This is a sequel to my last post on
Customer Cost or Care. 

Several people left comments, and I got even more email with opinions and questions about the real value of keeping or losing a customer, and the real cost, and P&L impact of providing care.

By the way, my husband is still in the UK,
and the bag will need to be checked one more time before I see it!

Let’s start by reviewing the things that we all know.

Getting a new customer is way more expensive than selling more to an existing customer.  Selling more to an existing happy customer is the lowest cost of all.  Having happy customers reduces your marketing costs as it refers you more new customers for free.  Having happy customers also reduces your liabilities – angry customers tell their stories more than 10 times more than happy ones.

Your customer service strategy can not be separated from
your business strategy.

Your decision on how much you are willing to invest in customer care is a big one.  It should not be seen as a peripheral or functionally isolated cost.  How you decide to treat your customers is fundamental to your business strategy.

If you don’t value keeping customers, your cost of customer care will go down and your cost of customer acquisition will go up.  Your overall costs will not necessarily do down, nor will your profits automatically go up — because reduced customer care will almost certainly result in reduced revenue.

And you will also forfeit an advantage that your competition can’t copy and the market can’t commoditize — treating your customers well.

Some ideas for the real world.

I’m not suggesting that you should provide limitless service and not worry about cost at all.  Every business needs to reduce the unit cost of doing business year over year.  It is the only way to stay competitive and fund innovation.  But don’t just squeeze cost out of customer care without considering the holistic value of keeping happy customers.

OK, so that all sounds nice.  But say you manage the service organization for a company who is not focused on customer care.  You would love to provide exceptional service, but you are being told that you can’t afford it, and that margins can’t support it.  You are being pressured cut cost and to increase the profit margin of your service and support business.

Two ideas:

1. Be the voice of the “Customer Value” line in the corporate P&L.

Expose the real cost of losing a customer just so it is clear to the whole organization. Do the numbers.  What is the actual value of keeping a customer in your business?  Be the one to show the hidden costs of losing a customer.  That should drive your customer service investment.

Calculate the actual cost of losing a customer in your world.  Things to factor in:

• Loss of new, incremental revenue/opportunity
• Loss of opportunity to create a “lifetime customer”
• Loss of annualized recurring revenue
• Cost of replacing a customer – marketing cost per lead that turns into a closed deal
• The cost of supporting the sales process
• Cost of viral effect, how many other customers will you lose based on bad referrals?

I spend about $120/month with Verizon.  They seem to have calculated that the cost of losing me as a customer for a few years is a few thousand dollars.  Verizon has on more than one occasion gone around their standard policies to invest $50-$100 in keeping me.  AT&T on the other hand has never done such a thing, and in fact has what I can only refer to as predatory methods for squeezing more money out of people by making mistakes then pretending it is the customer’s fault, and never refunding anything under any circumstances.

It’s really important to associate a specific value with the loss of a customer.

You need to connect the dots between customer care and increased revenue, not just between customer care and increased service cost.  If you don’t you will be inclined to squeeze your service and support organization on margins independent of understanding how it really impacts your business growth and profit.

2: Improve Service without spending more money.

There are a few things you can do to improve service even if you don’t spend any more money.

1. Personally use and test your standard service processes.
Get a first hand experience of how good or bad the level of service is.  Fight your way through your voice menus or website interfaces.  You will never improve it if you don’t have first hand experience. Even things like changing the hold messages, or not selling to people more than once while you are forcing them to hold, can make a huge difference in customer satisfaction.  Bank of America is the worst at this.  They over sell at every moment, (You can’t even activate a credit card without hearing six sales pitches) and they consistently deliver dreadful service.

2. Note what you like, and what embarrasses you.
You will be surprised at how much you can improve service by changing scripts.  How about having someone say, “I’m very sorry I couldn’t help you, would you like me to email you a survey form so you can provide your direct feedback to our company”, instead of the infuriating “I apologize for the inconvenience, can I do anything else to help you?” when you haven’t been helped with the first thing.  Also make particular notes about where your level of investment is creating a negative feeling in what you experience, so you have that as data for future budget discussions.

3. Spend a shift in the call center, on the help desk regularly.
All executives should do this.  Experience personally what customers call in about and how they are treated by your processes.  Get their reactions directly.   I guarantee you will uncover broken processes, mis-cues in scripts or service books, or repetitive or chaotic tasks that degrade both productivity and service.  You can fix many things for free if you just show up and pay attention.

4. Involve the team in cutting cost without degrading service.
Offer an award each month in each region for the most creative approach to reduce the cost of providing service without diminishing customer care. You can accomplish this if you involve the people doing the work to help figure out how.  One call center realized that a significant percentage of their calls were people asking questions.  They decided to make the answers more accessible, and their call volume decreased substantially.

