Where Has All the Service Gone?

Introduction

Recent presidential debates included predictable topics. More relevant than political rhetoric is voter perception of what this means to them. The cost of a gallon of milk, a gallon of gasoline, or a pack of cigarettes will have more impact than the war with Iraq and esoteric issues. Recognizing this, Kerry aligned himself with the American worker, bewailing lost jobs and promising legislation to penalize companies that outsource. Laudable sentiments. Dramatic, when translated by press coverage.

The reality is that controls in support of environmental issues, regulation, and legislation have created a situation where it is economically unviable to manufacture consumer goods in many geographies. Emerging economies, less concerned with the longer term impact of pollutants than the immediate gratification of full stomachs and vodka glasses, are reaping the benefits of social conscience and sustainability policies. More legislation and control is not the answer—this has always proved to be a double-edged sword. Automotive, textile, and other industries that imposed embargoes, penalties, and trade restrictions bear testimony to this.

Automation and technology challenge rules and create disruption. The industrial revolution changed the demographics of the world—forever. Workers were drawn from their agrarian base to growing cities by the promise of higher wages, shorter hours, and enhanced lifestyle. Waves of technology crashed through the 1900s leaving in their wake further changes. Men moved from smoke stack industries to white-collar positions. Armies of women joined the workforce, initially as hand maidens to the men in suits, evolving to corner offices of their own, as the personal assistant changed into digital form. In the unwired world of today, the immediacy of the Internet has transcended geographical boundaries. The physical becomes irrelevant. Activities taking place in Beijing that result in electronics for European markets are no more disruptive than the economic revolution that enabled creation of uniform products anywhere in the world.

Of greater concern is the fact that the most intangible of corporate assets—customer satisfaction—is now being outsourced. In almost frenzied fashion, major corporations—who should know better—are placing their customers, the source of their income, in the hands of the uncaring.

Take for example the consumer electronics industry. Symbiotic relationships between manufacturers and retailers are reinforced by sales and margin growth. Manufacturers support their products with incentives, discounts, and rebates. Retailers provide the point of purchase, to include zero percent financing, enabling consumers to take home the latest gizmo and gadget immediately. Another revenue generator is the extended warranty'. Sales personnel at specialty retailers urge the innocent to purchase these, in many cases at exorbitant cost. Yes, the product has a warranty, but of course this is limited, and the customer would be well served to protect this new investment.

What happened to the lifetime value of the customer?

This in itself should be a warning! Where is the manufacturer in this picture? What happened to the lifetime value of the customer? And whose product is it anyway?? After-sales service is increasingly part of the value add—product lifecycle does not end at the retail check-out. Product performance as promised challenges the future of the manufacturer/consumer relationship. Brand loyalty is hard won—product differentiation is in many cases based on perception. This is one remaining area where manufacturers can impact true future demand. But for some reason, once the product moves into the retail channel, most manufacturers lose control. When faced with a problem, the consumer is alone! The retailer abdicates responsibility. The product is still under the manufacturer's warranty (call a toll-free number). Or, more commonly, this has just expired. Yes, you purchased the extended warranty, but this has been outsourced. You need to call a toll-free number. The agony begins. A recording instructs you to select from multiple options. By the end of this first message you have forgotten what they were! More canned music followed by more choices. If you are really tenacious, you are finally connected with a living being. From the heavy accent it is apparent that Bert' or Nancy' is more likely to go home to an apartment in Mumbai than Memphis. Cost cutting is at epidemic levels and the Holy Grail of the customer experience—customer support—is now being outsourced to the lowest bidder. Contracts are negotiated based on hourly rates for call handling. Technicians and so-called support personnel are trained based on canned scripts and English language idiom, ignoring the key ingredient—customer satisfaction!

But there is light at the end of the tunnel. Forward thinking retailers like Nordstrom have empowered their personnel to do whatever it takes' to ensure true customer satisfaction. No matter where or when the product was purchased, issues are resolved with a smile. The ambiance, the piano player and the wonderful consumer experience more than compensate for a potentially higher price than at the alternative low price leaders'. Service industries have also embraced that philosophy—Ritz Carlton personnel treat each guest like a celebrity—hospitality takes on a new meaning. Supermarkets are recognizing the value of customer loyalty programs. And even the desk-top shop and ship', a potentially clinical process, has many opportunities.

Technology enablers are more common with on-line retailers—software programs recognize repeat buyers, personalizing the purchasing experience. Suggestions are made with regard to products that might appeal, based on purchase history. Accessories are recommended to accompany new selections, the whole interactive experience creating an illusion of intimacy. And even those companies that have chosen to outsource the after sales service' element can create a satisfying experience through the use of technology—number and voice recognition in combination with software programs, scheduled call routing, and other tools that smooth the bumps. But technology is only an enabler—the human element is the critical factor. Best practice at the process level should be identified and consistently applied. Problem resolution should be standardized through hands-on' experience, achieved during support analyst training through

• Role-playing
• Reviewing and analyzing real-time and recorded problem resolution by competent analysts
• On desk' experience, supported by mentoring program
• Tools that support a consistent process, prompts, links, etc.

Who knows—maybe technology will once again change the rules and enable the creation of consistent and high quality customer service—no matter who or where the players are.

ChainLink Research is a bold new supply chain research organization dedicated to helping executives improve business performance and competitiveness.