AT&T broadband cap gets a consumer wag-of-the-finger

AT&T made news this week by announcing a cap on broadband for personal internet use. Based on my own (purely unscientific) review of the comments circulating through social media sites, the move wasn’t favored by consumers.

From Twitter:

JD_Wright: Broadband cap? I think our days with AT&T for internet service are very limited.

Joel_Turnipseed: @att added a cap and didn’t lower price, this is why I have moved internet providers "att capping broadband http://t.co/u9YrKmi"

kevinlam14: AT&T cap broadband usage! 150gig for DSL and if you go over, $10 is charge for another 50gig http://ow.ly/4NAAs This is a load of crap!

beermonkey: Time to switch providers out of principle alone. RT @News4WOAI: AT&T putting cap on broadband http://bit.ly/mGoiqT


But before committing to indignation about how this is a money extracting move by an evil cable company who doesn’t want to provide the service it’s loyal customers, consider this as a move that potentially protects the service experience.

According to AT&T, the top 2% of customers – those for whom the cap will apply – use a full 20% of broadband.

When one customer’s service experience adversely impacts the service experience of other customers, the company has a decision to make – protect the experience for the customer whose use is negatively impacting others, or intervene to protect the experience of the many.

In some cases, the decision is easier than others.

If the customer is improperly using a company’s service experience – think of a severely intoxicated passenger on an airplane – the difficult but appropriate response is often to remove them from the service environment, to be served in another way or not at all.

On the other hand, if a customer simply uses “more than their fair share” of the company’s service capacity, the company has the option to charge for the capacity-draining use to either modify the behavior and bring capacity use back into balance or ensure any continued extreme usage of the service is compensatory.

The AT&T cap on broadband (which isn’t a cap, as much as a charge for excess use) isn’t without precedent. In fact, it is somewhat similar to the intelligent traffic system IBM implemented in Stockholm, which concurrently solved a major congestion problem while increasing municipal revenue and was ultimately seen as a creative solution to a difficult problem.

What is interesting to me is that while both organizations made changes to preserve scarce service capacity to serve more customers more effectively (and make more money doing it), one is met with case studies while the other is met with catcalls.

How much work would you ask your customers to do?

On a recent trip to see a good friend, he and I went to dinner at a steakhouse he was excited to show me. The source of his excitement was their unique take on meal preparation. He described a flat stone heated hot enough to cook on and brought, with my steak, to me for tableside grilling. The twist: I get to do the grilling myself, preparing my steak to my own desired doneness.

This didn’t seem like a terrific idea to me as a customer. I go to restaurants to have professionals – better cooks than I – prepare my food for me. That I was going to play a significant role in my own service experience while I knew there was someone more qualified and paid to do it standing through a set of double doors didn’t excite me.

Still, I’m always up for a new experience, and I trust my friend completely. (military basic training followed by 4 years of college together tend to do that) So, I mustered up some excitement to accompany the anxiety that came with the prospect of cooking my own tableside meal.

An immediate benefit of this format was that I got to see the main ingredient raw. You can’t hide bad product when the inputs are raw, and this steak was spectacular. I grew a little more excited.

As I started searing my steak, I began to see the participation benefit. Rather than a distracting hassle, the experience let my friend and I share an experience along with each others’ company.
The quality of the product, the way every other detail was taken care of and the result created accomplishment satisfaction that surpassed what consumption satisfaction would have provided.

Customer role is often overlooked in development of the service encounter. Most businesses fail to realize the potential of the service-producing capacity that also pays the bill, and how in some cases, getting a customer to do more work may actually increase their satisfaction with the encounter.

As you way how to include the customer in producing your performance, be strategic, but don’t overlook opportunities to push the boundaries of how you can apply their service capacity. Like a restaurant owner that says, “I know! Let’s get customers to cook their own meals!”

I want my “OpenTable” for appointed services.

I need a haircut. People can gauge my mood by the height of my unkempt coiffe. (If you wonder whether this is possible, ask @Brainzooming. He’s seen done it.)

It’s 10:00 on Sunday night, and I want to schedule an appointment now, not leave it until tomorrow, when I get into the swing of a busy week and forget about it until I’m sitting here again next Sunday night.

Problem is, my hair place (salon, if I must) isn’t open. Though it should be.

