Those Pesky Customers
I had a conversation with a colleague the other day about the company she worked for. She told me in a moment of unguarded candor that, “this is a great company to do business with as long as you don’t need anything.” I didn’t know whether to laugh or cry, but I got the point. This company sells every conceivable product and service in its category, so you’d have to need something pretty arcane not to be able to get it there. But don’t go looking for a lot of help buying exactly the right thing because for the most part, the people that work there really don’t have the time or expertise to help you. And for sure don’t expect much if you have a problem.
All of that got me to wondering . . .
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Why is it impossible to find a phone number on the web site of “new economy” retail giant, Amazon?
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For that matter, why is it impossible to find a phone number to call for service on the Sprint PCS website? Or AT&T? They’re phone companies for goodness sakes.
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And why is it that a 1K member and million mile flier like me can’t get an upgrade on a United Airlines flight to Europe at any time this summer to any destination?
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Why, in the midst of the biggest mortgage refinancing bonanza in recent memory, does Merrill Lynch charge a $5,000 loan lock fee?
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Staying with that theme for a moment, why is it that when financial institutions hit a boom in demand (like the current, rate-driven refinancing craze), service quality (which is already low), falls through the floor? The typical response is that “we’re overwhelmed” and there really is nothing that can be done. So get over it and get in line.
Each of these, and a hundred other examples like them, clearly point to a problem . . . at least if you’re a consumer. These experiences are frustrating and irritating, and certainly not within the boundaries of “anytime-anywhere blue ribbon service” that we were all promised once the Internet grew up and made real contact with real people irrelevant. So what happened? Who’s missing what here: the consumers or the companies?
For example, you’d think that the prospect of a customer getting on the phone and asking for help would be a good thing. You could solve a problem, secure customer satisfaction, and use that heroic moment of truth to identify another need and perhaps create another selling opportunity.
On the face of it, you’d think that airlines would want to do anything possible to get their most loyal customers flying as often and as far as possible. Sure they need cash, but they need loyal customers even more. They could reestablish customer confidence and get their most important and influential customers buzzing in a good way.
Similarly, you’d think that customers wanting to refinance with your institution should be treated like the lifeblood of your business that they are, not shifty-eyed, poorly intentioned ruffians who should be manacled and punished for wanting to do business with you. You could win a customer for life with sparkling service and use every interaction through the arduous process of obtaining a mortgage as another opportunity to build trust and value.
But maybe not. Maybe these are unreasonable expectations in the new business sensibility. Or maybe there is no problem and I just don’t recognize real innovation or cutting edge business thinking. Maybe these are just examples of consumer discomfort with the new paradigm of customer experience that puts cost control, customer control, process efficiency, and cash flow ahead of customer experience. Like somehow customers are an unpredictable but necessary functional utility that are part of a larger system designed to achieve a financial goal.
Presumably these customer-unfriendly conditions are a result of some sort of rational decision making process. Someone, probably a lot of someones, studied something and came up with a list of suggestions, one of which was, “Hey, I know, let’s make it harder for the customer to do business with us.” Except that’s not how the issue was framed.
No, each of those decisions was likely motivated by a super ordinate goal to drive out expenses, to meet efficiency ratios (a current measure that completely masks the long-term impact on customer experience), to maximize cash flow, to “lock in a customer,” or some equally laudable goal. The fact that the customer feels punished is an unfortunate and unintended consequence . . . unless you’re the customer in which case you’re left wondering, “Is it just me”?
The Cost of Lousy Framing
There are at least two big hairball problems here that go way past the grinding annoyance that some percentage of the customers feel with experiences like the ones I’ve just listed.
The first is a problem of decision quality. Unless creating customer dissatisfaction was a specific goal, or unless there was an explicit decision to ignore potential customer upsets for other more important reasons, it seems clear that something broke down in how these firms made decisions. I can’t come up with any other explanation.
Most people, and certainly most business people—myself included—would tell you that they are good decision makers. After all, isn’t that what managers and executives do? But in making that claim, we often mistake a quality decision for a quality outcome.
