Archive for February, 2009
Footnote #1:
Received interesting feedback from the recent Revenue-IQ article, Zero-Based Servicing, here’s one that got me thinking:
A contractor brought up the issue of how well customers understand the relationship between service quality and service level (as defined by specifications).
Meaning, if service levels have been re-engineered severely downward, will end-users see that as “poor quality”? In other words, does low service levels = low quality?
I don’t believe so. Specifications for low service levels can be performed well, which is high quality, or poorly, which would be low quality. But the service level has been specified independently of its performance, and it’s performance that determines quality.
This was the rationale behind Zero-Based Servicing where desperate companies gain cost reductions by re-engineering service levels down to the absolute lowest levels. Even at those bare bones levels, service still can and should be high quality.
If end-users mistakenly think low service levels = low quality, it points to a disconnect in their EXPECTATIONs, not service quality.
This becomes easier to understand in our new model for the contract service world.
Think about it. The end-users’ CUSTOMER EXPERIENCE has changed now that they’re receiving the lower service levels.
Their EXPECTATIONs though are still set on the higher service levels of the good old days. Why should they change their EXPECTATIONs unless they’ve been told service has changed (revising the PROMISE)?
EXPECTATIONs need realignment to reality when service levels have been decreased.
Otherwise, low service levels can only be seen as low quality, when in reality it’s not the case.
Footnote #2:
Sanity has prevailed, at least temporarily…and Revenue-IQ helped (maybe just a little).
A friend notified me that US Airways is reversing their policy about charging for water. Specifically, they’re returning their beverage service.
Although I don’t hold out much hope for US Airway’s understanding their CUSTOMER EXPERIENCE.
CEO Doug Parker said they were reinstating the service because other airlines didn’t follow US Airways. Sounded like Doug thought it still was a good idea, just that US Airways was so far ahead of the rest of the industry it was left hanging out to dry like laundry on the line.
Wow. I’ll bet there are still more surprises to come from US Airways’ a la carte business model. Can’t wait, but then again, I’ll have to read it online or hear it from someone else, I’m an ex-customer.
So, what’s happening in your world?
~~~~~~
Chris Arlen
President, Service Performance
Technorati: The Contract Service World, service expectations, service quality, layoffs, US Airways
February 26th, 2009
It used to be more important to select a company to work for, rather than choosing the industry it was in.
The belief was that a great company could outperform the industry as a whole. And wouldn’t you rather be at that dynamic place than somewhere else?
Well, today’s economy shows that making strategic decisions about healthy industries may be as important as choosing a specific company to work for, or with.
This is true if you’re managing an in-house service department, or providing an out-sourced service.
The company you keep isn’t what it used to be. The future of the industry is where it’s at.
What happened?
Strategy Caught up with Tactics
Strategy focuses on the larger, macro forces that overwhelm individual company efforts.
Look at automotive suppliers hurting as much as their customers. Doesn’t matter how brilliantly those suppliers performed their business, the bigger picture (automotive industry in this case) swallowed them up.
Conversely, a rising tide raises all boats. If you were in the right industry at the right time you couldn’t help but win, as in the early dot com years.
What’s this mean for an in-house service department?
The health of the industry your company is in will impact your service tremendously.
And that comes (might already have) in the form of drastically reduced budgets, headcount reduction, and deferred equipment purchases and/or maintenance.
Is this an over reaction by some companies to 2009’s fear-based economy?
Maybe, but here’s an example to think about: Microsoft made $4.17 billion in profit last quarter.
That’s worth repeating. Old softie made $4.17 billion in profit from October through December of 2008.
Then they immediately laid off 1,800 employees, to be followed by another 3,600 within 18 months.
With all that profit Microsoft looked at the industries it was selling to and saw bad times. So snickersnack went the RIF blade and headcount fell.
In all likelihood the layoffs were for investors, to show them Microsoft was proactive, not just sitting around waiting for bad things to happen.
But still, if your company is in a stressed industry, like automotive, banking, or many manufacturing sectors, how drastic a cut to your in-house services will you need to make?
Is 10% reduction enough? 25%? 50%?
Can you wait until the current contract expires?
Or does your company need drastic cost reductions now?
What’s this mean for an out-sourced service contractor?
If your customers are in stressed industries, you’d better go beyond the usual cost reduction drills.
It’s probable you’re not going to make those drastic reductions of 40% and more by skipping a trash can or two.
It’s time to explicitly define how your service contributes to your customers’ bottom line. Do you know how you contribute? Does your customer contact agree?
Once you’ve done that, then cut your scope to its absolutely, positively necessary rock bottom to reduce their spend.
You’ll also have to deal with end-users left over expectations They may expect a level of service that’s not in line with the new, gutted scope and spend.
