Yale Case. By: Germán Canale Segovia, and A. J. Wasserstein
This Yale case argues that customer service is one of the most overlooked sources of value creation in ETA. While searchers and ETA CEOs typically focus on acquisition price, leverage, growth, EBITDA expansion and capital allocation, customer service is often treated as a cost center. The authors argue that it should instead be viewed as a strategic, investable asset that compounds over time, ultimately increasing enterprise value.
The central idea is that customer service is not simply about being friendly or providing premium treatment. It is the company’s ability to consistently deliver on the explicit and implicit promises made to customers. Every employee and every operational process contributes to this promise. Excellent service therefore depends primarily on reliable execution rather than “niceness” or luxury.
Why customer service compounds, 5 five major economic benefits:
- Higher retention and lower churn
Service quality is a leading indicator of customer loyalty and retention. Reliable execution reduces customer defections and strengthens relationships.
- Lower customer acquisition costs
Satisfied customers generate referrals and positive references, effectively becoming an unpaid sales force. Referred customers can be cheaper to acquire and more profitable than customers acquired through traditional channels.
- Lower cost to serve
Strong systems, processes and SOPs reduce errors, rework and unnecessary intervention. As the company scales, reliable processes allow it to serve more customers without proportionally increasing costs.
- Greater pricing power
Companies that consistently deliver an excellent service experience can earn the right to charge slightly higher prices. Even modest pricing premiums can flow directly into EBITDA and free cash flow.
- A more stable workforce
Employees are more likely to stay when they have the tools to do their jobs well, see satisfied customers and feel part of a high-performing organization. Employee tenure and customer satisfaction therefore reinforce each other.
Together, these effects create more predictable cash flows, stronger margins, greater customer loyalty and ultimately a higher exit value.
How ETA CEOs should build great customer service:
- Systems and processes: The foundation of reliable service. SOPs should make service consistent and resilient to employee turnover.
- People: CEOs need to recruit, train and empower employees who genuinely care about customers. Frontline employees should have both clarity and authority to solve problems.
- Culture: Customer-centricity must become part of the company’s DNA. Culture is shaped by what the CEO celebrates, rewards and tolerates.
- AI: AI can improve speed, consistency and efficiency by handling repetitive tasks, routing requests and identifying patterns. However, it should amplify strong processes rather than automate poor ones.
Customer selection is equally important
Not every customer is necessarily a good customer. ETA CEOs should distinguish between “angel” customers who create value and “demon” customers who consume disproportionate resources or cannot be served profitably. Some customers should be repriced, rescaled or even removed.
Companies should also segment customers according to their economic value and adapt service levels accordingly. High-value customers may deserve a more personalized, high-touch approach, while lower-value customers can be served through standardized and automated processes. The customer portfolio should ultimately determine the structure of the service organization.
The CEO’s role
The CEO must make customer service a top-down priority, not delegate it to a customer service department. It should be discussed in management meetings and board reviews, measured through KPIs and reinforced through incentives and culture. The authors emphasize that employees will ultimately mirror what the CEO consistently pays attention to.
For the first 100 days after an acquisition, the recommendation is to initially listen and learn: ride along with technicians, work in the warehouse, listen to service calls and speak directly with customers. The CEO should then identify the biggest service gaps, establish a small number of meaningful KPIs and fix the most visible problem quickly.
Finally, customer service should be measured rather than treated as a “soft” topic. Relevant metrics can include NPS, CSAT, Customer Effort Score, response times, uptime, on-time delivery, service calls and contract renewals. The authors warn, however, against creating dozens of meaningless KPIs: a small number of metrics that management actually uses is much more effective.
Bottom line: The paper’s key message is that customer service is not an operating expense to minimize but an intangible asset that compounds. In ETA, investing in service can simultaneously improve retention, reduce acquisition and service costs, increase pricing power, stabilize employees and ultimately create a more valuable, more resilient company at exit.
Read the full case in: https://som.yale.edu/sites/default/files/2026-07/Customer-Service-is-the-Underappreciated%20Compounding%20Asset%20of%20ETA.pdf
