Strategic Service Management

We’ve been blogging about how customer experience has a direct impact on business revenue even during a recession, albeit anecdotally.

However, recent studies have proven this correlation - quantifiably.

Forrester Research just published two reports in December that demonstrate how critical customer experience is a company’s competitiveness.

While I can’t include the entire report here, if you have Forrester access, you should check them out:

• December 12, 2008. Customer Experience In A Down Economy, by Harley Manning and Moira Dorsey
• December 12, 2008. The Customer Experience Index, 2008 by Bruce D. Temkin

Some key points that we’ve been making have been verified in these reports. For example, in the “Customer Experience in a Down Economy” report, Forrester affirms that there is a direct connection between “a great customer experience and increased revenues.”

In the “Customer Experience Index, 2008,” Forrester reports that a good customer experience fosters customer loyalty. While that may sound banal, customer loyalty translates into additional purchases by the customer. In fact, according to the March 24, 2008, “The Business Impact of Customer Experience” report, “customer experience quality could cause a swing of $242 million for a large bank and $184 million for a large retailer.”

While banking doesn’t require service parts or service techs, a retailer just might. Consider once again, Best Buy, the nation’s largest electronics retailer, with $44 billion in annual revenue. While it, too, is getting pounded by the drop in consumer spending, Fitch Ratings, a leading global rating agency committed to providing the world’s credit markets with independent, timely and prospective credit opinions, says that Best Buy’s reputation for outstanding service that helped it become the number one electronics retailer will help it weather the storm.

[The day after this post, The New York Times reported that Best Buy will have to cut workers due to significant losses. The CEO Bradbury H. Anderson, said in a statement, "We believe that there has been a dramatic and potentially long-lasting change in consumer behavior as people adjust to the new realities of the marketplace."  One new reality, as we've blogged about in the past, is the  "repair vs. replace" attitude for consumers and industrial customers alike, putting a critical emphasis on getting service parts management in order. Companies that can perform well on after-sales service will have a clear advantage in this market, according to Walter Weart, Outsourced Logistics.]

In fact, Best Buy’s technical support business, aka Geek Squad, has been such a huge profit center for the company that other retailers are jumping on board. Target recently hired Zip Express, a company started by a former Best Buy employee, to compete with Best Buy on service.[1] Once again, this demonstrates that it’s not just about the price.

Finally, speaking of electronic gadgets and service, “The Business Impact of Customer Experience” report found that a cable television provider and a cell phone provider were most prone to customers taking their business to a competitor based on customer experience. Therefore, service delivery is extremely important in those asset-and-field-service intensive environments.

Like always, we welcome your feedback. Have any good/bad service experiences to report? We’d love to read about them!

[1] Zinn Fromm, Laura. “In Hard Times, Is Best Buy’s Best Good Enough?” The New York Times, Dec. 7, 2008.

Measuring Intangibles to Drive Customer Satisfaction and Sales

WBR recently hosted “Strategic Service Management 2008″ at the quirky, yet endearing, Hotel Le Plaza in Brussels. At the end of the event that combined the previous parts-focused Interlog and the field technicians-oriented Field Service to offer a more holistic (and relevant) view of the service business, Hilbrand Rustema of Noventum led a panel of industry leaders, including  ,Hans-Werner Albrecht of Pentax Europe, Harald Hofstätter of Gambro, Richard Burgess of Oracle, Ole Buus of Xerox and Paul de Swaef of Baxter Healthcare discussing the balance between tangible and intangible issues in Strategic Service Management.

The key point was how the focus of field engineers appears to be shifting away from traditional KPIs, such as number of visits/day, towards spending time developing relationships, gathering sales intelligence and keeping the competition out of the door. The participants agreed that they want field engineers to strengthen the corporate brand, the service brand; they want them to push additional services, gather information, and turn customers into our salesmen. They want them, pretty much, to add account management and pre-sales skills to their repertoire. That’s quite a (r)evolutionary shift…

Albrecht commented that “service is too often focused on the logic. There is a need to establish an emotional link”; Hofstätter spelt out the implications even more clearly, stating that “in my industry [medical], it’s worth spending half an hour with a doctor or a nurse for that emotional connection… it is dangerous to focus on optimising the number of visits/day”. Considering that scheduling optimisation is a key benefit of Servigistics’ Workforce Management Solution, I won’t deny that this suggestion sounded almost blasphemous… at first. Give it a few seconds to sink in, though, and it makes perfect SSM sense - as we’ll see shortly.

Burgess painted a typically British perspective, stating that Avery Weigh-Tronix found that its techs had served the company for an average of nineteen years. But their background and their British nature meant that their inclination was to “get in, fix the job and get out - it’s what we do”.

