Good service is cheap

“Taking the customer perspective into account is not rocket science, so blunders in service design are usually due to shortcuts taken in the hope of apparent cost savings.”

In the end, good service is the cheapest for companies

It has been estimated in the automotive industry that the repair costs of a defect left in a product grow tenfold every time the defective product advances one step closer to the customer. That is to say, from the production line to importer, retailer and finally to the customer.

I also claim that the costs of fixing defects in customer service grow at the same amazing rate. It is difficult to disprove my claim because costs caused by fixing errors in service are usually perceived in sales. And there aren't too many companies that would admit that their sales have slumped because of lousy service.

The majority of customers do not feel that they get excellent service from companies providing services. At the same time, the majority of companies believe their customers receive excellent service. Who is right? How about, whose opinion matters more?

Targets are usually set for customer service. Often, these targets can be achieved even though customers are simultaneously served haphazardly. Industrial production and service production are united in the fact that it only takes one weak link to spoil the whole.

In a perfect world, the customers solve their own problems: read the manual, go to a website to find the information needed, or call customer service, which immediately solves the problem.

Sometimes it happens like that. In more difficult cases, the customer service promises to find the solution and get back to the customer. In companies serving consumer-customers, these cases have a profound effect on profitability. In other words, they are either costly or really costly.

The customer service personnel forward the message to an expert, who answers when he/she has the time, or forwards the message. When measured in the time it actually takes to solve the problem, it usually doesn't take long to solve even special cases. You see, customers rarely ask for the impossible.

The problem is that time is measured with a calendar. Even though the duration of actual work was less than an hour, when measured with a calendar, two months may have passed. If attainment of a desired quality is not monitored, it is easy to waste the customer’s time without regrets.

In the worst case, the expert rolls up his/her sleeves and spares no effort in solving the problem, even though the customer has not had any interest in the problem for a long time and has moved on elsewhere.

If a customer is left without an answer, he/she will call again and again, until he/she gives up and takes his/her business elsewhere. Employing customer service personnel and experts is expensive, but a customer leaving frustrated can be truly costly.

From the perspective of customer service, it does not matter if nine out of ten employees surpass expectations in their work. In a long service chain, one link can make others’ work futile. If there are more than loose links, it easily happens that the majority of the service received by customers does not meet their expectations – and for a good reason.

When striving for good customer service, the game is usually lost as early as the planning stage. Taking customer perspective into account is not rocket science, so blunders in service design are usually due to shortcuts taken in the hope of apparent cost savings.

Planning decides the costs of service production, user satisfaction and workload of customer service. Even though planning is often seen as a way to cut costs, its success is most often seen precisely in the sales. Any salesperson can sell good products better than bad products. Bad service can of course be compensated by increasing the number of sales personnel, but that is not a long-term solution either.

Turnover is an excellent and incorruptible indicator of the development of the company’s products and services, but interpreting development from the perspective of planning is mainly useful in hindsight. Even though information gathered in hindsight is the most accurate, it would pay to look at other indicators as well. It is cheaper to think beforehand than in retrospect.

Juha Lamminkari

Juha Lamminkari’s article on service production was published in the Debate section of Kauppalehti newspaper 19 January 2009.