Why can’t I go online or use a smartphone app to schedule an appointment with my regular service professional at a time of my preference? My place has a website, and while it is good at telling me where they are and when they’re open, it has no scheduling application. Nothing that would allow me, during a time when they’re not open but that I have some time, to see my hairdresser’s schedule, pick a time that works and confirm it without having to call anyone.

While we’re at this, surely my dentist could also pick up on this need and stop giving me appointment cards that get lost in my wallet never to be seen again, or at least until call to tell me I’ve missed my appointment and they’re going to charge me for it.

A rule of business (maybe not the “first rule”, but still pretty important) is, “make it easy for customers to buy from you”. Being open online when customers are looking for you extends your ability to take orders and fill your schedule with paying customers. Better, it does so in a way that works to customer convenience. Better still, it does all this without needing an “appointment desk” to be staffed.

If you aren’t available to your customers when they want you, maybe they’ll call you when you are. Then again, maybe they’ll just find a service provider who is.

Service like a highway with no fast lane.

Stopped in to Costco on Saturday of the holiday weekend.

In a hurry. I had a small gathering to host, and I was under orders to come home with two platters of various vegetables, meats & cheeses, or to not come home at all. (The departure call of Spartan wives, updated for 2010 suburbia)

But Costco is no place for a person in a hurry, especially on a holiday weekend. Long, winding lines of cargo ship-capacity shopping carts stacked to adequately resupply a 50’s-era bomb shelter, and there I am, standing with two items.

The self check-out line helped, but not nearly enough. At a point, I would have gladly paid to skip the line. Not double, but maybe as much as 25% more.

For large-format retailers, (such as Costco, Sam’s Club, Home Depot) I wonder why an premium express line hasn’t been created for the busiest times to help serve customers in a rush. It could definitely be done, though they would have to set some rules. For example, no more than 5 items. No cash. No coupons. No price checks. They would also have to provide assurance. “Out in 60 seconds, or your 20% up-charge turns into a 10% discount.” I would have used it, and looking around, I wouldn't have been alone.

The warehouse format retailers perhaps didn’t intend a single-item shopper, but they get them. Forced to serve customers that don’t fit well with other customers, the company can either stick to the efficiency of the basic model knowing some customers will be dissatisfied, or serve customers with different needs differently, perhaps taking the opportunity to make a premium margin on a premium service level.

No customer can be characterized as shopping solely based on speed & convenience or solely on cost. If your standard service model trades these characteristics off to best serve the regular customer, look for ways to serve them in those times they need a different kind of delivery. It’s likely they’ll gladly pay a little more, and you get to provide service to your best customers along more than one dimension.

A 3-legged entry in the 100M dash.

I ran into an interesting capacity dynamic yesterday when I stopped to run a few errands on the way home at the end of my “official” work week.

My favorite time for an extended grocery run is late Friday afternoon / early Friday evening. Everyone else is on patios, in restaurants, bars or dens unwinding from the work week. Few are thinking about how bare their pantry is or how the fridge only contains condiments – that is a problem for Saturday.

On Friday evening the grocery store(s) I support offer few competing shoppers, though all of the weekend sales are already posted, and scores of people to help should I need something in particular.

Yesterday, however, I also walked across its parking lot to a liquor store. Same time & place, completely different result. The liquor store was a madhouse. The narrow aisles completely cramped with carts not designed for the space, store employees at a near sprint trying to attend to every customer with a question or and keep stock on the floor, every check-out line seven or eight customers deep.

Why don’t these businesses just team up?

They really don’t compete. The grocery store sells little beer, and the only items the liquor store sells that could be found in the grocery store are lemons, limes & Red Bull.

They could be balancing their service capacity with demand much better if they would take the Friday afternoon excess grocery store employees and apply them to the shortage of help in the liquor store. On weekend days and during the week, the flow could reverse to accommodate busy times for the grocery store.

Take it a step further. Move the liquor store from the place across the street into the adjoining retail space, knock out part of a wall and provide an experience where two patrons can sell complementary products through a single shared experience, supported by employees that know their stuff in both, able to offer suggestions on pairings, even “cross the transom” to support a single customer’s shopping experience.

