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Wednesday, September 30, 2009

You Can Untie the Cost Accountant Now.


Hyatt Place put in an automated check in process in the hotel I stayed at this week. I’ve been wondering when this development would come, and I can’t say that I’m disappointed in the least. I was down on the cost accountants earlier this week, but here’s one who worked with their service & brand teams for a successful result.

A service brand has to judge whether the introduction of self-service technology will reinforce the brand, be a net satisfier, and create improvements in service productivity.

It’s not for everyone. Imagine who guests at Ritz-Carlton or Four Seasons would react if greeted by a robo-staff, ready to accept their credit cards and spit out an invoice confirmation and a room key.

But for a brand that caters primarily to business travelers on limited-duration stays, this seems like a no-brainer. When I travel for business, the hotel check-in process is not a value-added activity. I’m either dead tired, or know where I’m going and in a rush. The automated check-in was faster than counter check-in the first time I used it (major bonus points for improving company AND customer productivity on the 1st try), got me what I needed and off to my next activity.

Obviously, it won’t make sense for every hotel to adopt. Automated checkout is a staple in most grocery stores, but it might look out of place at Stew Leonard’s. Self-service technology can enable the service promise, so long as it is evaluated ensure brand compatibility and satisfaction improvement amongst the target consumer.

Tuesday, September 29, 2009

Tie your cost accountant to a chair.

One of the main reasons why the US airline industry is composed of Southwest Airlines and everyone else is their fundamental understanding of customer behavior, its impact on their service operations, and how to promote consumer behavior that makes them a more efficient business.

Most famously, it was the airplane seating process – beginning as the “cattle call” and later evolving through multiple iterations of online check-in that have morning travelers setting early alarms the day before they fly, just so they can log in to get that highly prized ‘A’ section seating assignment.

Truthfully though, it is evident in everything Southwest does, which is one of the reasons they are consistently able to stay on time for departures, stay inexpensive and ultimately, stay profitable.

Keeping in mind the customer role the service is also why Southwest has been able to avoid the misstep that almost every other airline has made in charging customers for checked baggage.

Set aside, for the moment, the vehemently negative reaction the traveling public has had to the checked baggage fees. (A reaction Southwest takes GREAT pride in stirring up through their advertising)

In charging $15-$30 for checked bags, the other airlines have demonstrated a lack of understanding about their core service operation.

Planes are making money when they are in the air, not when they’re at the gate. Turn times and on-time departures are critical to an airline’s ability to make money. Everyone who has stood in the aisle while a 110lb non-gender-specific human tries to launch an oversized, 50lb suitcase into an overhead bin 3 feet above their head knows instinctively that the only way to get a plane to lift off on time is to completely separate the loading of people and luggage. (In fact, airlines employ professionals for just this reason, though I imagine their CFO’s at this very moment to be looking at some metric measuring bags per handler per hour and wondering why productivity is slipping.)

By charging extra for checked bags, the airlines ensure that everyone tries to cram as much as possible into the largest carry-on bag they can get away with, causing the overhead compartments to be crammed beyond capacity and requiring overflow processes of their own, all of which creates more time at the gate.

And who does this policy screw, apart from the airlines that created them? Not the business traveler, who can find room for that oversized suit bag if they take long enough. It’s the family of four, with 2-3 legitimate bags, maybe a car seat, that has no alternative but to check and pay. Of course, these customers are now flying Southwest, so it’s not the other airlines’ problem anymore.

By demonstrating a fundamental lack of understanding of how customers in a service environment pull a significant lever on their business’ productivity, most US airlines have incented exactly the wrong consumer behavior, created consumer discord and driven ever more business directly to their most able competitor, Southwest.

Leaves me wondering what's next from this group.

Thursday, September 17, 2009

Willy Wonka and the Hockey Game

A factor that differentiates services from products is the inherent difficulty in balancing supply of service capacity with the demand for it.

If a product’s demand outstrips the capacity for it, a company can produce more to create more sales, increase the price to create more profit, or both. World famous brands such as Apple and Harley Davidson are masters as manufacturing scarcity in order to drive margins and sales in future periods.

In the case of services, capacity has to be matched as closely as possible to demand, knowing that there will still be gaps.

Once a flight is sold out of seats, Southwest can’t sell more seats for that flight, nor can they reprice the existing seats to gain more margin. On the other hand, once a room at a Marriot goes empty for the night, that “inventory” of service capacity has forever perished, and there will never be revenue associated with it.

