Sunday, December 11, 2005

lowering costs vs increasing revenue.....

and the end of service as we know it....

During the years I lived in the US (early through mid 90s) one thing that never failed to amaze me was the quality of customer service. Many might think I am exaggerating, but compared to where I grew up (Bolivia), service was incredible.

I used to use long distance service a lot. My friends and family where pretty far away from where I was. If I ever saw something wrong with my bill, all I'd have to do was call my long distance company, mention the problem (sometimes things that had actually been my fault), and they wouldn't question it. They'd credit my account.

Same with in store purchases. If for any reason you had to return something, no questions where asked, you could return it. Living in the US was living life in "the customer is always right" land.

Those days are gone. At some point in the very late 90s, maybe during the bubble....maybe early 2000s (I don't really know as I no longer live there) some point corporations gave up on the theory that good service increased profits. They went from creatively seeking ways to make the customer happy, and get more return business, to creatively seeking ways to reduce the amount spent on maintaining existing accounts. That of course means lower service. This includes outsourcing phone service to places where they barely speak US English, replying to email questions with canned responses, and giving service personnel instructions to shun the customer if necessary and not waste to much time on them (time is money...and they are trying to save money).

I still do a lot of business with the US. Online purchases, using an American credit card, paying from my American bank account, sending to my US based forwarding mailbox, etc. I also travel to the US once in a while and participate in real shopping at physical stores (a.k.a. brick'n'mortar shops). My experiences during the past years have been horrible. Each one worse than the previous. Sometimes annoying, sometimes frustrating, but in general just plain bad experiences.

Why? Are economies of scale (due to the internet's instant world reach) such that its more efficient to lose customers than to gain new unsuspecting ones? Is the new generation of corporate managers just not capable of increasing profits and is therefore forced to lower costs simply to maintain previous years revenues? Did they just give up? Is keeping stock prices high more important than making world class companies?

Stock pricing, it seems, is a big culprit in all of this. Publicly traded companies pay millions to there top management and their top management wants to keep their million paying jobs. In order to do this all they have to do is make the company look good on paper. As long as revenues seem higher they look good. Stock owners are happy and they get to keep their jobs. Stock now-a-days says nothing about the quality of a company. It doesn't say anything about profits, it doesn't say anything about the company's beliefs, growth prospects, etc...all stock says is what is in fashion. Today's stock darling is tomorrows AOL??? Its all a mirage, and its this mirage that has caused quality of service to go down the tubes.

Its quite ironic that a good portion of US consumers are also stock holders and they themselves push "their" companies into doing whatever it takes to increase revenues but then complain about the service they get. This is especially true about the online community. Chances are that most people that will read this blog (yes, both of, not you, I'll explain later) are stock holders of a company that has given them bad service. Will these stock holders do anything about it? Nope...why? Because of the exact same reason that companies find its cheaper to get a new victim than to maintain a decent relationship with an existing customer. Because one person will not make a difference in the grand scheme of operation of multinational corporations. The stock holder knows that he can't punish the big company by selling his stock and doesn't have the power to make a difference in running the he might as well keep the stock and hope that his bad service experience is made up by his stock gains. The big company on the other side of the dilemma, can afford to lose a customer, but can't afford to hire better qualified staff, or (if the case be) have their qualified staff waste their quality time with one customer.

So all this adds up to....bad service and us having to learn to deal with it. Some of you might point out the priceritephoto deal that happened a couple of weeks ago, and how one blogger was able to get his revenge. This is really nice, but its got a major problem. Now these stories will start surfacing all the time. After all I am pretty sure most bloggers get bad service quite often (seems there are few good service stories out there...though there are), and once everybody starts blogging about their specific bad stories nobody will care and the blogosphere will become one more epinions like space.

So what to do about this? My theory is we can't do much. We created this ourselves. I think all we can do is just wait....with enough time, I am pretty sure the cycle of bad service will come to an end. This will most likely happen in several years...when service reaches some new low and a new company will offer a little higher prices but excellent pricing...and people will notice...and it will grow...and others will try to copy the "new formula"....and then companies will differentiate themselves by the quality of service they provide...and then the cycle will start again.


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