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From The Mistake Bank: Sue Pera on the downside of expansion

Tuesday, November 11th, 2008

This is the first of a series of interviews with businesspeople about mistakes they’ve made in their careers. If you’d like to be part of this series, email me at john (at) caddellinsightgroup (dot) com.

Find more videos like this on The Mistake Bank

Sue Pera is the owner of the Cornerstone Coffeehouse in Camp Hill, PA. Visit them on the web at http://thecornerstonecoffeehouse.com. (Disclosure: I usually hang out here on Friday mornings, when the cleaners come to do my office. It’s a great place; if you happen to find yourself in Camp Hill, you must stop by.)

Tags:
Mistake Bank, mistakes, narrative, customer relationships, expansion, growth, entrepreneurism

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From The Mistake Bank: Surprised by a large customer defection

Thursday, October 9th, 2008

From The Mistake Bank:

The following story is excerpted from “The Knack: How Street-Smart Entrepreneurs Learn To Handle Whatever Comes Up,” by Norm Brodsky and Bo Burlingham. This is a terrific book with great storytelling throughout. Brodsky uses so many examples from his storage company, CitiStorage, that by the end of the book you feel like you know that industry. To learn more about the book, visit the web site. I highly recommend it.

I still remember the moment, many years ago, when I found out we’d lost one of our biggest customers…. One of my salesmen called me in my car and told me we’d just received a fax from the customer, a major law firm, announcing its intention to move its boxes out of our facility when the contract expired three months later.

Now you have to understand that, in this business, moving your boxes is a big deal…. So it’s a real loud message when a customer leaves, and this one came completely out of the blue. I was stunned. “What are you talking about?” I said. “Man, how could we lose this account? What happened?”

The salesman didn’t have an answer, and we couldn’t get one from the customer. The people in charge at the law firm wouldn’t see us or talk to us on the telephone. Our urgent messages brought perfunctory replies: “The decision has been made, and it is final.”

Obviously, we had screwed up. The guy who had closed the account had left us five years before, and we hadn’t stayed as close to the customer as we should have been. A week or so after receiving the fax, I came up with a proposal that finally got us a meeting with the firm’s managing partner—to no avail. The situation was too far gone. We could offer good financial terms, but we couldn’t fix problems that had been festering for years. Our competitor matched the terms and got the account.

So I called my managers and salespeople together and said, “What did we learn from this? What do we have to do differently in the future?” The real lesson, I knew, was not that we had made mistakes. You always make mistakes. We failed because we’d waited too long to find out about them. We decided that, from then on, we’d go to each customer eighteen months before the end of the contract and offer to negotiate a new one. If the customer hesitated, we’d know right away that we had a problem—while there was still time to fix it.

As soon as we began implementing the new policy, we made a very important discovery. We had unhappy customers and didn’t know it. One customer was upset about our system for providing information; we fixed it. Another customer felt it deserved a lower rate because its volume had increased dramatically; the customer was right, and we made amends. A third customer didn’t like a particular aspect of our inventory system; we changed it. A fourth customer was miffed that we hadn’t been sending regular monthly reports; we started sending them.

So, in four months with the new policy, we made four improvements, pleased four customers, and locked up four accounts, and all these benefits came from one failure. In the long run, that failure proved to be one of the best things that ever happened to the company.

Tags:
Mistake Bank, mistakes, narrative, customer relationships, defection, renewal, entrepreneurism

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Customer complaints as a source of business insight

Monday, September 22nd, 2008

We’re taking a brief detour from the corporate change series to discuss customer complaints (every businessperson’s favorite subject) though in truth it is very much in sync with the “letting the outside in” philosophy we’ve been discussing in those other posts. The Wall Street Journal’s occasional Business Insight section prompted the thoughts with today’s article, “Making the Most Of Customer Complaints,” by Stefan Michel and David Bowen of the Thunderbird School of Global Management and Robert Johnston of Warwick Business School.

“Making the Most…” focuses on the relationship between the customer, the front-line rep, and service management, and correctly describes how to manage a complaint to minimize damage to customer satisfaction without “giving away the store,” and to incent behaviors that will result in customers leaving the interactions feeling good (or at least not badly) about their vendor. It’s particularly insightful when describing the conflicts the front-line reps feel when trying to deal with a difficult customer situation:

These workers have the difficult task of dealing with customers who hold them responsible even when the failures in question are completely out of their control. The attitudes of customer-service workers, positive and negative, spill over onto customers.

