Recently we had a horrendous experience dealing with the new, but not yet integrated U.S. Airways. Discussions with a senior customer service representative at the company’s headquarters did eventually get the problem fixed. However, more interesting was their comment to us that, "if a senior management [customer service] person at headquarters encountered such problems within the organization getting a customer’s problem fixed; it’s no wonder that customers were upset!"
For those of us in the front lines of marketing, sales, and customer service, we know that upset customers can wreak havoc on our businesses. As we usually lament that good news hardly gets disseminated, but bad news goes around the world instantaneously, this bad service experience with the airline wouldn’t have just been forgotten as we talked with friends and acquaintances. An unhappy customer tells many others very quickly.
In fact, similar circumstances within our own industry can also have disastrous results. We were recently involved with such issues at print market companies at both ends of the size spectrum.
Major Printer Dealer
The first involved a dealer for one of the largest printer manufacturing companies in the business. The dealer indicates that they sold many of this large company’s printers, "despite the manufacturer’s efforts." He further suggests the problem arose because nobody from the manufacturer ever came out into the real world. There were lots of rules and restrictions and marketing plans, but very little in the way of realistic help to close orders. The dealership, he states, had to rely on its own resources to sell and support or it would never succeed.
For all of the manufacturer’s size and historic competence, in this modern market push, this manufacturer wasn’t providing its front line troops with the tools they needed to be successful. We’re sure that if we asked the manufacturer’s management team, they would certainly think that they were providing a winning strategy and support for their dealers. Too often said in the offset manufacturer-dealer world, it is a real shame to see this stereotype continuing into the newer world of digital printing.
On the other end of the spectrum was a new sales person for a small dealer. He had just come back from headquarters, where he was supposed to have been scheduled for two full days of training. Unfortunately, his sales manager had to go out on an emergency sales call and the demo and training room got taken over by both the engineering department for technology testing, and for customer testing by the service department. The sales person noted that as an employee, he probably got enough out of the two days anyway, to be able to begin to do a good job selling, but as a customer there for training, he would have gone away very upset.
We’ve always noted that until a company gets to a critical mass, there are never enough people and facilities to do everything that needs to be done. In the smaller company above, this is certainly true. Much of what it does is done well because of a cadre of dedicated employees. What it doesn’t do well are the things that take infrastructure and dedicated resources. That is apparent in the shared/inadequate demonstration, test, and engineering facilities.
A digital printing customer purchased a 45-inch laminator from his dealer to laminate 45-inch-wide printed material. When the product arrived, it would only laminate 42-inch widths. The salesman had misrepresented the capability, says the customer. The dealer says the customer should have read the product data sheet more carefully, and refused to take back the unit, agreeing only to a credit note. Recently, the customer purchased a major addition to his facility, over $160,000 in equipment, from another supplier, indicating that he’d never buy equipment from the first dealer ever again. A significant profit was lost over taking back a product worth a few thousand dollars at most.
The Problem of Size
These scenarios made us wonder if there is an economic reason why such events occur. We don’t introduce this thesis as an excuse, but as a way to understand why they happen. If we know why, perhaps we can fix the problem.
A recent column by Jack and Suzy Welch in BusinessWeek, sees being a small company as a big benefit. Comparing large companies with small, and noting the differences in their ability to create really comprehensive strategic plans, they state, "No academic textbooks or consultants are needed. All that’s required is a team of engaged employees who can dream big, debate intensely, and ultimately emerge with a dynamic game plan. Then it’s time to implement and that’s where small companies really have it made…Small companies, like little powerboats, are able to adjust direction more quickly than the corporate ocean liners."
With their ability to make things happen—making decisions faster with fewer bureaucratic hurdles—small companies can revisit decisions more often, and make changes in direction that overcome their errors more quickly. Rather than having the infrastructure in place, the smaller company provides good customer service through the dedication of its employees. With perseverance, everybody’s expectations can be met.
The large company has more resources in place, but it still is not easy. As big as it is, and with its ability to survive while not being right as often, it has all the resources in place to make things work more smoothly. With dedicated R&D facilities, training programs, class rooms, good installation scripts, and the like, a customer should be able to be well taken care of. The problem here is the lack of business and personal dedication it needs to bring new products to market and to enter more competitive markets where its prior strengths may not be so strong. Autocratic, and bureaucratic, and talking too much to insiders, large companies sometimes squander their advantage by knowing too much.
They can succeed against smaller companies by creating inside tiger groups that give them dedication—but this takes special employees and understanding bosses. More usual is the promotion of those without the skills as payment for their long service to the company.
It Does Matter
Both companies must make changes in order to succeed. After all, it is customer service that is the number one attribute that keeps customers coming back. Yet, whether large or small, many businesses misunderstand the motivations of their customers. In a landscape of similar products, there must be a way to generate value to your customers that has more potential for your business than just to sell at low price. Yet, companies that really do want to value customer loyalty, still believe that cost is the primary customer motivation.
Market research done by CRMGuru, a customer resource management provider, indicates that while 70 percent of customers say that poor service caused them to take their business elsewhere, business managers believe that price was the prime factor for the defection. In one industry with a churn rate between 25 and 35 percent, each company was spending from $100M to $150M to replace lost customers. No matter how you look at it, that isn’t small change and could be boosting the bottom line instead.
When we talk with manufacturers, dealers, and printers, we do not believe that they take proactive measures to improve loyalty and retention, which will lead to increased profitability. What we see is that lots of resources are spent trying to recover from customer defections and to keep up sales, rather than to stem the tide and use existing customers to manage growth.
In some cases customers continue to do business because they have no alternatives, but it is not reasonable to use these trapped customers as prime examples. Truly loyal customers have a positive attitude about the business relationship. They buy more over time. They tell their friends how happy they are with their relationship.
In the printing market, we can say with surety that customers can acquire similar products at similar prices from an array of local, national, and even global suppliers. Yet, studies seem to indicate that emotions, rather than price are much more the drivers of decisions.