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Strauss is a passionate advocate of proactive customer service, but he's hardly alone among CEOs who speak in those terms. Some use the buzzword tier zero, a fiercely proactive strategy. "If we can understand why customers are contacting us," says Strauss, "we can try to modify our Web site, marketing efforts, and ordering process so that we don't give them a reason to call us."

A case in point: the cost of roses goes up dramatically right before Valentine's Day, which forces Proflowers to pass the price increase along to its customers. Strauss could easily envision hundreds of customers calling to complain about the price hike. But Proflowers nipped the calls in the bud, as it were, two years ago. The solution? Each January the company sends out an E-mail notification to existing customers, alerting them to the price increase and, of course, inviting them to preorder at a lower price. Proflowers even tries its best to protect time-challenged customers from themselves. "For instance," Strauss says, "if customers write a gift message saying 'Happy Valentine's Day,' but the delivery date is after Valentine's Day, we call to confirm that all is OK."

Proactive pursuit may be a lovely theory (it's even alliterative), but is it really a brilliant, cost-effective tool? Strauss has some impressive results to point to. In its fiscal year ending June 30, 2000, his company had sales of $27 million, and the overwhelming majority of those transactions were completed online without phone assistance. Telephone orders represented a scant 10% of sales. Roughly two out of five customers who ordered on the Web requested help either by E-mail or by telephone. That's a big improvement over 1998, when the figure was more like four out of five. And although the company's contact-to-order ratio (see "Buzzwords to Watch," below) is considered good in the E-commerce world, Strauss vows to improve it. For now, though, his 30 customer-service reps sit tight by their computers and phones. Tier zero? Not yet.

Costly Lessons
Despite the many examples of companies that report shining success in applying cutting-edge customer- service concepts to get a competitive advantage, there's a bleak side to that brave new world. You could summarize that other side with two words: Lids and Garden.com.

Lids Corp., a retail chain that specializes in sports caps, began with a single kiosk in a mall in 1992. By last year, it was operating 388 stores in 47 states and was generating sales of $125 million. A cap is a cap, but Lids invested in a level of customer service virtually unheard of in retailing, particularly among independent stores.

After launching its Web site, in late 1999, the chain installed kiosks equipped with high-speed Internet access in 55 of its stores and beefed up its customer-support team at its headquarters. Customers could reach Lids personnel by calling an 800 number or using a Web chat feature about 12 hours a day. To strengthen the link with its mostly teenage customers, Lids created its own prepaid cash card, which allowed them to order over the Web without a credit card. "Everything we do is to make it simple for the customer to get the hat," Lids CEO Nancy Babine Kucinski said in an interview in December.

The customer-care center at Lids was a drain on profits, notes CEO Nancy Babine Kucinski, but it was "very effective."

There were signs that the customer-service initiatives were paying off. During the 2000 holiday season Lids' Web-based sales tripled, greatly helped by orders placed in the store kiosks, Kucinski said at the time. And yet the company apparently lost control of its spending. The rapid expansion of stores no doubt had strained its capital reserves, as had the money it poured into customer service. In early January, Lids filed for Chapter 11 bankruptcy protection from its creditors.

Kucinski, who has not been available for comment since December, hinted then that the company had paid a high price for its zealous devotion to customer service. Conceding that Lids' customer-care center was a drain on profits, she said, "It's not a money- maker; no, it's not. It's expensive to run, but it's very effective."

Garden.com could tell a similar tale of woe. Before it folded, in November, the online vendor of plants and all other things related to gardening emerged as a symbol of fiercely innovative and elaborate customer service. Its offerings included assistance 17 hours a day and seven days a week by telephone or E-mail, plus a staff of gardening experts who responded to customers' questions online. Was the Austin-based Garden.com too fanatical in spending its scarce dollars on customer-service features? Ron Webb of the American Productivity & Quality Center, in Houston, who studied the company's customer service closely, says the emphasis should probably be on the word too. "They may have gone too far on the continuum of customer service," he says.

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