Yet companies do surprisingly little to support them.

To be successful, these workers need to feel that management is providing the means to deliver successful service recovery on a continuing basis. Alternatively, when employees believe management doesn’t support them, they tend to feel they are being unfairly treated and so treat customers unfairly. They display passive, maladaptive behaviors and can even sabotage service.

This alienation is compounded when the workers believe that management is not improving the service-delivery process, which keeps employees in recurring failure situations. Even though complaining customers represent an opportunity to fix problems and improve satisfaction, alienated employees often see them as the enemy.

In addition to the sound advice to repair the processes, provide appropriate guidance to employees and management, and incent customer-delighting behaviors, there’s a broader value that I see to studying these interactions.

Customer complaints are a window into the customer’s use of the product and perception of the company. Virtually all satisfied customers are silent. Many dissatisfied customers are silent as well–calling customer service is time-consuming and frustrating. The fact that many problems aren’t resolved compounds people’s feeling that engaging with the company is simply not worth the trouble.

This means that any customer complaint reported to the company is a very important piece of data. Taken together, complaints can illuminate patterns pointing to product over-complexity, poor usability, underservicing, poor expectation-setting. The patterns might tell you that the customer-service approach you are so proud of is not working as well as it should. Or that customers are using a product differently from how you expected them to. The patterns serve as marching orders to product management, marketing and customer service for important value-adding projects.

But… you have to collect and sort through the data. It can’t be resigned to the bit bucket because it’s unpleasant or tells you things you’d prefer not to hear. I have started to work with clients to learn from customer-service interactions–the raw material, not just the statistics. And, not surprisingly, we are always surprised by what we learn.

Tags:
narrative, learning, customer relationships, customer service, knowledge

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A competitive advantage: employees who "spend most of their day talking to people"

Thursday, August 28th, 2008

I recall a number of years ago dialing 411 (Information) and asking the operator for a phone number for a store a few miles away in Boston. In a thick Dorchester accent, she corrected the name of the store for me. “I think you mean this one,” she said, and she was right.

Old school customer service has been in decline for some time now–pushed out by the costcutting allure of self-service, offshoring, IVRs, etc.

Impersonal customer service works in some cases. Shopping for a known commodity like a book, or CD, for example, or putting a vacation stop on your newspaper delivery. But companies have thrown the baby out with the bathwater, because if it’s really important to understand what a customer needs, a trained, empathetic person is the best resource a company can have. These folks, as John Kotter writes in “A Sense of Urgency,” help “bring the outside in”–in other words, they provide insight from a vital outside constituency–customers–into the organization.

I’ve talked before in this blog about how data about customer interactions will be captured and mined for insights about customer perceptions of products, service and the company that provides them. Today, surveys and focus groups attempt to paint this picture. Tomorrow, the real, raw data will be used. Stories from customers, and the stories from the people who serve them directly.

This will provide a new value proposition for customer service. As opposed to a replaceable part hired at the lowest hourly rate possible, front-line staff will be well-paid and well-trained. Their insights will be carefully collected and utilized, and products (and the customers that buy them) will be better off for them.

Shifting customer service to a different location to save $1.00 a call will be unthinkable.

It’s possible that Best Buy’s Geek Squad is an early prototype of this mindset. In an article in today’s New York Times, Matt Richtel depicts a power struggle between computer manufacturers who install application craplets on their PCs, and retailers, who are responding to customers’ desire to buy a PC free of craplets. This section was notable:

Mr. Stephens of Geek Squad says he agrees with H. P. that the future is in allowing computer buyers to choose and download what they want. But he said he believed Best Buy, not H. P., was in the best position to help people choose what works for them because, he argued, the in-store technicians are in closest contact with them.

“Geek Squad agents have one thing over Apple and Microsoft engineers. We spend most of the day talking to people,” he said.

Tags:
narrative, learning, customer relationships, customer service, knowledge

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The power of "anecdotal evidence"

Tuesday, August 26th, 2008

We have a bike rack on our 12-year-old Isuzu Trooper that fits into the trailer hitch. I mentioned to my wife the other day that perhaps next year we should add a hitch to our 6-year-old Acura MDX, so we can use the bike rack on the MDX after the Trooper gives out.

