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Commoditization and Customer Service

The number of ways consumers can make a purchase today is amazing. The option I find most interesting are the Best Buy vending machines found in many airports since their introduction in 2008. Being comfortable spending a couple of dollars for a drink from a vending machine is one thing, but the fact that consumers are now willing to spend several hundred dollars purchasing electronic equipment from a vending machine is a true paradigm shift.

Consumers are placing great value on convenience and have demonstrated a willingness to spend large sums of money as long as sellers make the process easy. And it doesn’t get much easier than a vending machine.

Another example, Redbox, is shaking up the video rental industry by offering video rentals via vending machines at the low price of one dollar for a one-day rental. I recently spoke at a company meeting for Family Video, one of the largest video “rentailers” in the industry.  One of their executives made a profound statement about why they place such a strong emphasis on exemplary customer service in their stores. He said, “Customers are choosing NO service over POOR service. They’d rather simply put money into a machine than having to deal with employees who either aren’t knowledgeable or don’t care.” Family Video has been successful in differentiating themselves because of their service (record profits and continued expansion), but we all know companies whose service is so bad we’d just as soon not have to talk with anyone who works there.

The vending machine phenomenon is a symptom of the much larger issue of how businesses are commoditizing themselves more and more each day. A machine can take money and dispense a product quite efficiently, and at a much lower cost than a bricks and mortar location staffed by employees.

What machines can’t do is make  customers feel welcome, valued, and unique. A company’s employees are the only ones who can do those things. Employees are the only ones who can provide a truly personalized experience. But if a company’s employees and service aren’t adding value to the customer experience then why wouldn’t customers prefer to just deal with a machine?

I do believe that having a variety of purchasing channels is a smart approach to business. Letting people buy things in the way they like to buy them is a good thing. However, when customers intentionally avoid dealing with a company’s employees because the experience is usually poor, automating the purchasing process moves the company and its products one step closer to commoditization.

I think Best Buy’s vending machines are cool, although I admit I haven’t purchased anything from one – yet. The point, however, is the fact that they even exist. That fact should make any employee in any organization look over his or her shoulder to see if a machine is able to perform the same job function with no loss of value. And with the advances in technology today, value can’t be based on completing a transaction efficiently; machines can do that. Value must be based on creating an experience that makes the customer feel valued.

Commoditization and Customer Service

The number of ways consumers can make a purchase today is amazing. The option I find most interesting are the Best Buy vending machines found in many airports since their introduction in 2008. Being comfortable spending a couple of dollars for a drink from a vending machine is one thing, but the fact that consumers are now willing to spend several hundred dollars purchasing electronic equipment from a vending machine is a true paradigm shift.

Consumers are placing great value on convenience and have demonstrated a willingness to spend large sums of money as long as sellers make the process easy. And it doesn’t get much easier than a vending machine.

Another example, Redbox, is shaking up the video rental industry by offering video rentals via vending machines at the low price of one dollar for a one-day rental. I recently spoke at a company meeting for Family Video, one of the largest video “rentailers” in the industry.  One of their executives made a profound statement about why they place such a strong emphasis on exemplary customer service in their stores. He said, “Customers are choosing NO service over POOR service. They’d rather simply put money into a machine than having to deal with employees who either aren’t knowledgeable or don’t care.” Family Video has been successful in differentiating themselves because of their service (record profits and continued expansion), but we all know companies whose service is so bad we’d just as soon not have to talk with anyone who works there.

The vending machine phenomenon is a symptom of the much larger issue of how businesses are commoditizing themselves more and more each day. A machine can take money and dispense a product quite efficiently, and at a much lower cost than a bricks and mortar location staffed by employees.

What machines can’t do is make  customers feel welcome, valued, and unique. A company’s employees are the only ones who can do those things. Employees are the only ones who can provide a truly personalized experience. But if a company’s employees and service aren’t adding value to the customer experience then why wouldn’t customers prefer to just deal with a machine?

I do believe that having a variety of purchasing channels is a smart approach to business. Letting people buy things in the way they like to buy them is a good thing. However, when customers intentionally avoid dealing with a company’s employees because the experience is usually poor, automating the purchasing process moves the company and its products one step closer to commoditization.

I think Best Buy’s vending machines are cool, although I admit I haven’t purchased anything from one – yet. The point, however, is the fact that they even exist. That fact should make any employee in any organization look over his or her shoulder to see if a machine is able to perform the same job function with no loss of value. And with the advances in technology today, value can’t be based on completing a transaction efficiently; machines can do that. Value must be based on creating an experience that makes the customer feel valued.

Defining a Culture of Service Excellence

When asked to describe their corporate culture, business leaders sometimes struggle to answer. Responses often run the gamut from vague generalities such as “we have a culture of putting the customer first” to recitations of the company’s mission statement.

I believe that you can see a company’s culture simply by watching what employees are doing and how they do it. In short, a company’s culture is defined by what people do within the organization.

The critical point of course, is to have a culture by design rather than by default. Many organizations simply allow their culture to evolve with no plan or direction and then wonder why there’s no consistency of performance and no anchor for accountability. A much better strategy is to understand exactly what you want to happen within the organization and build the culture accordingly.

While an organization’s culture is made up of many elements, my focus is helping organizations define the service component of their culture. And the process for doing so is quite simple, consisting of two questions:

  1. What we want our customers to say about their experience with us?
  2. What employee behaviors would lead them to say those things?

