Is it possible to over-qualify?

Some retailers don't seem to mind the lack of quality they inflict on their customers. Is this a good calculation? Is it possible to over-qualify?

Case study

If you've ever shopped on the Champs-Elysées or bought a coffee in a busy train station or airport, then you may have already been amazed at the poor quality of service delivered by some retailers. What's even more astonishing is that, in spite of this, there's always a queue, and these stores are always full.

For over 10 years now, I've been assuring all my customers that improving their quality of service will lead to an increase in their sales. And for more than 10 years now, I've been dejected every time I find myself in a queue as long as the service is deplorable.

In these specific cases, if a lack of quality obviously doesn't harm the retailers' sales, could improving customer satisfaction hurt them financially? In other words, is it possible to over-qualify? Is customer satisfaction necessarily correlated with sales, as Fred Reichheld, the inventor of NPS, claims in his landmark book "The Ultimate Question"?

First of all, what we've just said needs to be put into perspective. In the vast majority of cases, customer satisfaction and sales are indeed correlated. If one goes up, so does the other. But it's true that in busy locations, negative word-of-mouth has little effect. Busloads of tourists on the Champs Elysées or overcrowded trains always bring in more new customers, who are either oblivious to the experiences of previous customers or simply hostages to the situation (an almost monopolistic situation for certain retailers). It's a different story for a regional car garage, for example. Its clientele is concentrated and recurrent; competitors are not far away.

Quality and Sales

Let's return to the case of my shopkeeper on the Champs-Elysées. If he wants to improve his quality of service, he'll probably have to spend more time with each customer (which hurts his sales) or invest in staff training (which hurts his profitability). In other words, a lower quality of service actually enables him to increase his sales and margins.

Short-term calculations

But is it a good calculation? Fred Reichheld talks about good and bad profits. For me, it's a short-termist maneuver that exposes the retailer to more risks. A monopoly situation can change very quickly (a competitor can set up next door); a technological evolution can change the situation (a review site alerts tourists to this retailer). And all of a sudden, trouble begins for our merchant.
Well-located hotels thought they were safe; AirBnB forced them to reconsider. Parisian cabs were refusing rides, increasing their rates with "approach fees" and being resistant to any technological evolution; Uber changed their minds and even put their profession in danger of extinction.

Conclusion

To sum up, it is of course possible to over-qualify: if my shopkeeper spent 5 minutes with each customer to serve them their coffee, explaining the origin of the coffee and asking how their children were doing, this would no doubt be disproportionate to the price of the coffee. But in the vast majority of cases, we're nowhere near that. So, the best thing to do is to consider that it's very difficult, if not impossible, to over-qualify. That way, you take fewer risks.