For example, someone could decide to head to the local pub and stay there until closing time, drinking like a fish until the barkeep finally turned out the lights. That same person could get in a car, drive home, and by stroke of luck, make it into bed alive. You’d be hard pressed to claim this as a quality decision, but arguably it was a quality outcome.
The same is true in business. Not to continue to beat the “lessons we should learn from the nineties” drum, but one obvious conclusion is that those go-go years were the poster child for bad decisions but great outcomes. For a time there, it seemed like anyone could make money doing anything. Plenty of people, some very, very smart people, made decisions that you or I wouldn’t make today on a bet. I made some myself, like over allocating my investment portfolio in the infinite-demand driven “telecosm”. Can’t miss, except I did. Today, you can’t buy a burger at for what a share of Corning, Cisco, or JDS Uniphase is trading for.
In retrospect, those same decisions and plenty others like them look . . . well . . . dumb (do you think Martha Stewart would like her decision to sell her Imclone stock to do over?). Like the drunk driving home, good outcomes and an unwillingness to consider information that would suggest other alternatives fooled plenty of people into thinking that they were making good decisions when in fact they were just surfing a Tsunami. So they kept making them, or thinking they were making them, until those nasty “unintended consequences” showed up.
Like just about everything else in life, good decision making is something that you can learn to do. The innate instinct and genetic material is already there. It’s just buried in the automatic stimulus/response mechanisms and information filters we’ve built up through our socialization and life experiences.
Mostly this is a good thing. Think about it. If you had to make a conscious decision about everything all the time, you’d spend all day working out the problems of getting out of bed and going to the bathroom. The fact that you can do that and a whole lot more by 8:00 a.m. is a function of the fact that you—or someone you trusted or wanted to please sometime in the past—have already made a whole series of decisions, the outputs of which you’ve pre-programmed into your subconscious.
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Alarm goes on, you turn it off.
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Toothpaste tube is squeezed from the (bottom or middle).
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Read the (sports, business, comics) section first.
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Traffic turns yellow and you floor it (or stand on the brakes).
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Stop by Starbucks (before or after) you arrive at the office.
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See an item that’s on sale or in high demand and going fast, you buy it . . . even if you otherwise wouldn’t.
At one point, these were each “decisions”. Now they’ve moved into the realm of automatic, unthinking, stimulus/response. And that’s good, because that’s how we get on in life.
Except that it’s not always good. Like the last example illustrates, these former decisions become what are known as “fixed action patterns”, automatic behavior tapes that are activated by what psychologists call “trigger features.” It is these unconsciously triggered behaviors—substituting for decisions—that professional sales people and other compliance professionals ethically try to trigger, and the less scrupulous play on with all their might, that cause us to become influenced and ultimately to make decisions. Some work out, some we would give nearly anything to take back.
In the case of the “buy now before they’re gone” stimulus, a sudden sense of scarcity triggers a fixed action pattern that says “get it, horde it, protect it” . . . whether or not there is a real scarcity. So you wind up speeding up a decision you may or may not have made, or suddenly making a buying decision you would otherwise have passed on simply because you fear missing out.
One of the silliest examples of this pattern in action occurred in Hawaii several years ago when word spread that there was an imminent shortage of toilet paper on Oahu. People went crazy, running down to the nearest grocery or convenience store to buy up all the Charmin they could get. Well, by the time everyone got done, there indeed was no toilet paper to be had, but that was because it was piled ten deep in every closet on the island, not because there was any real danger of people having to do without. The rumor that TP was running out was just that, a rumor. But the “click, whirr” response was real enough.
These same automatic, fixed action patterns also appear in more formalized, consciously declared decision making processes like the ones that presumably were used to eliminate the possibility of human contact over at Amazon or Sprint, or the decision to make it functionally impossible for a frequent flier to redeem his or her miles for a business class ticket to Europe in the summer of 2002.