Ole Buus then crystallized the panel’s thoughts by stating that “Strategic Service Management represents the shift from technical service management to business management, from solving technical problems to solving customer issues”.  Neat. But how will this evolution be managed - and does the downturn threaten it?

I put my concerns to the panel, who appeared upbeat about the shift’s chances of survival. Albrecht replied that Pentax had processes in place to measure customer satisfaction. Great - because improving customer satisfaction is one of SSM’s true deliverables, with proven ROI. But what if the emphasis on ‘intangible’ means you can’t measure the benefits? Will Boards continue to support it without visible ROI?

Don’t get me wrong, the shift represents unquestionable progress and makes long-term sense. Techs are ideally placed to gather such intelligence, and should be encouraged to do so. But many visionary long-term strategies have been the victims of short-term-ism in troubled financial times.

How will companies balance management’s strategic vision with the risk of technicians abiding by more traditional, operational KPIs to protect their jobs? If this is not addressed, and the CFO orders a 20% headcount reduction, time spent helping their Sales colleague book their President’s Club tickets could suggest they’re slow and unproductive….

This is why I believe another way will prove to be the true SSM way, safeguarding the visibility and measurability that companies have spent years establishing. By breaking down the critical intelligence gathered by field technicians into basic components and feeding that into the corporate CRM system and processes that have so far been the primary domain of Sales and Marketing personnel, that intelligence can be measured, rewarded and acted upon. It can also ensure engineers are coached throughout an evolution that is asking them to move out of their comfort zone while continuing to promote the company’s values. And there is nothing intangible about this strategy - or about the results it can deliver if successfully executed.

This is why Hofstätter wasn’t being blasphemous after all. There is more to Workforce Management than scheduling optimisation. Leveraging mobility and Knowledge Management, it provides the necessary interactivity to capture the metrics that in Brussels were defined as ‘intangible’, ensuring they become actionable intelligence and avoiding the danger of another buzzword failing to deliver ROI.

SSM looks at the bigger picture, leveraging synergies. Whereas in the past technical and psychological barriers meant that CRM systems were the kingdom of Sales and Marketing staff, ERP systems were the kingdom of Finance and Administration, and Service used whatever disparate tools were left, in this brave new world those old barriers have been knocked down and common platforms established. That is one of the cornerstones of SSM, which delivers cross-functional decision-making support throughout an organisation to facilitate maximising service and profitability even as your employees’ skills (and needs) broaden.

Anyway, enough from me… what about you, and your organisation? Are service technicians broadening their role? How are you ensuring the time they spend developing relationships is measured? Is there increasing convergence between how your Sales and Service personnel are managed and rewarded? Let me know by commenting below. Let’s talk SSM.

by Giacomo Squintani, Marketing Manager, EMEA

From the moment you first sent an e-mail, you knew that things were never going to be the same again, at home or at work. With the Holiday Season truly upon us, are you escaping those checkout queues and putting on a Christmas CD as you surf for gifts? If, like me, you are (well, minus the CD), you are a challenge – to the retail marketers for whom seasonal in-store promotions and glitzy shop windows are of no use.

Of course, many of those skills have been successfully transferred to e-mail – and enhanced in the process. But what about our less frivolous investments – those that are set to last a few years (the Web 2.0 age equivalent of what our parents would call a “lifetime”)? What are the implications for us – both as marketers and customers?

Research in Motion experienced one such implication quite clearly in the UK recently. As they launched their BlackBerry Storm model with a marketing campaign worthy of its name, they could not foresee the online backlash. In particular, popular comedian and TV personality Stephen Fry caught the imagination with a Twitter comment – and, while he made a point of stating that “Yes, I blame n’works more than RIM”, his paragraph “Problems are terrible lag: inaccurate t’screen, awful, slow and fiddly text input. I SO wanted to like it” was still sufficient for the BBC to ask: “Can Stephen Fry kill a gadget?”

Yet, for every negative side of a coin, there’s an upside. Web 2.0 allows the smarter players to turn junk mail into viral marketing. We accept comments from people we like and trust far more than corporate communications. The problem for marketers is that this can mean losing control.

The key reason Service is both a threat and an opportunity today is the “2:11 Principle”. This states that customers receiving good service will share their experience with two people, whereas those receiving poor service will tell eleven. Now take a second to consider how everyday Web surfers have taken over the Net from the critics, and how they influence opinion through social networking, blogs and even review sections on e-commerce sites. Your Service team was late resolving a call? The product was delivered late? What before was a private matter between customer and the Customer Services Department is now as public as the Internet itself. And, while commercial buyers may be more reluctant to air grievances online, don’t think you’re immune if you’re operating in B2B.