Add to this the conundrum of the one-of-a-kind service experience. The Super Bowl is a great example, where demand for tickets vastly outstrips capacity to provide them. The result: Tickets can be priced excessively high, to the point where much of the live audience for the game is corporate hospitality, and most fans of the teams involved are hosting parties in their home theatres.

Here’s an interesting spin on a one-of-a-kind event: Every year the NHL hosts an outdoor “pond-hockey”-style game called the Winter Classic, where two teams meet in a match that counts only in the regular season standings. For 2009, in Chicago, there were more than 240,000 ticket requests for the game played at Wrigley Field.

This year, Fenway Park will be the venue on January 1st for a game between the Boston Bruins and Philadelphia Flyers. The interesting part is how you get in:

First “dibs” goes to season ticket holders of the Bruins and Flyers. Makes sense. These are the people that form the revenue lifeblood of the franchises, they should have first option.

A selection of tickets is held back by the NHL for youth hockey programs. Great move. Children are the lifeblood of professional sports. It’s an horrific shame that with ticket prices what they are, kids are getting squeezed out of live sporting events.

The remaining tickets will be granted in a drawing, amongst all who request them, as options to purchase a single lot of two tickets. Register to “win”, and you have a shot at attending. Regardless of geography, regardless of means (you still have to by the tix, between $50 and $350 per), regardless of connections. Its egalitarian. It lends a Willy Wonka feel to the experience, where fans (myself included) will be watching on lottery day to see if I get to buy the tickets.

A masterful way to keep make the game more accessible to greater numbers and make the excitement for the event build long before it actually takes place. The NHL has come up with a unique solution to providing fair distribution of supply to an event with extremely limited available capacity to serve.

Obviously not an everyday scenario, but enough to make you think about how you distribute your available capacity across the customers demanding your services.

Tuesday, September 15, 2009

Who cares how many billions served?

A marketing pet peeve of mine: companies that use how long they’ve been in business as a proof point of their expertise.

You see it in copy, usually as a slogan or a sub line, such as “serving customers since 1896.”, or “serving Linden, MI since 1939.” My least favorite form of this are those companies that add the experience of the employees and project that as the sum total of their expertise, “serving customers with over 210 years combined experience.” This type of experiential reference is usually, though not exclusively, done by small local businesses. (“Billions and Billions Served” is a variation on the theme)

These “proof points of experience” grate on me because they’re largely irrelevant to what I’m looking for in a service environment. Further, I want you to get my interaction right, and if you point to millions or decades worth of satisfied customers, I'm likely to get more frustrated that you couldn't do for me what you seemed to for them.

The services they represent can usually be characterized as out-of-date in their use of technology to enable the experience, in need of a massive service process overhaul, and often frustrating to do business with manually in an otherwise automated world. But for these faults, they also tend to have one major positive element in common: After having been in business for a reasonably long time, they usually get the people part of service right.

The way they do business may seem out of touch to those of us uberconnected, high speed, low drag customers looking for the shortest line in every encounter. But the high-touch, people-centric service models do fit with a large segment of customers that don’t place an absolute premium on their time and would rather have the confidence that comes with a reassuring, if slower, encounter.

As much as the “in service since” approach is a personal pet peeve, I concede that it is not a marketing vehicle intended for me, and likely works for the customer segment most small businesses covet.

Sunday, September 13, 2009

$2.15 can lose you thousands.

Yesterday I stopped at one of two sporting goods stores that sell hockey equipment in Overland Park, KS – the one where I do a vast majority of my spending.

Not a major spree – I just needed a number applied to the jersey for my fall men’s league team. The total came to $2.15.

It was the attitude of the person who performed the service that set me off.

The same individual that applied the number also rang my purchase up. When finished, she was surprised, borderline disgusted with the amount showing on the register. “That’s it? Seriously?”

Now I know that $2.15 isn’t a heavy commission sale. I’d even acknowledge that the time and effort to apply the number likely made it an unprofitable transaction. But the service employee, other than being rude, was taking the short view, the view that didn’t take into account my lifetime value as a customer.

Ask a parent. Hockey is an expensive sport. I spend hundreds a year on equipment, sticks, and sharpening. I’ve played since moving here, and referred several adult players to the store. I’ve have coached in the area and referred kids & their card-wielding parents. In all, my lifetime value, already in the thousands, is likely to double or triple that before my wife and my doctor finally conspire to convince me to stop playing.