In these cases, the problem isn’t being conned or unduly influenced by some overt act. It’s not like someone tricked the people at Sprint into making life hard on the customer looking to talk with a live person. The problem arises instead from a lack of rigor in the decision process that causes even the cleverest amongst us to fall into a “click, whirr, run the tape” fixed action pattern decision trap. For example, I’d hazard a guess that one or more of the following contributed to the glowing examples of poor customer experience currently being practiced by Amazon, Sprint, AT&T, Merrill Lynch, and others:
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Oops, Wrong Number: Working on the wrong solution because you didn’t take time to define and frame the right problem.
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Anchoring: Over relying on first thoughts.
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Status Quo: Keeping on keeping on because change seems too difficult.
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Sunk Costs: Protecting earlier choices, even if they were bad choices, even if the conditions under which they were good choices no longer exist.
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Confirming Evidence: Knowing what you want to know and then seeing what you want to see in the information you gather.
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Misplaced confidence: Being too sure of yourself, your instincts, and your past experience. Or, being unduly cautious in evaluating probabilities outcomes.
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Vividness: Focusing on dramatic events, whether or not they’re representative of what’s relevant to your decision.
The most insidious of the lot may be sloppy framing of the problem, the “oops, wrong number” trap. If you’re working on the wrong problem, or working on the problem from the wrong direction, everything goes downhill from there. For example, let’s take the larger issue of dealing with “customer complaints” or “customer service requests.” Maybe the real problem is viewing those interactions through those frames in the first place. For example, let’s begin by describing these interactions for what they really are:
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Someone who has already spent money with you experiences some event that causes him or her to want help from your company.
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Perhaps that person needs a lot of help or maybe just a little.
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Perhaps that person is upset about their situation, perhaps amused, or perhaps somewhere in between.
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There is a cost to you for interacting with that customer.
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Based on your current business model and accounting methods, the fully loaded cost of a customer service event is $x.
So let’s assume that you have an overarching goal to increase profitability (for whatever reason). So what do you do? You figure out a way to cut costs by forcing the customer to interact through a lower cost channel and/or making it more difficult or more costly to interact through a higher cost channel. Problem solved!
Except who says that that interaction should be called a customer service event or a customer complaint in the first place? Why isn’t it called “customer research” or “free product performance feedback”? Why isn’t it called “customer initiated sales opportunities”? Or why isn’t it called “part of our value proposition”? Or “opportunity to support higher use and satisfaction which leads to new sales and profits”?
By framing the “problem” as one of cost control/cost reduction instead of something else, the decision makers effectively turn customers into annoyances if not adversaries. The fact that customers want service is a cost and a problem, and we need to make both go away.
But maybe the real issue is lousy accounting. The cost isn’t too high. It’s your cost allocation model that’s broken. Move all those overhead costs somewhere else and voila, you have a low cost customer touch point that gathers up gigabytes of valuable input on your products and services every day!
Or maybe it’s that the initial offer wasn’t properly priced. Or maybe the entire value proposition needs to be completely rethought. Or maybe ten other things. The point is, you’d head in a completely different direction with any one of those frames than you would reasoning from the standpoint of reducing the cost of dealing with service requests.
Large, scale businesses with huge numbers of individual customers—like banks, telcos, utilities, and airlines—seem inordinately prone to coming up with strategies that effectively treat customers as adversaries. Much of this is driven by cost allocation models that portray significant numbers of these customers as unprofitable. (In banking, often 70% and 80% of the customers are described as unprofitable.) So, with that frame as a starting point, banks and others frequently go through a cockeyed decision making process where they seek to push some or all of their customers into some theoretically lower cost channel, only to find later that: 1) customers want channel choice; b) once customers remove themselves from your physical channels, the difficulty of selling to them actually goes up, not down.
ATM’s were a classic example of a decision that was developed out of a cost-reduction framework. Given an assumption that serving customers was unacceptably too expensive, and that customers didn’t really want to come to bank branches anyway, banks spent piles of money building out networks of ATMs, and then piles more pushing their customers out of the branches and onto street corners to do their banking. Simultaneously, they bought each other at a furious rate, further seeking to drive out costs by closing overlapping branches (and sometimes those that didn’t).
