the only thing important to investors is major market share.  Customer service never enters into the equation because Wall Street prefers companies that don’t do anything for customers once they’ve bought the product.  Customer service is considered a waste of money.  Wall Street should realize that usually the lower margins are, the less amount of money will be spent on providing customer service.  Any high-end brand should offer better customer service.  Apple having the best customer service has no impact on Apple’s value at all.  In fact, it may have negative value.

This is something that is hard for me to understand.  Consumers need to be offered good customer service because it establishes brand loyalty.  However, Wall Street insists that everyone will be throwing away their Apple products to buy cheaper products that are poorly supported.  I often wonder what type of people these investors are and do they lead their personal lives thinking that way.  I see the way Apple consumers are pleased when getting some help instead of being ignored.  Why this means nothing to investors is beyond me.  They’re definitely a group of despicable people who are out to destroy American values.

Lancashire-Witch

I think the problem, C O, is that the bean counters can put a cost on Customer Service, but can’t put a value on it. Consequently, in accounting terms, it ends up being a liability not an asset.  That perception carries over to investors. I’ve no idea what value to put on Apple’s customer service, but judging from my own personal experience over the years I’d say it was big enough not to be ignored.

I’ve bought a couple of Samsung products recently (not related to computers, phones or tablets). They are quality products - but Samsung’s after-sales customer support is poor. Very poor.

IOW I agree with Mr Um for once.

Bryan Chaffin

Great points, Constable, and this line from you, LW, is genius:

[...] bean counters can put a cost on Customer Service, but can’t put a value on it.

Apple’s gotten away with it (vis a vis Wall Street) by generating enormous profits. They don’t have to understand all of the specifics of Apple’s formula to appreciate the results.

What’s been happening of late is that the opaque quality of Apple’s business has dovetailed with something that Wall Street understands all too well, the success of open licensing in gaining marketshare. That’s when the “not understanding all of the specifics of Apple’s formula” turns to a sort of panic. It will work itself out in the end, I suspect.

The really interesting thing to me is that Apple’s formula is there for all to see, yet no one seems able to understand it enough to replicate it.

Phil Pool

Apple has replaced not one, but two 27” iMac used in my photography business. The first time my 21” REFURBISHED iMac started acting up. Phone support couldn’t fix it and a local Apple Tech replaced the monitor, motherboard, and HD. Still wouldn’t work correctly. My personal technician on the phone finally went to upper management and they decided to replace my machine. The then new 27” iMac had been released. I figured I would get another refurb. They said ‘no’. I thought I’d get a new 21”. Well, if they had still been making them, I would have. I couldn’t believe it, they replaced my machine ok, with new 27” iMac.

Unbelievable! Two years later, out of warranty, that 27” iMac was under the HD replacement program. Since the local PC repair store had let go of their Mac Tech, they no longer had the ability to work on my Mac, so Apple sent a tech 160 miles to replace my HD. After he left, I couldn’t get my Time Machine to restore. I talked again with a higher up phone tech from Canada. I told her the story and she asked if there were any other issues. One thing I hadn’t said, was my DVD burner wouldn’t burn except from certain programs and never from the desktop via the system. She came back and said they were going to send him back with a new motherboard and a 2nd new HD! NO COST. Remember, this machine was out of warranty.

He came, replaced the motherboard and the 3rd HD. He left. Guess what? Still couldn’t restore from Time Machine.

Long story short(er), The Apple higher ups said it wasn’t right for me to be this long without my main business machine (even out of warranty). I had to wait about 6 weeks, but I’m now one of the few people that have a new 27” iMac!!! Again, Apple goes so above and beyond.

In the early ‘80’s, my first computer was a Commodore 64. My next was a Macintosh with 512k of ram. I never thought I’d need more than my 64k, and a computer salesman talked me into trading his wedding photography for a 512k Mac. I thought he was nuts. He talked me into it! He got $2,500 worth of wedding photography (1984 dollar valuation) and I got my first Apple product!

Well, almost 29 yrs. later, I’ve always had Macs. Mac Plus 512k, Mac Plus 1Meg, Centris 650, original iMac, PowerBook 100 ($1,000), PowerBook G3, 17” white iMac G5, 21” iMac Intel aluminum, MacBook G4, 13”, MacBook G5, and my current MacBook Pro 15”, original 27” iMac, and now the 2nd generation 27”. iMac. I also have an original iPod Nano, a current iPod touch and a second generation iPad.

Do you think customer service had anything to do with my loyalty?......NAH…........

Lee Dronick

“I’ve bought a couple of Samsung products recently (not related to computers, phones or tablets). They are quality products - but Samsung’s after-sales customer support is poor. Very poor.”

I agree. The feature phone I had before my first iPhone was a Samsung and it was pretty good. I recently bought a Samsung TV and am quite pleased with it.

We have a Samsung refrigerator and it has a computer and some sort of operating system to control the temperatures of the freezer and chill sides. It once acted and wouldn’t keep the set temperatures up so I called customer support. A very helpful and cheerful tech had me reboot/reset the pram by unplugging and replugging the power supply which did the trick.

Getting back to the Samsung TV. It is also a computer monitor which leads me to believe that an Apple TV may soon be more than a rumor. A tuner doesn’t have to be big, I have an Elgato TV tuner dongle that is not much bigger than an Apple Remote and a lot of the bulk is the outer shell and the connectors. I can see an Apple Thunderbolt/Cinema Display that is also a TV monitor. Connect it to your Mac or your TV service. It would have BlueTooth and WiFi connectivity instead of infrared for the remote. You could use an app on iPhone, iPad, iPod Touch, or even a Mac as a remote as we do now for iTunes. It would have to be “disruptive” to upset the status quo of flat screen TVs.

Lee Dronick

AAPL down, probably on news that there is no fix so to the so called Fiscal Cliff.

MichaelRo

Thirteen years ago I had a Sony Vaio laptop with a small HD that I wanted to upgrade. That required a BIOS upgrade, I was told by the manufacturer of the BIOS chip. The chip was proprietary to Sony. All attempts to contact someone at Sony, via Internet or phone failed. There was and still is NO customer support.

That experience was a major factor in my return to Apple.

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