But easy on the Prozac. Your Service team exceeded expectations? They always deliver on time? Hey, it works both ways. Positive enthusiasm may not match angry venom, but it still has a role to play. When, in 2007, TechRepublic asked “What bothers you when you are a customer?”, it received 132 responses; when it asked “What do you remember about good service you received?”, just 12 comments followed. But that just makes the praise (such as this heaped on Dell for the speedy replacement of a faulty hard drive) all the more valuable.

Will great post-sale service ever help turn a terrible product into a success? Unlikely, but not impossible. Will bad service ever turn a great product into a failure? You bet. So make sure you take care of your customers for the long-term – long after the excitement of opening the box is gone. And leverage the Web to make sure tomorrow’s customers know how happy today’s customers are.

With the real-time applications and connectivity it enables, Web 2.0 has taken away many excuses. And for Service to be a threat to your business is one of them.

by Sebastian Urbina, Product Manager

A month ago I thought I had found a killer deal on a new HD TV: a 37” High Definition TV for $450 at an online retailer.

I had never used the retailer before, but since I’m technophile, I went ahead with full confidence in the website. After all, I trusted the site that referred me, and they do analyze the sites they refer users to. Additionally, I was paying with my trusty American Express with their great consumer protection policies.

I was excited. Not just with the new TV, but also with having found a good deal.

There is something magical about high definition that makes college football so much better; it’s almost like you are there. Of course, nothing is like being at the stadium. Nevertheless, I wanted my High-Def TV, and I wanted to see the individual leaves of grass on the field.

It turned out the price was actually $500 as I had to pay for shipping, but $500 for a new HD TV seemed pretty good.

A few days later, the door bell rang and I received the big box. Like a kid on Christmas morning, I ripped it open and started arranging it in my living room. Within moments, I was watching Judge Judy in High Definition. I would have chosen another show, but really, Tuesday early afternoon the channel selection, is well, limited. Despite my lack of interest in the show, Judge was crystal clear, and I could see every pore in her judicious face.

A month later the unfortunate occurred: My TV wouldn’t turn on.

Now the fine print of a purchase comes into play. The TV is branded “Scott;” turns out it’s basically a rebranded Aiko. Another company I had never heard of. There is a refrub in the fine print. Turns out refurb means refurbished, which means this was broken, but the manufacturer hope it’s fixed. I called the online retailer. They told me I have to contact the manufacturer, but it should be covered since I’m within 90 days of the purchase date.

I contacted them and explained the situation; they tell me to send them a receipt. I forwarded the confirmation email in and was told to wait 5-7 business days before I’d learn if the warranty was approved.

A week later I called to check in and was told that the receipt hadn’t been received. Fortunately, I wrote down the name of the agent that I had talked to the week before and asked for her. She informed me that I can’t just forward the receipt because it’s too easy to modify. They need it faxed in. So I called the retailer, who told me how to get a receipt form their website and how they could fax it in. I went online, created a pdf of the website and emailed it in. Apparently, that was enough to satisfy the receipt requirement. Next, I had to wait for the warranty department to come through.

A week later they contacted me and requested that I ship them the bad TV. That would cost me $100 - A quarter of the price! Good service would have offered me one of three possible solutions:

1. A refund
2. An in-home technician to service it
3. A new TV with return shipment paid for so that I can replace one with the other and ship the bad one back.

Not this company. I called them multiple times, argued with costumer service, asked to speak to the warranty department, supervisors, and different agents - all to no avail.

The retailer is equally unaccommodating until I threatened to dispute the charge through my credit card company.

So now I’m fuming. Do I waste another $100 chasing a TV that may be returned to me bad again or attempt to recover the cost through my credit card? Why do I have to be in this position? It’s a bit frustrating that all it would take to make me a repeat costumer would be good customer service. And instead of ranting about what went wrong, I could be lavishing praise on them for taking care of a frustrated costumer.

In the future, I’d rather pay more for a product – if it includes outstanding and reliable service – than find the best “deal.” After this ordeal, good service is worth the extra money.

If there’s a company, or an industry, that receives the MOST complaints about service, it would have to be the cable company.

Have you seen the youtube segment of the cable field service tech who actually FALLS ASLEEP during a service call?

Friend after friend and colleague after colleague have shared stories about missed service calls, faulty equipment, misdiagnosed problems, multiple service calls because the tech couldn’t fix the issue on the first call, and the best story of all – the one where the service tech shows up to repair the AC unit when the call was for a cable service tech. How the wires got crossed on that one I’ll never know.

Nevertheless, it amazes me that cable companies continue to thrive despite such dismal service. But most people don’t have a choice: Either go with the cable service provide in your region or go satellite – with nothing in between.

Until Now.

