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High Impact Quality:
Customer
The importance of the customer, in any
business, is an oft repeated but idealized concept that is seldom
understood at a practical level across the
organization. Although every business person knows enough to
repeat this mantra, particularly when the customer might be listening,
there is a very strong pull in the opposite direction, a pull from the
current mania for increasing profitability--despite, instead of, and
because of, the abscence of a real commitment to increasing value for
the customer. The focus on increased profitability, without
increasing the value delivered, can be seen and
felt everywhere by consumers. The core value of the
underlying product or service is subsumed by the costs of
marketing, sales, distribution, re-distribution, and executive
compensation. To truly regain a focus on the
customer requires that business leaders and business managers
understand the importance of value in their focus on the
customer. High Impact Quality offers
a hard lesson on this score. The quality of the
business model cannot be separated from the value that is provided to
the customer, nor from the value of the work environment provided to
the employees. The forthcoming section on "employees" will
emphasize this point about providing both customer value and employee
value. The companies that are effective in providing
increasing levels of value to their customers, and steadily developing
extraordinary relationships as a result, are also the ones that are
focused on continually improving their work envronment.
The example provided below illustrates the
need to fundamentally rethink the role of the
customer in any business system. Examples of this sort are
all too easy to find and all too clearly point out the shift, across
many global brands, from a focus on the customer to a craven attempt to
harvest additional fees and eek out a few additional points of profit
at the expense of the company's long term brand
viability.
A Philadelphia law firm leased their copier
from one of the largest distributors in their area. The
copier was a sizable expense in their small, but rapidly growing
business, running $500 a month, plus additional charges if they ran
over a contracted number of copies per month. They had a
great relationship with their local sales representative and had
steadily increased the capacity, and cost, of their copiers over the
years.
One month they received an invoice for
$4.61. The invoice noted that the bill was for
shipping “toner cartridges.” The office manager knew
that they had not received any toner cartridges that month. A
quick call to customer service was initiated, with the expectation that
the charge would be dismissed as a clerical error.
The customer service representative at the
copier company explained that the $4.61 was a new fee that the
company had introduced to cover the cost of any toner that might be
shipped in the future.
The customer wondered, in increasingly angry
tones, how she could be billed for shipping charges on toner that had
not shipped, yet, but might be shipped in the future. A
demand was expressed to talk with the manager. The manager
was not available, naturally, nor was it anticipated he would be
available at any time in the near future.
The phone call was terminated and the
customer emailed the service representative to document the incident
and, again, request that the $4.61 be removed or proof supplied that
toner had been shipped. Meanwhile a call was placed to the
sales person requesting that someone with sufficient authority to
write-off $4.61 call the law firm back immediately.
Meanwhile, the service representative
composed and sent an email back documenting her view of the customer’s
inquiry. The email she composed was meant for her
boss, but she accidently sent it to the customer.
The email read: “None of my tricks
are working with this witch, you have to help get her off my back.”
The office manager was reading this email
when the copier company’s V.P. called. The office manager
listened politely while the V.P. started explaining in equally vague
and pompous terms that the charge was appropriate, entirely within the
terms of their contract, and such a small amount, shouldn’t it just be
paid and be done with.
The office manager listened to the inchoate
rambling for a few mintues and then read the email back to the V.P.
She noted that he would not have to worry about prying this
particular customer off of their representative’s back because the
$6,000 annual lease arrangement had just been cancelled due to a phony
$4.61 shipping charge.
Too many businesses operate on this premise,
the customer is someone to be tolerated, lied to, overcharged, and
abused. The service representatives in these companies
actively dislike their customers and consider any requests for
assistance an interruption and an imposition on the time they need to
do their jobs. The owners of these companies are so concerned
with short term profits (like phony shipping charges and hidden credit
charges) that they lose site of the highly profitable relationship they
have with a long term, loyal, customer.
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Nuisance fees are not the result of unthinking
malice--they are the result of detailed analysis and carefully nuanced
malice.
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These "nuisance" fees
are not the result of unthinking malice on the part of these
companies. They are the result of detailed analysis and
carefully nuanced malice on the part of these companies.
There is a deliberate trade-off. Test marketing and focus
groups identify the percentage of new customers who will
"figure out" the nuisance fee and refuse to do business.
Additional research determines the number of current customers who will
cancel or chose a competitive alternative. The numbers are
churned through the large caveat emptor
calculator in the back office and the fees are rolled into the
product.
Banks now charge $50 to process a check some
other customer bounced on your account. Airlines charge a
$100 to change a reservation that they insist you make 30 days before
your travel dates. Doctors charge $75 for a 7.5 second office
visit. Lawyers charge $3,000 to print a piece of paper off
their hard drive and afix a signature, presumably using very expensive
ink. Credit card companies charge a $45 late fee when the
consumer pays a $3.75 balance due 2 days after the mail by date--even
though the mail by date has already passed by the time the bill arrived
in the mail.
There is an epidemic of poor quality among
U.S. businesses and a pandemic of horrible service running in
parallel. The root cause of this precipitous decline in
quality is primarily financial, although there are always cultural and
management dimensions in a problem of this magnitude. Even
though our understanding of strategic quality management and
the use of analytical tools, such as Six Sigma, have improved our
technical ability to deliver superior quality, the level of
quality continues to decline. On virtually every dimension
and across many critical economic sectors there is a consistent record
of declining performance over the past few decades.
Executive compensation continues to rise as
a multiple of the average worker's pay. Is it any coincidence
that increased executive compensation is now understood, by these
same executives, to be a consequence of decreasing their
worker's pay? As labor arbitrage continues on a global scale
and employers seek the lowest cost sources with the least regulatory
oversight, there is increasing pressure on all businesses to organize
the business system against their own employees.
In our healthcare system we spend
more than twice per capita of any other developed country and
yet the healthcare system itself remains one of the leading
causes of death. As Dr. Barbara Starfield,
a leading health care policy analyst at Johns Hopkins notes in her New
England Journal of Medicine article, "The United States now
ranks 15th to 40th worldwide on various key
health measures, such as life expectancy or years of life lost
owing to preventable causes."
In our educational system the U.S. spends
more per student than any other developed country and performs
below average on global achievement tests. A 2003
study by UNICEF ranked the U.S. 18th out of 24 developed countries in
educational achievement. The United Press International noted
in a 2008
report that South Korea graduates 93% of its high school
students, the U.S., in miserable comparison, graduates only 75%.
Our major
manufacturing sectors, the automobile industry
being the most visible in its recent malaise, have largely
achieved parity in production quality only to lag far behind
in manufacturing effectiveness and design quality.
There is a critical need to recover our
understanding of the customer and develop a leadership commitment to
producing sustainable levels of real value that attract and retain a
loyal customer base, served by increasingly effective and engaged
employees. The mission of High Impact Quality
is to help small businesses and entrepreneurs recover this
understanding one customer at a time and rebuild this commitment to
excellence one company at a
time.
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