Matching service capacity with demand is tricky in any environment. The natural flows of these businesses are too great a gift to be overlooked. A business can try and make it on its own, staffing for service & knowing full well they’ll have times with both excess capacity and times when they’re dissatisfying customers with inadequate staff. Conversely, they can partner to expand their formats & share labor cost, to make the most of the customer experience and approach the capacity problem creatively.

Trainers with no sense of (business) balance.

My gym has some issues managing service capacity when it comes to adequately staffing to meet the demands of their clients.

For the 3rd time in the last 6 months, I’ve been a negatively impacted guest when they’ve closed the nursery early and without advance notice. In each case, as I’ve arrived with a pair of little ones in tow, for an all-too-infrequent workout, I’ve found the nursery locked tight.

Since I’m too cheap to leave - I have one of those grandfathered monthly rates that would see me increase my exercise expense by about 200% - my options are to either deal with the inconvenience or make some suggestions to management on what they might do to overcome a severe operational shortcoming.

Fulfill existing capacity commitment. Satisfies the client base by maintaining the capacity levels needed to keep the nursery running as scheduled, and likely has negative profitability implications. It certainly would have fixed my issue with them.

Use customer understanding to change the schedule to reflect demand. This should happen anyway, but some inexpensive research to understand the clients who use the nursery, how they use it, when they use it and what they value when they do. Based on that, scheduling decisions (and other operating changes) could be made that would increase satisfaction and efficiency by matching the operation with the desired usage of the clientele.

Communicate to reset expectations. If the policy is that no kids in the nursery means they will close early, communicate that. Better, post for parent guests when the busy times and slack times are, so that we may select our service times accordingly.

Let the guests co-create the experience. Establish a network of gym member-parents whom are regular users of the gym. Using any number of electronic scheduling, the clients themselves could coordinate nursery use so that the gym seldom has excess capacity.

Flex labor to create capacity. It may horrify some to think of their personal trainer in charge of their little one for any period of time, but consider that many trainers have designs on management. Understanding how an effective nursery operates is a skill-building endeavor for trainers. Cross train some gym staff so that the nursery can flex capacity up and down as demand needs.

Increase demand to fit current capacity. This should only happen after multiple of the above have been successful, but recast the gym experience so that it becomes the destination of choice for “health-conscious families” (rather than “just something we offer because every other area gym does”) and spend the time & effort promoting the positioning to attract the segment.

Likely multiple, if not all of these solutions could be used in different measures in order to balance a critical need to fulfill on guest commitments with the need to match service-supplying capacity with demand for a specialized service within the operation.

That said, what did I miss?

To improve service, don’t play the percentages.

Many B2B and B2C companies market their service delivery rate – fulfillment, up-time or on-time percentages – as an indicator of how reliably they perform.

These external claims usually reflect internal service quality metrics, independent of whether they are important to consumers or not. But while helpful for internal comparisons that lead to incremental improvement, these metrics provide a false sense of security about service quality and may actually impede true improvement.

Consider the following:

99.5% up time sounds great. Even at 95% fulfillment success on your core promise, you feel pretty good about things, right? But if your business had 100,000 customer interactions, service encounters or “moments of truth” yesterday and your delivery rate was that “A” letter grade of 95% - you’ve failed to deliver on your promise to 5,000 people.

5,000 times some level of disappointment yesterday. And, if your service is consistent, you know today that you’ll fail for 5,000 more people tomorrow.

Take that pure failure number in your core operation and add the performance in the interactions you have with customers in your customer service channel and at the point of sale. Take that number and apply it over the week. The month. The year. How many customers, as a percentage, had a defect-free year in dealing with your services? And that’s just basics – your satisfaction core. It doesn't consider any effort or need to provide customer delight.

To create a sense of urgency around improvement, report the failures in real numbers at the time you report your service performance.

Would that focus managers on finding root causes of defects in the core offering? Focus the service operation on fundamental change rather than incremental improvement? Focus marketing on finding the right customers and promoting them while finding the wrong customers and managing them out of your business?

The false sense of security that the percentages provide is the reason a vast majority of companies feel they provide outstanding service, while an equivalent number of consumers feel that service performance is low.

Percentages are important, but appreciate the personalized perspective, that measuring your success and failure in pure numbers provides you business, and the subsequent urgency it creates.

Service Rant: January at the Gym

January at the gym – the month where “resolutioners” – those people who make the promise to get back in shape, commit to a healthier lifestyle, eat better, etc. for the coming year – come to the gym in droves on newly purchased or gift memberships.