For question number one I recommend crafting three statements you want customers to say about their experience. These statements can come from survey data, focus groups, observations, or from a variety of other sources. But coming up with three statements forces an organization to define the customer experience in terms of outcomes that lead to customer loyalty.

At Walt Disney World for example, the three statements that lead customers to want to return and to also talk about their experience in glowing terms are these:

  • It was a magical experience.
  • They paid attention to every detail
  • They made me and my children feel special.

Certainly Disney wants guests to say a lot of other things about their experience, but these three statements are at the core of guest loyalty.

In my business as a speaker and consultant, I want my clients to say:

  • He knew our business and customized the program content to our unique situation.
  • He didn’t just provide concepts; he provided specific tools to help us apply what we learned.
  • He made learning fun.

These three statements came from reviewing testimonials from clients that have either had me back a second time and/or referred me to other clients. In essence, these are the statements that lead to customer loyalty in my business.

After defining what I want clients to say, pinpointing the behaviors that would lead them to say those things is pretty straight forward. For the first statement, for example, it’s important for me to talk with members of the organization, research industry data, and connect every learning point to their situation. As I prepare for a client engagement, the behaviors I need to demonstrate to achieve these statements guide my planning process. And those times when I don’t feel as successful as I would’ve liked to have been, it’s usually because I violated my own rule.

Ideally this approach should be used at the organizational level. That way you have consistent behaviors across the entire organization. It can, however, be used at the department level and even at an individual level. It all depends on what your sphere of influence is. As a bank teller for instance, what three things do you want your customers to say about any interaction with you? What behaviors would lead customers to say those three things?

While this approach may seem overly simple, I think simplicity is what makes it work. Leonardo da Vinci said, “Simplicity is the ultimate sophistication.”

What three things do you want customers to say about your organization?

What employee behaviors would lead customers to say those things?

Toyota Recall – Part 2

I hit the “Publish” button too soon on yesterday’s post, Toyota Recall – The Brand Challenge. Today’s news reports that Toyota executives admit they knew about the gas-pedal problem for over a year before taking action. In fact, evidence about unexpected acceleration has been mounting for six years. The firestorm has just begun.

Toyota completely blew Step 1 of how to handle company screw ups:

1.     Admit to the mistake quickly

2.     Accept responsibility

3.     Apologize

4.     Say what you’re going to do to fix the problem

5.     Explain what you’ll do so the problem doesn’t happen again

(For details of each step, link to Toyota Recall – The Brand Challenge)

While Steps 2-5 are in motion, it appears Toyota failed miserably at Step 1: admitting to the mistake quickly. So the perception will be that they took action only because they got caught. It would be one thing if the company didn’t know about the problem until the National Highway Traffic Safety Administration notified them, and they immediately took action. But that’s not what happened. They knew.

Toyota’s credibility is now shot – certainly in the short-run and likely in the long-run. In fact, the company’s recall of 437,000 hybrids because of problematic brake systems, announced although the recalled cars “meet safety standards,” is being met with skepticism in light of the sticky gas-pedal debacle. Customers are wondering if the recall came quickly only because of increased scrutiny. What could’ve been a feather in Toyota’s cap for quickly admitting the problem is now another dagger in their reputation for quality. Projected hard costs to Toyota for the recall repairs is projected to be in the $billions. The cost to the brand is unknown, but will likely dwarf the cost of repairs.

I’ve said many times that a company’s brand is fragile, built over years and even decades. Trust is the foundation of successful brands. When trust is knowingly violated, the brand (so carefully built) is compromised. Winning back trust is a long, long road.

Toyota Recall – Part 2

I hit the “Publish” button too soon on yesterday’s post, Toyota Recall – The Brand Challenge. Today’s news reports that Toyota executives admit they knew about the gas-pedal problem for over a year before taking action. In fact, evidence about unexpected acceleration has been mounting for six years. The firestorm has just begun.

Toyota completely blew Step 1 of how to handle company screw ups:

1.     Admit to the mistake quickly

2.     Accept responsibility

3.     Apologize

4.     Say what you’re going to do to fix the problem

5.     Explain what you’ll do so the problem doesn’t happen again

(For details of each step, link to Toyota Recall – The Brand Challenge)

While Steps 2-5 are in motion, it appears Toyota failed miserably at Step 1: admitting to the mistake quickly. So the perception will be that they took action only because they got caught. It would be one thing if the company didn’t know about the problem until the National Highway Traffic Safety Administration notified them, and they immediately took action. But that’s not what happened. They knew.

Toyota’s credibility is now shot – certainly in the short-run and likely in the long-run. In fact, the company’s recall of 437,000 hybrids because of problematic brake systems, announced although the recalled cars “meet safety standards,” is being met with skepticism in light of the sticky gas-pedal debacle. Customers are wondering if the recall came quickly only because of increased scrutiny. What could’ve been a feather in Toyota’s cap for quickly admitting the problem is now another dagger in their reputation for quality. Projected hard costs to Toyota for the recall repairs is projected to be in the $billions. The cost to the brand is unknown, but will likely dwarf the cost of repairs.

I’ve said many times that a company’s brand is fragile, built over years and even decades. Trust is the foundation of successful brands. When trust is knowingly violated, the brand (so carefully built) is compromised. Winning back trust is a long, long road.