So sure, the transaction was $2.15, and hardly worth the service providers’ time. Except that I see it as one minor though potentially critical, touchpoint in a long-term relationship. And so should they. Then they might have also seen it as an opportunity to secure or lose a fairly revenue stream.

How then, should they have acted if a customer worth thousands in revenue and thousands more in referrals came in for a $2.15 purchase? Write it off for a loyal customer? I’d have considered it.

As it stands, their actions have me giving that other store another look.

Saturday, September 12, 2009

Table (and expectations) for Two

It’s my turn to pick the restaurant for date night.

When I requested input on what type of food my spouse was in the mood for, her only reply was, “let’s try something new”.

Immediately, the task of choosing the dining experience for the night got more complicated than I ever intended.

When we’re experiencing a new service for the first time, our sensitivities are heightened. We pay more attention to the physical environment, the people providing it and the way in which they do so. In the restaurant setting, this means that EVERYTHING comes under the microscope: how easy it is to find parking, the wait, the atmosphere inside, the manner of the host, bus and wait staff, of course the food, the other diners, and on and on. In a new restaurant, I’ll probably use the facilities just to get the full atmosphere effect.

Only one thing could create greater expectations sensitivity than trying a new service yourself - choosing a new service experience for someone else.

Not only do you have your own internal evaluation going on, you’re also indirectly responsible for the experience of another. In addition to how you experience the meal, you’re intensely aware of the experience your partner is having, because ultimately, they put their trust in your selection, and you want to make sure their experience is a good one.

Now, rather than just going to OpenTable for one of our standbys, I’m on the internet reading reviews, making calls to foodie friends, going over drive times and other planning minutiae that I would never otherwise consider.

This is taking about 10 times longer than I had intended, so I’m copping out.

When we were in the Tempe / Scottsdale area, there was a hipster sushi place called RA we went to frequently. They’ve imported the experience for the Leawood, KS crowd, and so I’ll use a decisions loophole to find a place that is both new (to here) yet familiar (to us).

Of course, now we’ll be evaluating this experience against the ones we had at the former Arizona version, a tough matchup, given that we were younger, (maybe even hipper), and less discerning than we are these years later.

Wednesday, September 9, 2009

Everyone's a critic. (and a fan)

A friend asked me what I thought of the mystarbucksidea site. Never wanting to miss an opportunity to make my opinion public on a service question, I’m posting my response.

Customer listening posts are critical in any business, but even more so in a service business. The core offering is intangible, comprised of a process performed in full view by front line employees, and requires customer input in order to be successful.

Listening post opportunities are everywhere – traditional satisfaction and customer value research, customer service organizations themselves, front line sales and service employees, are all examples, though few companies capture knowledge from each.

A listening post will have positive customer impact if it provides customers with fair treatment – a simple, visibly legitimate outlet to voice their concerns and a quick response that is adequate to their level of dissatisfaction. This is the case regardless of whether the company actually uses the data they collect. (Though we would hope they would)

Mystarbucksidea achieves this objective.

The feedback process is easy, and if you miss it, Starbucks lays it out graphically. Users sign up by opening a starbucks.com account (also opening them up to future marketing opportunities) and leave “their starbucks idea” – anything from a complaint to a new service improvement or merchandise idea. With a lot of loyal followers, Starbucks’ customers have taken the offer up by the thousands – enough that starbucks has categorized the commentary by various categories of product variety & quality, service process and physical environment.

But, you don’t have to leave your suggestion to be heard. You can opt to show up and vote on the validity of other peoples’ ideas with a simple thumbs-up / thumbs-down selection. In this way starbucks shows procedural fairness by making every suggestion public and letting the customer base vote on which ones are most valid. Disagree with the comment that starbucks baristas should be able to have their tattoos visible during working hours? Vote the suggestion down, and the customer has to eventually recognize that they aren’t in the majority. (Incidentally, another reason why service businesses are more complex than product businesses. Think Steve Jobs has visibility of employees’ tattoos filter up to him as an area of customer concern?)

Customers are also encouraged to “discuss” their and others’ ideas through a mediated open forum, creating another source of fairness, while putting some of the corporate empathy burden back onto the customer base.

Finally, Starbucks showcases the most popular ideas, and those where they’ve taken action. This closes the loop on a clear process for launching a complaint / suggestion, having it vetted against the opinions of other customers, allowing for open discussion eventually resulting in change on Starbucks part.