I am one of those customers who experienced poor service. I took a morning off of work to wait for the cable guy. I waited and waited until noon approached, called the company, and they assured me he was on his way. Five hours later, he finally appeared. He didn’t have the right part to fix my problem. So I had to miss another morning of work to wait for the service tech. Once again, the morning turned into an entire day. And still, he couldn’t fix the problem.

In the meantime, the cable company continued to charge me for cable service, that’s right – the cable service that wasn’t working. So I cancelled it, knowing that I had NO other options at the time, except for some old rabbit ears from the 70’s handed down to me from my parents. Needless to say, I couldn’t watch TV. Which isn’t so bad given the new study that announced watching TV is a sign of depression… The finding, announced on Thursday, November 15, comes from a survey of nearly 30,000 American adults conducted between 1975 and 2006 as part of the General Social Survey.

However, the only thing that depressed me was the cable company. So what’s an average person to do to access her favorite shows and movies?

Watch out cable company, average Jane now has OPTIONS thanks to the internet. And it’s about time. Oh wait, I also had to find an alternative internet provider service, which I obtained through my cell phone provider. A teeny tiny device that provides clear, constant internet service at $69 per month. Not bad and no service calls required!

I signed up for Netflix. Blockbuster or Netflix provides access to not only movies, but also TV episodes from seasons past. And thanks to the Netflix ready device, I can watch unlimited shows/movies on my TV at a much cheaper price. While I may miss the new episodes, it’s only a matter of time before companies like Netflix, itunes, Blockbuster, etc. figure out a way to offer TV online without the cable company.

Once viewers have access options, the true differentiator will be service – I wonder how Netflix service techs work? Haven’t had a problem yet….

You know how when you buy a new car, you start seeing similar cars everywhere but never noticed it before? I think I’m starting to feel that way about service. I’m starting to see examples of the good, bad and the ugly of service everywhere. I can’t believe that I’m starting to talk service with friends outside of work.

For example, I was catching up with a classmate a few days ago. We hadn’t talked in a few weeks, and we were talking about how work was going. Now this friend works for a large hardware, software, and services company; she manages one of the storage divisions. About a month ago, a big software company teamed up with one of her competitors to create a new fit-for-purpose storage device that was better, faster, and cheaper than anything comparable on the market. I asked her if this new offering scared her.

“No, it really doesn’t”, she said quickly and firmly. I was amazed, I rattled off details about throughput, software specs, price, and applications. I expected her to at least show a chink in the armor, some sign that this seemly disruptive technology would be a threat. “You made a lot of good points, some people will jump to try the latest and greatest, but what happens something goes wrong?” The smug smirk on my face fell.

“You mean you’re betting that service is the differentiator for your products?” I asked.

“Listen, when you talk about products in the dollar range we’re talking, feature, functions, and speed are important but the number one reason people make this level of investment is reliability,” she said. “People will pay for the security and integrity of their data.”

To try and counter her, I mentioned a bit about their redundancy and security features. “It’s not about RAID levels and hardware specs, it’s about who is standing behind the products and answers the phone when you have a problem,” she said. “Both of these companies have a record of poor support and service, reputation means a lot in this market.”

Then she added, “Not to mention, this is a new and untested product, and you know the history of first versions in the technology market.”

She’s right. A few years back, I had to buy a high performance storage array and selected the leader, which was almost double the cost, based on their support agreement terms and levels. I went with the leader based on the experience and reputation of service. I didn’t want to trust our data to a new upstart for fear they wouldn’t be there when I needed them.

I hate to lose a debate, but I conceded.

“You’re right, they both are horrible at service and support,” I said.

“Wait until the finger pointing starts between them when an issue arises, that gets out on the Internet, and they will not be able to give them away,” she said.

“I bet they don’t have the technology to effectively manage their service chain between them,” I said, thinking of that possible opportunity.

“By that time, we’ll have our new products out that will complete very well with their offerings” she finished.

“Sometimes all you need is a small head start,” I piped up.

“Drink your beer,” she scolded.

You know you hate it.

You know you also feel sorry for that guy.

That guy.

I could write about the recession, but that guy offers a bit of hope amidst the gloom and doom of today’s headlines.

What guy? That pesky sales guy. Calling during your dinner. Calling on your cell phone [how did he get that number?] Calling when….

Well, it doesn’t matter. It’s just annoying that he calls. And when you say “I’m not interested” and slam down the phone, you know you feel bad. Think of how that guy feels hearing that more than 50 times a day. Who’d want to be that guy?

Truth is, we’re all that guy once in awhile. We don’t need to pick up a phone and cold call, but we all must play salesman for a season. ‘Oh not me, I’m an accountant’ you may be saying, or ‘No way, I’m in IT’.