As your past experience has told you, your customer contacts aren’t always the best at telling their end-users they’re paying for less service. You’ll have this realignment of expectations to accomplish on top of all the other operational stuff.
However, there’s one thing the economic crisis has done, its empowered change.
End-users may be more willing to accept the change of gutted service if it means keeping their company’s doors open longer, and their paychecks.
The Business World may be a Scary Place for Now
Business survival will likely be white knuckled for the next several years. But you can make it scary like roller coaster scary – not Texas Chainsaw Massacre scary.
Your choice. Things are what they are. And will be that way for a while.
New Strategy Anyone?
In the upcoming monthly Revenue-IQ article (what you’re reading now is the weekly blog) I’m planning to present a new service strategy for our current economy. In particular for companies in stressed industries.
It’s based on a line from the recent movie The International, which says “When there’s no way out of the current situation, look for a way further in.” Interested?
MORE ABOUT: US Airways shooting themselves in the head
They’ve started charging for pillows and blankets. $7 to keep your head cushioned and your legs warm. And you get to take that snazzy US Airways logoed pillow with you onto other airlines’ flights. Yup, good thinking marketing department. And how did they avoid the layoffs?
~~~~~~
Chris Arlen
President, Service Performance
Technorati: economy, Microsoft, layoffs, US Airways
February 19th, 2009
On January 28th we sent out a survey to get a feel for how the economy of 2009 might impact the customer-contractor relationship.
This qualitative temperature check provided some interesting responses. Thank you to those who participated.
Respondents were all contractors, except one consultant. Therefore the summarized results below are from the contractors’ perspective.
How do you see the customer-contractor relationship changing in the fear-based economy of 2009?
The consensus response was that customers will be forced away from value and partnerships, and towards lower costs. It’s being seen in more contracts bid out to lower costs, with the implication being contractors’ profits will suffer.
(No surprises here. CA)
Several respondents thought customers would become more committed to getting the most value from their contract spend.
And as importantly, showing they extracted higher value from lower costs to their bosses. This seems an understandable form of customers’ justifying their job for greater security.
(It’s a good idea for contractors to help make their customers look good upstairs anyway. Reporting contract service performance should be done as much for contractors’ benefit as for customers. CA)
One respondent took a long-term view of the current crisis, recognizing customers had a need to reduce costs now, and as a result hurts contractors’ profits.
This response looked at the tough economy as the time when partnerships are truly made. As an opportunity for contractors to get “baked in” with customers, positioning themselves for the eventual economic recovery. The belief being contractors who stayed with customers during tough times will be rewarded in the future.
(This is the strategy I’d employ if my customer base was struggling badly. Although, I’d wonder how many of my customer contacts would remain in their positions after the bloodletting passes to appreciate my toughing it out with them. CA)
What can be done to confirm the receipt of service value at lower pricing?
Almost every response contained some mention of either:
- Communication,
- Customer Expectations, and/or
- Benchmarking
Respondents felt greater communication was needed to shape customers’ expectations to the new impacts of lower spend.
Another common theme was contractors’ desire for customers to understand how costs and wages related to the service value received. Contractors felt customers would still expect the same levels of service, just at lower pricing.
Contractors mentioned two methods to increase customers’ understanding; benchmarking and service metrics.
Benchmarking would show customers their contractors’ wages and/or performance in line with the rest of the benchmarking group.
Service metrics would show customers they’re receiving similar value, relative to their new spend, from what they received in the past.
(Making service visible, tangible has always been needed, now more than ever. Shaping customer expectations helps customers’ perceptions align with contractors. CA)
Will contract governance become more, or less important in 2009’s fear-based economy?
The consensus was that contract governance would increase. Contractors felt customers would focus more on receiving full value from lower spend, holding contractors accountable.
One variation to the consensus felt there would be an initial increased focus on governance, but then customer layoffs would reduce customer oversight, and governance would fall off.
(Governance may end up being the last customer contact available to check contractors’ performance. Depends on how badly the customers’ industry is hit.
Yet, performance will always need to be reported, it’s just the nature of contract services. No reason for contractors to pull back because of a lack of oversight – should be all the more reason to report performance. CA)
How will service quality be impacted? Will it still matter? Why?
Responses were varied. However, a common theme in most responses pointed to the age old conflict between cost and quality.
Contractors have always struggled with trying to figure out which side of the scale customers might land on. Their responses showed the 2009 economy has brought the cost-quality conflict front and center, and with a vengeance.
This showed up in contractors’ questioning of how well customers understood their cost drivers, and how that cost affects quality.
If contractors’ responses were put into questions, they would be:
- Customers get what they pay for – but are they OK with that?
- Do customers expect the same quality at lower prices?
- Will customers believe other contractors’ promises of higher quality at lower price?
(How well do contractors understand customers’ specific quality expectations?