My guess is, not every popular idea is put into force, (Starbucks customers come up with a lot of reasons that a free drink is ‘merited’) but the process is simple and has a high level of perceived fairness.

If they’re mining the suggestions for the next service experience improvement, all the better (my guess is that they are). If not, the site still serves as an outstanding listening post.

Sunday, September 6, 2009

Customer Productivity. There is not an app for that.

The ubiquity of smart phones and supporting applications has made us ready for the next dramatic improvement in self service technology for service companies to increase customer productivity, but we haven’t seen it begin yet.

Part of the fault lies with application developers, but most lies with small service businesses themselves.

The logic behind developing customer productivity apps is simple. Yet while application developers may have taken on business productivity, they’ve missed what improving customer productivity could mean to small business productivity and profitability.

A list of best selling apps for small business have plenty of tools for small business productivity – accounting, travel, networking, HR, meetings, and even a “sloganizer” that helps managers create clever slogans for their businesses. But the list contains almost nothing that helps companies make customer interactions more efficient.

Then there are personal productivity tools, such as OmniFocus, which uses Wi-Fi or GPS to detect your location and creates lists of tasks for you to complete nearby, and OnePassword, which keeps all your online and personal passwords in one place. (For every time I’ve accessed banking / ecommerce sites through the “forgot password” side door, I NEED this.)

Still, small businesses that are not using the flood of newly created personal connectivity technology as an opportunity to review processes to make customers more productive are stepping over customer satisfiers and dollars.

Example: since many small businesses are appointment based, I would expect to see something as simple as a calendar reminder. Doesn’t need an app, just a change of process to ask for a regular customer’s email address, (once) and email them a meeting reminder for the service appointment.

This could be used in conjunction with the traditional appointment card. (I have two of these in my wallet right now, and a 90% chance that I will miss one of the appointments.)

Not sea change, but enough that a small business can improve the productivity of the customers that engage its services, and decrease the amount that they impact each other negatively.

Yesterday alone, it would have kept me from being 15 minutes late for my hair appointment, making the hairdresser late for her next customer and potentially every other for the rest of the day.

Friday, September 4, 2009

Geeks rule the world AND provide the best service.

I spend my money with the service company that puts the most expertise on the front line, providing service to customers.

Don’t get me wrong, quality of service offering and the underlying products are unbelievably important to me.

But I usually look for the provider with “service geeks” on the front line – those people that know far more than a layperson, but also more than their competitors, about the products or services they represent.

In any service environment, companies have a wide enough variety of differentiated offerings that I have a staggering selection of options to choose from to satisfy my immediate need. Because I have a choice, and I’m not an expert, I almost immediately search out the advice of an expert – a service or product geek – that knows the topic deeply.

On any trip to Whole Foods, there’s a good chance my wife will conduct 90% of the shopping while I spend 20 minutes talking with the cheesemonger about options for a $6 block of cheese to complement a meal or wine selection. He’s a cheese geek, and I want to use his expertise to make a better decision and learn a small measure of what he knows. While I may not seek him out every time I pick up cheese, there’s a good chance a previous conversation is influencing the current purchase.

If I’m at an unfamiliar restaurant, I’ll almost always ask the wait staff what is the one thing on the menu I absolutely have to have. When they answer anything at all, I’m never disappointed. They’re geeks about the food their restaurant makes – they know better than I do and taking their advice yields satisfaction. Every once in awhile, someone will say a variation of, “Everything here is good.” They’re showing that they don’t care enough about the offering to have a default answer. They’re not geeks, they’re employees. In these cases, I have almost universally been disappointed with the meal and the other aspects of the service experience as well.

In the end, if I’m ordering coffee, I want to be talking to a coffee geek.

If I’m ordering a cable package, I want to talking to a geek who watches way more cable television than is likely healthy.

If I’m in the beer store, I want the merchandise assistant to tell me about the small batch micro-brew that just came in that can only be consumed in small quantities but simply has to be tried.

When service providers display their passion and their knowledge, we’re completely drawn in as customers, almost regardless of setting. We feel that spending time with the provider is making us more knowledgeable, more of an insider, and more confident in our purchases / selections

Whether expertise comes as a result of internal training or is due to company hiring practices, the company that invests more in making its front line service providers knowledgeable about their business category is the company that I will spend with, almost 100% of the time.