Those silos are gone. And in this cash-strapped, credit poor, paranoid economy, that’s good news. As more and more doors are slammed in salesmen’s faces, businesses are going to need a contingency plan – or a back door.

According to James Alexander of Alexander Consulting, that back door is a customer’s trusted advisor, or his service technician. Think about it– a field technician can actually visit a client’s home or business and assess not only the current problem, but can sell a system upgrade or even additional services – something to which the front-end salesperson couldn’t access.

It’s similar to automobile repair. You take your car in for a grease, oil and filter, but then you find out your brake pad are about to go. So what’s a customer to do? Spend more money on brake pads. Or the tires need to be replaced. Or the transmission flushed. Or whatever else. That’s a way to make money on service while delivering excellent service.

The Field Technician enters a customer’s business or home to repair a problem, but with a little training, he’ll learn how to assess a situation for a new service or product sale. Think of Best Buy’s service person visiting a customer to repair a desktop computer, and the service person could potentially sell not only a printer/fax machine, but also a plasma screen television and surround sound. Or maybe he could sell a lease on an entire networked computer system.

Apply the same concept to B2B. It may be difficult for your salesperson to access an existing client who has been ordered to freeze all spending, but the field technician will pay a visit and see what the real needs are –and, in fact, he may be able to sell something that could save your client a bundle of money. This happens all the time with complex products and systems where the end user may not be maximizing its performance due to a missing piece or an outdated system/product. It gets complicated, so bring in the trusted advisor.

At least the trusted advisor or field tech will never have to be that guy all the time, but he sure can play his part in adding to the bottom line.

It’s good to hear that we’re not the only company extolling the virtues [and profit margins] of service.

I just returned from ASU’s Center for Services Leadership Symposium on “Competing Through Service” in Phoenix, where an impressive array of industry leaders and academics discussed the growing significance of service as a competitive differentiator. Featured speakers included executives from Cisco, IBM, Sony, Cox Communications, Best Buy and even the online ‘upstart,’ Zappos.

While much of the discussion and presentations centered on service at the point of sale, I did take home some key points on post sale service.

According to Gary Bridge, Ph.D., SVP and Global Lead, Internet Business Solutions Group, Cisco Systems, automobile manufacturers make about 1 percent profit on the initial auto sale and 22 percent profit on the aftermarket services.

1. Sean Skelley, SVP, Services, Best Buy Inc., reported that Best Buy’s Geek Squad performs service on only 40 percent of the computers it sells and the remaining 60 percent comes from competitors purchased elsewhere.
2. A study on service from the hotel industry found that service recovery had a significant impact on customer loyalty – and future sales. Customers who experienced a service issue and received quick and helpful resolution reported that they were more likely to recommend the hotel to a friend or colleague than customers who experienced no service issues.
3. All the speakers agreed that businesses in the future cannot win on product price due to commoditization. Instead, businesses must compete with value – and service is an enormous factor in that.
4. James Alexander of Alexander Consulting shared that the majority of technology services organizations, to off-set shrinking profit margins on products, expect their field service techs to aggressively help sell services and solutions. Think about it– a field technician can actually visit a client’s home or business and assess not only the current problem, but can sell a system upgrade or even additional services – something that the front-end salesperson wouldn’t see.

More interesting facts, figures and anecdotes to come!

Yesterday was Election Day and as a technology guy, I both love and hate to see the technology in our system.  As I was waiting in line, one of the machines that load the ballot into the smart card stopped doing its only function.  Of course, no one in the polling station had a clue how to fix it.  So we went from two registration lines down to one.  I was almost at the front of the line, so it really didn’t affect me.  However, I hate to think about all the poor people behind me, their line just got longer and they didn’t even know it.

Technology is great when it works and we’ve all become more increasing more dependent on it.    I think we all feel better about electronic voting rather than the “hanging chad” alternative, but it also can be a bit scary.  How do I know my vote has been counted?  How do I know the machines work?  Paper trail or no paper trail…  I find it interesting that we all can love technology on one side like cell phones, HDTV, and Roomba but hate it when it comes to something like voting. 

Do we love technology when it comes to service? (You do remember that this is a blog about service right??)    I would say yes.  Let me give two very recent and relevant examples.  I had to have two service techs on my house over the last two months.  One tech was there to fix the oven; the other was to do maintenance on the heating system before it got cold.  The difference between the two was night and day. 

The oven tech showed up late, couldn’t find the address, and documented everything on three part forms.  The heating tech was on time, used GPS for the location, and documented everything on a handheld.  The oven tech needed a check and just wrote PAID on my goldenrod copy of the form.  The heating tech just had me sign the handheld and said my account would be billed. 