She laughed. “What if the Acura dies first?” she said.

My wife holds the perception very firmly that the Isuzu is a highly-reliable, trouble-free car, and that the Acura is a fragile thing, constantly in need of expensive maintenance.

Statistics say otherwise. JD Power gives Acura four stars for reliability (out of five), and Izusu only two stars–tied for the worst rating.

But looking beyond statistics, at the stories, the Trooper has a bunch of ardent fans. Some people have had terrible problems and hate the car, yet many others, a larger number, love it. (See this group of epinions posts for an example.)

And the MDX’s reliability has some detractors as well (see reviews from Edmunds.com), with many complaints about transmission problems (writer crosses fingers).

What’s most amazing is the firmness with which the reviewers–positive and negative–hold their opinions. It demonstrates the “tyranny of the mean,” in which a lot is lost by averaging ratings together. A car is an emotion-laden product–expensive, used daily, inconvenience-causing when broken. Opinions then vary dramatically based on personal experience. The stories are arguably more important than the statistics when evaluating this type of product. And product managers, as well, should be especially attuned to the stories customers are telling about their products.

The lesson here is that “anecdotal evidence” should not so easily be dismissed, and that statistics can be useful but, just as when buying a car, you should look under the hood for yourself.

It might help you figure out why your wife thinks the old Izusu kicks the newer Acura’s butt.

narrative, product management, learning, Mistake Bank, customer relationships

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Time to start listening to front-line employees

Wednesday, August 13th, 2008

I have a colleague who runs a small outsourced contact center in the Pacific Northwest. I told him of my project to find and use stories from call centers to get more useful customer input. He said, “It’s a great idea, but nobody listens to the reps.”

Then, as I wrote about last week, a bank that is renowned as a great place to work told me that an idea to have tellers share via internal blogs customer interactions they found interesting was a non-starter: “We just put into place a policy to limit the access our employees have to the internet.”

Well, it’s time to start listening to the reps. It’s time to let tellers blog about what they experience.

We generally accept that having happy employees at the front lines can help revenues, because happy employees convey good feelings to the customers they meet, making those customers feel better about who they’re buying from, etc.

But it’s now clear that in addition to courtesy and helpfulness, front-line employees also know more about what customers want, what they like and don’t like, how they feel about the company, than anyone else. Because “the reps” hear it, every day, direct and unfiltered.

Back in the day, the only way an executive could access this insight would be to visit stores and talk to employees and customers him/herself. This still happens. But with cheap, ubiquitous data-sharing technology like blogs, RSS, wikis, social sites, etc., there’s nothing standing in the way of systematically gathering and immersing oneself in detailed, rich information about customer interactions–even if you’re the CEO.

And don’t you think getting the chance to communicate, and being listened to, might increase the job satisfation of the front-liners?

An executive at a large US insurer told me that at their quarterly management meetings they listen to selected recordings of customer calls. “It’s always a shock when you hear what customers say directly. We’re so far removed from the customer.”

Precisely.

Tags:
narrative, social media, blogging, learning, customer relationships, customer service, knowledge, knowledge management

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M&T Bank – piling on the fees, it’s a company easy to hate

Wednesday, June 25th, 2008

A funny thing happened to me at the end of April. While I was on a business trip, our personal checking account with M&T Bank dipped below zero. I didn’t get back from the trip till late Friday, then the weekend came. At any rate I didn’t find out about the problem till Monday, when I checked the balance on line.

During the time we were below zero, Ten checks and auto withdrawals came in, totalling about $500. On my online statement were ten insufficient funds notifications (NSFs). The first charge was $18. The second through tenth NSFs were $32.

Each.

[I have a business account with Graystone Bank. When this same situation happened a few months ago, they called me immediately and alerted me that I didn't have enough in the account to cover a check that had come in. They offered to hold the check till I made a deposit. Which I did. That day. No NSF fee, and my undying gratitude.]

As soon as I learned that our M&T account had dipped below zero, I rushed to the bank with a check. I told the teller my situation, and she saw that it was a very unusual case for us. I asked if they ever forgive NSFs for customer goodwill purposes. She said I had to call the manager of the branch where I opened the account in order to discuss any credits.

It took me a while to think about which branch we opened the account at, since we have been customers of M&T for almost eight years and have visited many local branches in that time.