All of this was a first in the history of retail where the normal tendency is to get customers to cross your lease line and spend time on your premises. If Starbucks followed the same theory, there would be one location per zip code. The intervening geography would be filled in with vending machines down at the local superette. After all, a cup of coffee is practically the definition of a commodity, right?
Assuming the problem was reducing distribution costs, ATMs were a bust. It’s true that banks got more geographic coverage for less than the cost of building an equal number of new branches or hiring more employees. But they simply spent the money acquiring other banks or proliferating even more channels (phone and internet). Distribution costs didn’t go down and the technology-driven savings never really showed up.
More to the point, changes in the complexion of financial services as a whole—principally the erosion and then elimination of the regulatory boundaries governing who could sell banking, insurance, and investments—suddenly raised the stakes on controlling the customer relationship. Not long after customers had fully embraced ATMs—largely because of convenience, not because of all the other behavior modification tricks that banks tried—banks began to discover the idea that they were really in the business of retail sales and relationship building after all. The greatest irony is that the most desirable customers were often the ones to most fully adopt the convenience driven, “never go to the branch unless you have to” banking model.
Ooops. Suddenly the frame changed to: how do we persuade customers to do all their business with us? Chasing customers out of the branches now didn’t look like such a great alternative.
Or take the issue of the loan lock fee. Mortgage lenders go crazy with customers saying they want a loan and then not taking it once they’ve been approved. The typical chain of events goes like this:
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The customer gets cold-called by a mortgage rep about refinancing his/her/their mortgage. Alternatively, the customer calls a mortgage broker or lender and indicates an interest in a loan.
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Some information is exchanged and based on that, a loan is selected and the lender begins the process of making a credit decision.
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Simultaneous with this process, many of those same customers call other lenders or reps, ask and answer the same questions, and initiate the same process.
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One or more of the lenders make a commitment to give the customer a loan at which point the customer chooses, leaving one or more of the others at the alter.
By framing the problem as “capricious customers who need to be controlled,” charging a loan lock fee is an entirely sensible solution. After all, the lenders reserve capital to make that loan. Now they’re not going to make it, so now they’re out some amount of money. But who says that customers skipping out on your loan is the real problem?
Why not ask the question, “Why do customers shop multiple lenders in the first place”? Maybe it’s because they fear getting turned down. Maybe it’s because in the past, the process of getting approved was so arduous, that they don’t trust anyone to get it right. So they hedge their bets.
Or why not define the problem as “delivering a superior value proposition and customer experience in an otherwise commoditized industry” and go from there? Or how about starting with the premise that lending someone several hundred thousand dollars presents at least a half-dozen touch points at which you can further differentiate yourself, further delight an anxious customer, and gather information you can use to build deeper levels of trust and ultimately superior value and profits for your bank? Don’t you think you’d come up with something better than: charge the customer a lock fee that exceeds the monthly income of the average wage earner in the US so that they won’t decide to do business with us because the rest of our business processes are so miserably poor?
You could go through each of the customer experience puzzles I listed at the beginning of this contemplation and expose the same problem: start with a cost-driven, process driven, or otherwise inward facing frame, and chances are you’ll come up with a customer unfriendly solution. In the end, it’s almost inevitable that a “customer service costs too much” frame will result in someone choosing the cheapest, most sensible alternative: refuse to serve your customers.
Unfair! Operating efficiently is the lifeblood of business! That’s true. It’s also true that you could say I’m applying revisionist history. After all, you could rightfully argue that yesterday’s solutions become today’s problems, or simply that problems and opportunities change over time, and either way you’d be right. But you still wouldn’t have disproved the point: how you frame the problem matters.
Next time you sit down to work through some problem that ultimately touches the customer, ask yourself: will this frame, or the alternatives it generates, wind up punishing any or all of our customers? If so, maybe you need to rethink the problem.
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Kevin Hoffberg
Last modified:
05/03/06