Now I could only imagine if the oven tech didn’t fix the problem.  Did the right copy of the form make it back to headquarters?  Did their copy show that I had paid?  Did they know what the tech fixed when he was out at my house?  What about the make and model of my oven? 

The heating place had me covered; they knew the make and models, had payment history, and when the tech started and stop my job, all in the system.  I’ll take the technology-based system any day.  Investment in technology for service makes sense from a customer satisfaction and well as it can be a money saver.  Aberdeen just published a report that said putting mobile devices in the hand of techs increases productivity, boosts first-time fix rates, saves money, and increases margins.  All things people are looking to do in this economy.  Investing a little in technology can return tremendous savings. 

Now if the polling places had better service or we could vote on-line, I guess that’s just wishful thinking.

      “Opportunity is missed by most people because it is dressed in overalls and looks like work.”

-          Thomas Alva Edison

Well, it’s almost official, we’re in a recession.  So now what?  A solid strategy is to make sure you don’t lose the customers you already have.  A major opportunity in this market is a strategy around service.  Good service can win lost customers back and keep the ones you have satisfied.  Here are some tips on what you can do to make service pay in a recession. 

First, you need for your customers to be satisfied after each and every service event.   A current trend is to apply the practices of Total Quality Management (TQM) to service.  So to summarize what this means for service:  understand the customers’ expectations, identify the risks in trying to meet them, put processes in place to mitigate them, incent staff, and create a feedback loop.   Simple, huh? 

The first point, understanding expectations, isn’t as easy as it sounds.  This fact is why company spend hours negotiating Service Level Agreements (SLAs).   Now these are very popular in the IT world but are used more and more in other industries.  The problem is many customers have iron clad SLAs are still unhappy with their service.  Why?  Expectations.  Meeting expectations isn’t enough. 

Think about it, when you were in grammar school, were you happy with an “S”?  All that said was you were “Satisfactory, met expectations.”   In other words you did what was expected, what you were obligated to do.    Big deal, I’m sure there are a dozen of your competitors that are willing to do a satisfactory job as well. 

So how do you exceed expectations?  By focusing on the second step, risk mitigation.   You better have everything in place to execute and execute well.  That means having a high performance service supply chain.  Everything should be monitored and managed: repair, planning, sourcing, pricing, and logistics.  Stock outs, for example, should be a major exception rather than a “fact of life.” 

The final step of a feedback loop is often underutilized.   Notes when closing a case really doesn’t cut it.  Root cause analysis of what caused the problem is key.  Can you prevent this issue for impact other customers?  Can you lessen the impact to other customers?  Unless you are really analyzing data, capturing the field knowledge, completing the feedback loop with all the data, then finally making this information available to the front lines, you are operating in the dark. 

Another missed opportunity is repair.  In a down economy, people hold on to their equipment longer, this means more repairs.   For repairs, the demand patterns are less predictable and more speculative, the sources of supply are varied (new, repaired, and refurbished), the life cycle extends beyond manufacturing lifecycles [in some cases like A&D by decades], repairs can take multiple paths, the levels of part substitution  are huge, and multiple levels of inventory require optimization.   All of this makes repairs a complicated but critical piece of the chain. 

So that’s just a small window into some of the tactics you can use to build into you service strategy.  Many people forget that service can be your most powerful profit lever, especially in hard times.  Any the only way to pull that lever is with quality service and quality service is hard work.

As a tech reporter for the Austin Business Journal, the stories that would make me drool were the ones that seemed like science fiction, not news.

Hi-tech start-up promises to deliver a refrigerator that does the shopping for you – for example, automatically orders milk when you’re almost out or gathers and orders the ingredients for Monday night dinner.

The Matrix pitch: a C-level executive from a leading computer company told me about his work on a brain implant that would enable you to download information directly into the brain.

Almost ten years later, I’ve still not found a “smart” refrigerator and we have yet to download data directly into our brains, but look what we do have: ShopSavvy, a price comparison engine on Google’s G1 phone. It will transform the entire shopping experience.

Yesterday, my friend showed me how it works. Using the phone, he scanned the bar code on his baby daughter’s giraffe and Voila! There was the price of the giraffe listed on multiple sites, both online stores and bricks-and-mortar shops in his area selling that item by using the G1’s built-in GPS.

Imagine a similar tool for service. Simply input the model number, or scan the bar-code, with a brief description of the problem and Voila! There’s a list of the service providers in your area and estimates of price and time to repair the problem. It’s not as far off as those smart refrigerators and brain implant, so service businesses better have the people, parts, prices, knowledge and processes automated optimized and automated to make way for the Brave New World of service.