It happens every year, and it makes January is a capacity disaster at the gym.

Lines are stacked 3-deep at many machines with people waiting for a turn. Personal trainers and nursery slots are booked weeks in advance, and you have to palm the cleaning staff a fiver to find an open treadmill. The gym becomes a mixture of expert and novice users, with the former waiting while the latter read machine instructions for proper technique.

Because it happens every year, the gym’s annual unpreparedness is inexcusable.

I’m not saying the temporary increased interest in fitness is a negative. If more people made the commitment and stuck with it, our country would be healthier, lives would be saved, healthcare costs would decrease, and all manner of positive societal benefits would ensue. But the truth is, that most of the resolutioners will be gone by the time the calendar turns to February, and the gym has to shoulder some of the blame for it.

If they wanted to keep the new clientele, they’d make it more attractive for them to stay. Dedicate capacity to the new users to show them how hassle-free gym services are the other 11 months of the year. Deploy more instructors to shepherd new clients through their first few trips. If permanent staff is fully allocated, they could get creative and use a compatibility service to assign a current power user customer to a guide the “newbie” on how best to use the services. They wouldn’t act as a trainer, but someone who can give helpful tips on when to go, how to use the extended services, general etiquette, and so forth. It could be a reinforcing relationship for each party, and at the least would make someone new find what can be an elitist environment more comfortable. If the current user needs motivation for their time, offer something – training sessions, tanning sessions, free protein shakes for a month – for their troubles.

At the same time, create capacity to serve all clientele. Consider taking loyal customers out of the gym – arrange for an alternate facility, or better, a loyalty experience such as a series of hosted events – a hike or climb, ski trip, a members’ triathlon, an adventure race – something that rewards the most loyal clients for their loyalty and gets them offsite in January. For those that stay and put up with the wait on machines, reward them with free training sessions (AKA a free service trial for a potential future stream of revenue) in December or February as a thank you for their patience.

My gym – and most I’ve ever used - manages the annual January capacity shortage awfully, and deteriorates relationships universally, frustrating loyal customers while alienating new ones. It all sorts itself out when most of the new customers cease using gym services, and a few of the frustrated loyal customers change gyms, and capacity turns to normal. But it doesn’t have to. The gym could use the capacity shortfall creatively to reward loyal customers, welcome new clients with positive first experiences and customer-to-customer interactions. Of course, customer retention would create an ongoing capacity problem, and then the gym would have to deal with more revenue, profits, need for expansion, and other such successful business headaches.

Unexpected Demand for Health Care in Flu Season?

I spent 20 minutes on hold for the pediatric triage nurse this morning. When I asked how she was, she responded, “busy”. No doubt. Cold & flu season isn’t even in full swing yet, but doctors’ offices are full of the unwell.

She asked me some basic questions about my children’s symptoms, and then gave me the, “monitor and report back” response. Relieved that neither of my boys was in immediate danger, I grew annoyed with their management of the demand for their services.

Pediatric care practices are all over-capacity right now. But with H1N1 having been telegraphed for 6 months, increased demand was not unexpected. Still, this office relied on the standard processes that are in place 365 days a year.

Why?

Variability of demand, coupled with the fact that in any process involving human service, capacity is difficult to bring on- and take off-line, combine to make service operations difficult to manage at the best of times.

Still, they knew this was going to happen. Where was the proactive response?

The on-hold messaging indicates that the response process is first-in-first-out (FIFO), but is that the best when demand is outstripping capacity? You don’t have to be visibly fair to customers in a telephone queue, so why not prioritize even before the call gets answered?

How about changing the IVR to automate triage and engage the caller in provision of their own service?

In the case: one line for flu, one line for everything else.

The flu line could ask qualifying questions such as temperature range, duration, and additional symptoms that could be aggregated on a desktop system that would allow the triage nurses to prioritize before answering a line, and respond most quickly in critical cases. If a parent is really only looking for the comfort of having spoken with a professional, they can wait awhile.

Managing demand better allows caregivers the ability to keep the community more healthy. It also lets them serve more customers and take in more money.

Thankfully, the first message in the on-hold system indicates that if this is an emergency, hang up and call 911. At least it is unlikely that response is delayed to a serious health issue because of the mismanagement of demand.

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.