What cost pressures are customers under?
Specifically, what will customers put up with for a lower price?
And how much lower should the price be?
Answers to these questions may require more of a change in contractors’ expectations than customers . CA)
Summary
Remember, responses here are coming from the contractors’ perspective, and may not reflect how customers feel.
It would make sense for contractors to more fully understand customers’ expectations, and what level of service they’re being forced to accept in this new economy.
Understanding and profiting from the Customer-Contractor Relationship in 2009 will be a challenge. The crippled economy puts even more pressure on many of difficult areas of the relationship.
Themes revealed in this survey include:
- Shaping Customer Expectations
- Customer Communication is Key (using benchmarking & service metrics)
- Readjusting Contractors’ Understandings about Customers’ Expectations
What are you doing to understand your role in the customer-contractor relationship of 2009
~~~~~~
Chris Arlen
President, Service Performance
Technorati: customer expectations, 2009 economy
February 16th, 2009
That’s right, in the head, not the foot. Because the foot might take some time. And US Airways appears in a hurry to end it all.
US Airways Targets its Noggin
In the past US Airways, like other airlines, eliminated free in-flight snacks and food, and began charging for them. Instant new revenue source. Their resourcefulness is understandable in the long suffering airline industry.
Now, US Airways has eliminated it’s in-flight beverage service. This means passengers no longer get soda, coffee, or water without paying for it. That’s right, no water unless you pay.
I learned this on a trip from Seattle to Philadelphia to hold a training session. Imagine a 4-1/2 hour flight, no pay, no H2O.
US Airways
Clear Cutting the Forest for the Trees
US Airways’ zeal for cutting costs has blinded it to the experience customers have in their planes. It’s cannibalizing what little is left of its customer experience. And at some point that’s fatal.
US Airways must believe their only hope of survival now is having the lowest costs so they can offer the lowest prices. Because lowest prices always fill planes.
This strategy appears to have reached a tipping point, one where US Airways may be driving passengers away, rather than drawing them in.
Why? Because people talk.
Customers to customers, employees to employees, and employees to customers. Word of mouth is king. Not rocket science.
I Told You So
Here’s an example, it’s mine. During breaks in my Philadelphia training session I told at least 4 clients how shocked I was about no-pay, no-water on US Airways.
One of those clients told me his US Airways’ water story. He asked an attendant for a drink of water and was told “that’d be $2 please”. He thought she misunderstood him and said “no, I don’t want a bottle of water, just a drink, you know, in a cup”. The attendant hesitated for a moment, then sheepishly said “the $2 isn’t for a bottle, it’s for a cup of water”.
He looked at her with his jaw on the floor then said it was outrageous.
She agreed, said she felt really bad about having to charge passengers for water, that she no longer enjoys her job, doesn’t feel like going to work because of it – she also said she wasn’t alone, it was a common feeling among other flight attendants.
On my return flight I saw proof of what she was saying. One of my flight attendants wore a button that said “I Just Work Here”.
I asked her what it meant, and she said she couldn’t answer that question. She just wore the button. I took that to be mean US Airways wasn’t allowing her to speak out against the airline, but union regulations allowed her to wear buttons.
What does that button say about US Airways?
What does that say about how their employees feel?
How long before dispirited employees become disgruntled?
And what does that tell you about the US Airways’ customer experience you’re going to receive.
And I’d guess that several of the clients I told my water story to are already passing it on to their clients and friends.
What’s Next? Paying to Use Restrooms In-Flight?
Don’t laugh, it could happen, soon.
I’d guess US Airways’ number crunchers have already worked out how to charge for restrooms. They’re called pay toilets and are another revenue source. When that happens, we’re all ____ out of luck if we don’t have the cash in flight.
I’m not belittling the situation US Airways is in, they’re struggling to remain afloat. But the savings they’re generating aren’t showing up in widely lower pricing than their competition. They’re not saturating the market with pricing so low that all their flights are filled every time.
Think about it. How low of a fare would it take for you to fly on a plane with a pay toilet?
If other airlines follow, does a free toilet and cup of water become distinct competitive advantages between airlines?
Bad Customer Experience & Repercussions
For myself, I’m not going to fly US Airways. I’ll have my clients book another airline for me.
Funny, I’m the one thing that can help US Airways survive in trying times, I’m a customer.
Oh yeah, and I’m going to tell these water stories to friends and clients too. Matter of fact, I just did that.
And I only hope pets transported in the cargo holds of US Airways’ craft carry the exact change. So helpful to flight attendants, and another contribution to US Airways’ bottom line.
How are survival cost cuttings affecting your customer experience?
~~~~~~
Chris Arlen
President, Service Performance
Technorati: customer experience, customer satisfaction, customer loyalty, US Airways
February 6th, 2009