However, we’re one step closer to that level of automation through service knowledge management. Today, you can actually diagnose the problem on-line even before you pick up the phone to ask for outside assistance. That way, if you just need to plug the machine into the wall or clean a sock from the filter, you can save a ton of money. Conversely, call center reps can do the same before they send the issue to dispatch, and dispatchers can better manage the field techs based on problem-diagnosis. And the best part of all of it: Field techs can use knowledge management to guide them through the repair process if they face an issue they can’t diagnose on the field. Saves the customer money (you don’t have to pay for multiple home visits); saves the company money ( truck rolls only once); and the field tech can access the intellectual capital of more experienced techs who have retired (without lugging around multiple manuals that would require hours of page-turning to find an adequate diagnosis and solution).

Of course, I’m still waiting for the day that my washing machine can predict imminent failure before it even happens. And then walk me through the repair itself. And then give me a backrub….

I think for most people, it’s pretty clear; we’d rather not need service.

We’d rather not need to call about an error on our credit card, take our car to the shop, or invite a repairman into our homes. We’d much rather have things that “just work.” The classic example is the POTS, which is going the way of the dinosaur, but remember how reliable the dial tone was? The phone company created a service that was reliable 99.999% or five nines reliable, which meant the phone was out for about 5 minutes a year. Don’t you wish your cell phone was a tenth as reliable?

We know that’s not the real world; things break and need service. So, in fulfilling that commitment lies an opportunity. I started reading about something this week called “service recovery.” This concept is that excellent service can trigger better customer loyalty than if the customer never needs service to begin with. I think this was illustrated in my laptop example. I am much more loyal to this manufacturer after I needed service than before.

The question with service recovery is if it’s just rare and whether or not it can be fostered within a company as a competitive advantage. I think it can be and while rare, the alternative is much worse for your company. A new survey done by the Harris Interactive shows that 84% of people are willing to share a negative customer experience. So while you customers might not be as willing to sing your praises, they are sure willing to speak ill of you.

Some other interesting data points in that survey as well: 87% of people have stopped doing business with a company due to bad service. So when you looking at reducing your spend in service next year due to economic factors, make sure you account for all the new customers you’ll have to acquire to replace the ones that leave. A typical manufacturer will spend 8-10 times the amount of money acquiring a customer than making the ones they have loyal. Even through for many of these companies, service and parts can generate three times the amount of the original sale, as reported by both McKinsey and AMR. Where do you think the wise investment would be?

A final point out of that Harris study: 58% of people are willing to pay for a better experience. Shannon mentioned that in this post. I am a prime example of that; I will pay to be treated better. I pay for AppleCare, VIP tickets to shows, or commercial-free radio. I think there are many more people out there like me who would be willing to shell out a few extra bucks for the promise of an above average experience. If individuals are willing to pay for better service, shouldn’t your company invest as well?

You know a business is a bit desperate when it hires a plane to write boldly in the sky, “SALE TODAY.”

I remember planes flying banner advertisements over the beaches of sunny Ft. Lauderdale over spring break, but they’d fly those things back and forth, usually announcing some type of event – like a happy hour drink specials, ladies night or a wet t-shirt contest. That’s one way to garner attention among beachgoers lying on their backs looking forward to a night of partying. It’s quite another on a weekday in Atlanta.

But this morning, as I hastily schlepped my coffee and laptop to my car, the “SALE” portion was already fading like the morning mist as the plane completed the “y” on “TODAY.” The worst part: As I drove toward the interstate, I never even got to see who was having the sale. What a waste of advertising.

Was it a clothing sale? Car sale? Home appliance sale?

Perhaps I’m a bit jaundiced, but with consumer spending down, it appears that people simply aren’t purchasing new products. Which is why, when my friend – no, not Joe the Plumber but the female equivalent, a stay at home mom – complained to her husband that she desperately needed a new washing machine, he asked her to see if the current one could simply be serviced.

Since the washing machine was no longer under warranty, she discovered that it would cost over $100 just to have someone come out and look at it, much less repair it. Follow-up trips and parts would add up, so she packed up her three children – all under the age of 10 - and drove to the nearest home appliance store. The one she wanted was priced well over $1000, far beyond her budget, and the lower-priced options weren’t near the same quality as what she already had. What could she do? The clothes had to be washed.

This seems like bad news for business, but there is a silver lining – for business and for “Hockey Mom” - and that’s SERVICE. Since most consumers are cutting spending on durable goods, they have to maintain what they’ve already got. Businesses with sub-optimized service centers may be taxed, but those that have optimized the people, parts, prices of those parts and the knowledge involved in repair/return have a significant opportunity in increase profit margins on service. If you can’t sell more washers/dryers, you can sell service on those already purchased.

Case in point: my friend walked out of the home appliance store not with a new washing machine, but with a new service contract on the appliances she already owns.

WIN/WIN for business and for the consumer!