When I finally remembered which branch, I called and spoke to the manager. He told me company policy is to forgive the first NSF. The others would stay. I told him how displeased I was with this, especially since M&T hadn’t bothered to give me any notification of the low balance (as Graystone had) so I could have made the deposit before more checks came in.

The manager said: we are a big company, and that is the policy.

Here’s how that response sounded in my ears: “F— you. Go somewhere else if you don’t like it.”

This episode reminded me of the great article in the June 2007 Harvard Business Review: “Companies and the Customers Who Hate Them,” by Gail McGovern and Youngme Moon of Harvard Business School. The article begins:

One of the most influential propositions in marketing is that customer satisfaction begets loyalty, and loyalty begets profits. Why, then, do so many companies infuriate their customers by finding them with contracts, bleeding them with fees, confounding them with fine print, and otherwise penalizing them for their business? Because, unfortunately, it pays.

Regarding my experience with M&T, here’s a most salient excerpt:

Companies can also profit from customers’ bad decisions by overrelying on penalties and fees. Such charges may have been conceived as a way to deter undesirable customer behavior and offset the costs that businesses incur as a result of that behavior. Penalties for bouncing a check, for example, were originally designed to discourage banking customer from spending more than they had and to recoup adminstrative costs. The practice was thus fair to company and customer alike. But many firms have discovered just how profitable penalties can be; as a result, they have an incentive to encourage customers to incur them – or, at least, not to discourage them from doing so.

Which is my perspective in a nutshell. Shame on you, M&T. You have earned the hate of at least one customer.

Tags:
narrative, pricing, penalties, marketing, customer relationships, Harvard Business Review

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Shop Talk Podcast #11 – (not) raising prices: a mistake

Tuesday, June 17th, 2008

From The Mistake Bank:
The following story discusses how something as well-meaning as holding off on price increases until there’s no other option often backfires.

Click here to access the podcast.

Tags:
Mistake Bank, narrative, podcast, sales, marketing, customer relationships, pricing

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When things get tough, you need to negotiate face-to-face

Tuesday, November 6th, 2007

There is a moment early in the movie “Local Hero” where MacIntyre, the executive who is being dispatched to Scotland to negotiate a land purchase for an oil company, complains to a colleague about the trip. “I don’t need to travel there; I’m more of a Telex man.” Yet he goes anyway, and finds the Scots extremely challenging (and shrewd) negotiators. The deal wouldn’t have gotten done via Telex.

I was thinking of this while reflecting on the experience I had negotiating with a client was dragging their feet on signing the contract. Our general manager requested that I travel to New York and try and get the contract closed myself and I protested and said we can get it done on a conference call. He said, “Sometimes you have to go there in person.” And so I did. Here’s what happened…

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negotiation, narrative, psychology, dealmaking, customer relationships

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Why I don’t hate US Airways right now

Wednesday, August 22nd, 2007

21 August 2007, 2:30pm UK time. I just arrived in England on US Air Flight 734, five hours behind schedule. The plane was two hours late getting to the departure gate from the maintenance hangar. We then boarded, and sat for nearly two hours while the pilot periodically told us about the progress the mechanics were making on the problem with the brakes. Then we got off the plane, moved down the concourse four gates to get on the other plane. While waiting to board, we heard that the mechanics had fixed the first plane. Finally we reboarded the original plane and took off at around 2:00 am.

Throughout the long wait, I’m saying to myself, “I’ve been reading about these horror stories all year. Now I’m in one.” I waited for the passengers to start to melt down–first the small kids, then the adults, the flight attendants, and finally the crew. We’ll be reading about this in the Wall Street Journal Middle Seat column soon, I thought.

So how come it didn’t happen?

I’ve been thinking about this the whole flight. And the only explanation that makes any sense to me is the attitude and poise of the flight attendants, gate agents and crew.

They kept calm during the whole ordeal. They provided as much information as they had, when they had it. They apologized for the inconvenience, yet never got defensive. And once we got on the flight for the last time, it was all business.

Example: I asked for a glass of wine with my dinner, and fully expected them to charge me for it. I was ready with an obnoxious comment. But the flight attendant handed me the cup and the tiny bottle, and moved on without a word. She knew, the whole crew knew (and I should’ve known) that drinks were on the house for that flight. It didn’t need to be advertised.

customer service customer relationships