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Improving Customer Service – Why Now?

Most of the companies I work with are facing big challenges now and in the months (possibly years) ahead. Sales are down, profits are down, and morale is down. The news reports daily of yet another company that is losing ground.

What do you think most companies do in a climate like this? You might answer – discount prices on goods and services (increase sales!) and layoff the extra staff to cut costs (increase profits!). And, to improve moral – tell everyone that things are great and everything is going to be just fine (muffled cough that sounds a lot like ‘yea right’).

I have another idea. How about improving process inefficiencies to increase profits, improve customer service to increase sales, tell everyone the truth and then lead them into a new era of quality and pride in the organization (increase profits, increase sales, and improve moral).

This probably sounds like something an MBA, a consultant, or even a Walter Mitty (the day dreaming hero of Thurber) would suggest. Owning and/or leading an organization is a lot more complicated than this – right? And besides, it’s really freaky scary out there right now and there is no room for such perilously imprudent ideas (cynic!).

Well, I have owned businesses, I have led organizations, I have an MBA, I am a consultant, but I’m no Walter Mitty. And, I think an organization, your organization, deserves better than a knee-jerk reaction for a short-term gain which could potentially ruin your long-term sustainability. Now, more than ever, it’s time to do the right things right.

Take a look at The American Customer Satisfaction Index (www.theasci.org) which was developed by the Ross Business School of the University of Michigan (Go Blue). The index measures satisfaction with the quality of products and services and reaches across all types of industries. The index is primarily focused on comparing the quality of economic output to the quantity of economic output and with over 12 years of data, they have some interesting postulations:

For individual companies

·        Customer satisfaction is a leading indicator of company financial performance.  Stocks of companies with high ACSI scores tend to do better than those of companies with low scores.

·        Quality plays a more important role in satisfying customers than price in almost all ACSI-measured industries.  Price promotions can be an effective short-term approach to improving satisfaction, but price cutting is almost never sustainable in the long-term.  Companies that focus on quality improvements tend to fare better over time in ACSI than companies that focus on price.

·        Mergers and acquisitions have a generally negative effect on customer satisfaction, particularly among service industries.  ACSI-measured service companies that have engaged in frequent, large acquisitions typically experience significantly lower ACSI scores in the period following a merger when the customer as asset often takes a backseat to reorganization and consolidation via cost-cutting.

For the economy

·        Changes in customer satisfaction affect the general willingness of households to buy.  As such, price-adjusted ACSI is a leading indicator of consumer spending growth and has accounted for more of the variation in future spending growth than any other single factor.

·        Because consumer spending accounts for 70% of GDP, changes in customer satisfaction as measured by ACSI also correlate with changes in GDP growth.  As GDP is a measure of the quantity of economic output and ACSI a measure of its quality, economic growth is dependent on producing not only more but also better products and services.

How this relates to your company

·        Concentrating on customer satisfaction is going to improve your financial performance.

·        Improving quality is more effective than discounting price and in the long-run a better corporate strategy.

·        Allowing the customer to take a backseat while you cost-cut will send you into a downward spiral of customer dissatisfaction, more lost sales, more cost-cuts, more customer dissatisfaction – it could kill your company.

Of course, believing that improving customer satisfaction will improve your financial performance isn’t enough. Making it happen requires leadership. John Kotter, the famous professor of leadership at Harvard University, says leadership must:

·        Establish direction: developing a vision of the future – often the distant future – and strategies for producing the changes needed to achieve that vision

·        Align people: communicating direction in words and deeds to all whose cooperation may be needed so as to influence the creation of teams and coalitions that understand the vision and strategies and that accept their validity.

·        Motivate and inspire: energizing people to overcome major political, bureaucratic, and resource barriers to change by satisfying basic, but often unfulfilled, human needs.

Transparency about the condition of the organization and a real commitment to change will inspire your organization. Articulating your vision of the future, where top awards in customer satisfaction are received and the organization is flourishing will motivate your employees. Setting a goal of great customer satisfaction will arouse pride and improve morale. Then, empower your management to look for ways to make the organization more efficient and deliver great customer satisfaction at the same time. They will be aligned and motivated. They will fix inefficiencies creating real savings, properly aligned with the right strategy and profits will increase. Your customers will appreciate the better quality you offer and they will be willing to pay for that quality with loyalty. Sales will increase.

In these tough times, doing the right things right is what will separate the winners from the losers. It is the right time to improve customer satisfaction, now!