Our company is headquartered in Atlanta. We had a gas shortage a few weeks ago and gas prices shot up through the roof. The real interesting thing about it, for me, was the change in traffic. It’s no secret that Atlanta has bad traffic; however, during those two weeks of the shortage, it was great. My morning commute, which takes typically 35 minutes, was down to 10 minutes. It seemed that the shortage and the price really affected demand. Everyone is familiar with the relationship between supply, demand, and price; the more demand, the less supply, the higher the price.

Interestingly enough, there is a real relationship between price and demand as well in many products; it’s a more dramatic curve but it exists.

Now the example above shows a perfectly elastic price. There is nothing that really fits that model; at some point everything will become too expensive and demand will drop off. The key to pricing elastic goods is to find that perfect point, where you are maximizing demand and price. It’s a science but its something that can be done.

Regular elasticity curve image

Back to the gas idea: now there seemed to be a point where the cost of gas was too high and demand drops off. However, there are a lot of factors in that. For some, gas is a necessity and it doesn’t matter what the price, they are going to buy it. For others, they might just cut back on some non-essential driving and just use less. The point here is there is a lot of non-price factors that people would consider before filling up, criticality would be one of them.

Same with service: people take into account a number of factors before deciding to buy, including whether or not a price is fair. Criticality is a factor, age of the machine being serviced, warranty, cost of the labor, and so on. So how do you maximize profit on service? Well, first of all, cost plus isn’t the answer and neither is just elasticity.

You need intelligent pricing strategies accounting for all the factors. Competition is another key one: If you are a station charging four bucks a gallon and across the street they are charging a buck less, you probably won’t be selling much gas. Same with different grades: Charging a great price on regular might work, but you will have problems if all the other grades are out of whack from that base price. The grade prices should be aligned within ten to fifteen cents.

These are simple examples, but image it on a scale of hundreds of thousands of service parts across dozens of locations. It is a big problem accounting for all the prices, competition, alignment, and demand. For most companies, it’s too big of a problem and they only focus on pricing high volume or high demand parts. That is leaving big money on the table, which is a crime in this economy.

Specialized software can solve this problem and generate millions of new profit.

One final service example: a Servigistics customer figured out that it lost about 20% of service call business after the tech had arrived to do the work. Why? The cost of parts. If the machine was old or the price of the parts was too close to the replacement value of the machine, the customer told the tech to leave. It cost the company money, about $150 a visit, because of bad pricing. I bet that lost sale cost much more in Atlanta with the shortage.

Do you think they could adapt to higher gas prices in a single region? Not without a real pricing product.

Sounds like an episode of HBO’s “True Blood” - the one that features vampires - but it’s not.

In fact, it’s not even related to television or film. It happened at a local deli.

Some Servigistics colleagues and I walked over to a popular deli during our lunch hour to feast on some fresh subs. The line ran long and the number of employees low. The woman in front of me ordered a tuna sub on wheat, as did I, but the customer in front of her had ordered roast beef.

While the employee took the order from my colleague who ordered after me, the woman said aloud to any employee that would listen, “Uhm, excuse me. There’s blood on my sandwich!”

No joke.

Only one employee paid attention to her. With a look of annoyance, he moved over to face her behind the counter where the sub makers placed blocks of cheese and deli meat on the stainless steel slicer in order to prepare the subs.

She pointed to her tuna sub on wheat that was placed next to the meat slicer.

“Some blood from that beef fell on my sandwich,” she said.

“What?” the employee said.

“Blood,” she said. “On my tuna sandwich there,” and she pointed to her tuna sub.

He lifted the bun off the top of it. “I don’t see anything,” he said.

She insisted that she saw blood fall somewhere on her sandwich.

The employee let out an exasperated sigh and lifted the piece of cheese up from the tuna fish.

“I don’t see anything,” he insisted.

The woman tried one more time to explain that blood had spurted on her sandwich. It was obvious that she was NOT going to eat that sub. Instead of offering to make another one, the employee just looked at her, insisting that HE didn’t see any blood. I didn’t either, but she sure did. Real or not, the woman threw up her hands and walked out of the store.

No doubt she’d never return. And I’m sure once her friends and acquaintances heard of blood spattered sandwiches and poor customer service, no doubt they’d never return either.

When my colleagues and I finally sat down with our sandwiches, one of them said he’d never return to that deli after witnessing the spectacle. Blood or not, the employees’ reaction was inexcusable, he said.

How much business did this deli just lose? How spoiled had their brand become?

Certainly the loss will amount to more than the $4.29 tuna mini-sub. Blood or no blood, the employee should’ve offered to make her a fresh sandwich. A satisfied customer, positive word-of-mouth and relieved patrons would have been worth the cost.