If you don’t give your team a chance to help solve problems, they will have no motivation to do anything other than follow the process you put in front of them.

It’s your choice:

You can reduce the cost of customer service without cutting the care. It’s possible if you start with the strategic decision of providing care first, then cutting cost as a tactic, not as a strategy.

Special Note for People in the Bay Area

This year I am holding only two sessions of my Career Workshops in the Bay Area.

This is a chance for a small group of people to spend a day with me building a plan to manage their career, be more effective, build their Personal Brand, increase their influence, and grow their network.

I have about 4 seats left for June 4th, in San Mateo.

If you are interested don’t wait to sign up.  There will only be one more bay area session later in the fall.

I do this workshop because I like to help talented people get their break-throughs.  It’s been wonderful to hear the stories about the big promotions, and the career and life changing events that people have been able to create for themselves as a result of this workshop.

You can learn more about it, read what attendees say, and sign up here.

I have been traveling to and from the UK
this past week. 

Due to a canceled outbound flight/lost bag
situation, which took more than a week of
phone calls to four different service centers
to “resolve”, I have had an opportunity to
observe various businesses and their attitudes
and strategies for customer care.

It all starts with one executive decision.

There is a single, primary, strategic decision that
every company has to make with regard to how much
“care” their customer service staff provides. 

It’s binary.  Either:

1) You decide to provide customer service as a value
2) You decide to provide a necessary customer service “presence” at the lowest possible cost.

All subsequent decisions, staff behaviors, and customer experiences start with this one decision.  Care or Cost?

What service do you get?

When you are face to face (or phone to phone) with a customer representative, ask yourself, is this person instructed, motivated, encouraged and authorized to actually help me? Or are they being instructed and paid to infuriate me by saying, “I can’t help you.  I apologize for the inconvenience, can I do anything else to help you?” 

If Azzarello Group were a big enough company that we couldn’t answer all phone calls personally, and you phoned one of my customer care centers with a problem, this is what would happen:

1.  The issue would be logged as a “customer disappointment”, not as a “trouble ticket”.  The phrase “trouble ticket” enrages me.  It is an internal, information-free, and motivation-deprived name for a serious, real customer issue.  Language matters.

2. But first you would be greeted with a recorded voice that says:
Thank you for calling Azzarello Group.  You made a good decision to call.  Relax, we intend to actually help you. Please bear with us for ONE list of choices so we can connect you directly to a human who can best help you.  We will not make you to talk to a voice activated system and pretend it’s a benefit for you.  If none of our standard choices address your problem, just stay on the line and someone will answer the phone to learn about what you need, and will do what it takes to help you. 

3. My customer service representatives would be instructed to actually help.  They would have the training to turn a customer disappointment into a customer happiness, and the authority and/or budget to do so.

4. They would be measured on the number of transitions to happy customers, not the number of closed “trouble tickets”.  When you measure closed trouble tickets you just encourage your staff to be not-helpful, but more quickly.

Make sure Technology works!

Another thing that I feel very strongly about is that if you substitute technology for a person as in your service delivery and you want to provide actual, good service, three things need to happen.

1. It has to WORK!!!  Don’t require flash plug-ins that not everybody has, or provide links that don’t go anywhere. Test the hell out of any technology that is used in lieu of a person and make sure it works 100% of the time.  I can’t tell you how many times I have tried to use a website to provide feedback or report an issue instead of picking up the phone, and the online process doesn’t work! If you want people to use your online system instead of calling you, make sure your technology works! 

2.  Technology should never make humans feel stupid.  First it should work, and it should work in a way that makes sense to a human.  Every time I try to use a self check-out at a store, what I am instructed to do is incongruent in some way with what you actually need to do to get it to work.  I always end up feeling stupid AND requiring a human to get involved.  Actually watch what people struggle with, make it work well and easily, as expected, then people will use it.  You will keep customers and you will save money. 

3. Technology should never rob people of their humanity.  Never make a person talk to a voice recognition system.  Nothing is more infuriating than talking to a computer in the first place, then having it respond, “I’m sorry I didn’t’ get that …”.  By the time your customer gets to a human, your automated greeting and routing has made them angry, even if they weren’t angry to begin with.  I would never put one of these systems between my business and my customers.  It breaks all rules of customer care, and it’s only real function is to cut cost.  Back to the original primary decision.  Which is your primary strategy?  Care or Cost?
 
A tale of two customer Service Models

You can determine a company’s customer service strategy based on observing their behaviors and noting thier investment in: Motivation, Systems, Authorization and Training.  It becomes pretty clear how they made that initial strategic decision: Care or Cost?

I will illustrate this using my recent experinece traveling on United, but being re-routed on Lufthansa, and losing my luggage as an example.

1. Motivation - Customer Service Strategies:

Care Decision: People believe it is their job to solve the customer problem
Cost Decision: People believe it is their job to close the “trouble ticket”

(Cost)  On Day 2 in the UK of not having our luggage, the United baggage service rep said, We found the bag. It will be put on the first plane to London this morning.  Once it is there, it will be routed according to the lost bag claim you filed and you will be called regarding delivery.  From now on you should call the Lufthansa phone number associated with your lost bag claim. (i.e., Don’t call me again, “trouble ticket” closed.)

(Cost) On day 4 of not having luggage, we called the Lufthansa lost bag people who told us that the bag had been flown to Munich, and is scheduled on the flight from Munich to London to arrive at 16:55 at which time we will be phoned to so the bag can be “rushed to us”.

(Cost) At 18:00, after not receiving said phone call, we called the Lufthansa lost bag people again, who tell us that they have identified the bag and it is in San Francsico.  Outright lying and making up information about flights to Munich was a new twist for me!

(Care!) Next: Finally thinking to call the United 1K baggage service vs. the standard phone number, I got someone on the phone who was actually motivated to solve the problem.  It is a shame that United has made the actual “care” choice only apply to their top tier customers.  But, the agent, Grace, apologized for the problem, took personal action, got a hold of our bag personally, re-tagged it and got it on the next flight to London – the one she said it was on.  She called the next day to follow up, but once it was in London, it went into Lufthansa’s system. 

2. Systems – Customer Service Strategy:

Care Decision: The systems are quipped to allow credits, upgrades, refunds, make outbound phone calls and allow the person to say “yes”.

Cost Decision: The systems are locked down to prevent any cost incursions no matter what the customer situation. No reason or business judgment can make a difference. The service person is only able to report, “the system won’t let me do that”.

(Cost)  Once the bag was actually in London and needed to be delivered to us, the Lufthansa “Express Bag Delivery Service” was not able to call a US mobile phone number to arrange where to deliver our bag.  So they simply didn’t call.  When we called them, and tried to expedite they said “We’ll send a Telex to our depot“.  A Telex???  Talk about technology investment.  How about a pigeon?  ….  I digress. 

We also learned that their system for their “same day delivery service”, only allowed them to, and I quote,“hopefully deliver the bag tomorrow”.  As it turns out their system also did not allow them to update our contact phone number or the delivery address.  So they ended up not calling, and ultimately delivered the bag to the place we were three days earlier. 

(Care)  This did NOT happen, but an example of a system that allowed for care might have an “harmed customer button”, (that may require a supervisor passcode) to get to a screen that would allow outbound phone calls to any phone number and the ability to route the task to a third party, actual “same day” delivery service.

3. Authorization & Training – Customer Service Strategy

Care Decision: People are trained to listen, think, and make judgment, expected and encouraged to actually solve problems. People are allowed to incur cost to solve a customer problem.
 
Cost Decision: People get fired for incurring cost to solve a customer problem. People are trained to only read what is on the screen and instructed to say “I am sorry for the inconvenience. Is there anything else I can help you with?”  

(Cost)  On my way home a week later (still without the bag, by the way) when I told the story to a United agent about being a 1K traveler whose weekend in the Lake District was ruined do to a cancelled flight, and a bag of being over a week late, and my husband is staying in the UK to collect the bag from where it was delivered to the wrong place said only, “my system will not allow me to upgrade you”.  I think we all know that in this case the agent was using the “system” as an excuse for what was a training, authorization, and motivation issue.

(Care)  I waited a bit closer to the flight time, and then went to the transfer desk inside security.  I told my story again to another United Agent.  I was at this point doing an experiment to determine how many United agents I would need to tell this story to, to find someone who even cared a little.  Turns out to be three.  Finally, Hema Amin, at the transfer desk in LHR heard this story and actually said:

That’s terrible.  I’m so sorry your vacation was ruined.  I can’t upgrade you myself, but I will call my supervisor to get a code to allow me to upgrade you.  I told her that whatever happened from this point on that she was a star for being the first person to care at all, and that I greatly appreciated it.  I did not embellish the story I told her, but she called her supervisor on her cell phone after not getting through on the desk phone, and told a story on my behalf including all the details I gave her and ending in “so things just went from bad to worse, and I think we should upgrade her”.  She got the approval, and I am now typing this in business class, sipping a glass of champagne.

Cutting Costs without Cutting Quality of Service

I’m not suggesting that companies provide limitless service and don’t worry about cost at all.  In the next post I will discuss ways to understand the value of keeping a customer and ways to cut the cost of customer service without cutting the care.  It’s possible if you start with the strategic decision of providing care first, then cutting cost as a tactic, not as a strategy.

Heros and Villains

• Companies who made the Care decision:  Zappos, Verizon, JCrew, Ritz Carlton
• Companies who made the Cost decision:  AT&T, ATT&T, AT&T, Lufthansa, Comcast

What has your experience been?  Leave a comment.