The Customer-Service Imperative 542.3
I read somewhere that a person who has a positive restaurant experience is likely to tell three friends, but if he has a bad experience he’ll tell ten. Thus, there are two sides to the customer-satisfaction equation: Good service generates more customers, and bad service keeps new customers away and sends current ones elsewhere.
This compelling case for treating excellent customer service as an indispensible cost of doing business, however, runs headlong into a conflicting two-sided equation: Executives succeed only if they increase profitability, and a simple way to increase profits is to cut costs. This translates into mean and lean personnel strategies -- reduce the number of employees and keep compensation and training expenses as low as possible.
This year, Circuit City, a national electronics retailer, fired 3,400 of its highest-paid hourly workers so it could replace them with lower-paid employees. By doing so, it expects to reduce its costs by $110 million annually.
Since management had to know that letting go of its most experienced line-level employees – the ones who answer customer questions -- would both damage morale and reduce the quality of customer service, it must have concluded that employee and customer satisfaction aren’t critical.
In the next eight months, its stock price dropped from $25 to $6. Sure, other factors were probably at work there, but cutting customer service is an irrational strategy, especially in a business where customers want and need help.
Home Depot made a similar decision to trim its workforce and replace full-time workers with part-timers. This year its stock price plummeted from $40 to $27.
The long-term costs of failing to invest whatever it takes to create a workforce capable of producing positive customer experiences will always exceed the short-term savings.
This is Michael Josephson reminding you that character counts.


Comments
I heard you're commentary today driving home from putting in another grinding day at The Home Depot. I absolutely seen what was going to happen at Circuit City when they layed off all those higher paid employees. Then you mentioned what had happened at The Home Depot. You hit it dead right on the head! I can guarantee you also that if my management could find a way to lay me off they would do exactly the same thing. I am a ex contractor who has been there for 9 years now, previousy 7 years with Contractors Warehouse (now formerly known as H.D. Supply). Well, my point was just to say you are 100% correct with you're commentary.
Posted by: Michael J. Fekete | November 28, 2007 3:39 PM
you're right, but who is listening? depot? no
Posted by: berlin47112 | November 28, 2007 11:47 PM
Unfortunately, too many of these retail companies are being run by Bean Counters instead of Merchants. Throughout the history of retail, the Bean Counters replace the founders. Then the companies begin to falter. Why? basis points -vs- customer service.
Posted by: Bunker Charles | November 29, 2007 6:09 AM
I agree 100% For a short time I worked in an Apple Computer store. The one thing I left the company understanding was that the customer experience was #1. To this day they strive to make the customer experience better and better. Check out their stock prices over just the last year. Yes, they have great product, but their stores are they're front lines, and they will do anything to protect that.
Posted by: Howard Johnston | November 29, 2007 5:17 PM
Michael, this commentary is great!!! My wife and I thought maybe it was just us. We refuse to go to Circuit City for any reason, even if it's the cheapest price in town, because of the way management treats you when there's a problem. About 1 1/2 years ago, I saw the same thing starting to happen at Home Depot and I sold all the stock I owned in that company (luckily before the price dropped). When are these companies going to learn? Please keep up your outstanding work! I listen to all your commentaries and have done so for approx. 10 years ( I think-how long have you been doing them?). I have also financially supported you for the past 3 years and plan to continue to do so in the future. Thanks again for the great work!!!
Posted by: Ken Seibert | November 30, 2007 9:44 AM
I have to agree also with your commentary. I to was a 12 year employee of United Healthcare and they decided to close our office here in Southern California and move the operation to Chico California. There they hired all new employees of course at a much lower salary. Within the first year they were completely backlogged and had to rehire 13 former employee, from So. Ca. I being one of them to work from home telecommuting to reduce the backlog, once the backlog became managable they raised our quota and fired many of us. Within that 2nd year, they later closed that location and moved it back east. They were willing to sacrifice Quality and experience, but it came back to them in the end.
Posted by: Cheryl Warr | November 30, 2007 2:53 PM
Macy's - home of Miracle on 34th Street where customer service is more important than "make a buck", right? Not for a long time, unfortunately. Several years ago, my husband and I cut up our Macy's credit card when we kept receiving the bill AFTER it was and the CSR in India couldn't or wouldn't be helpful. I still shopped there because some of the old salespeople who were friendly and helpful still worked there (from previous stores who were bought out by Macy's) but they have been slowly disappearing. Last night, I discovered that Macy's will not even call another store to get some merchandise if they are out of stock. I guess they must be doing very well since they don't have to care about customer service. After 35 years, I will never shop there again.
Posted by: Andrea Ridgely | December 3, 2007 8:04 AM
Ironically, the Circuit City store in Palmdale California just became a store I will shop at again. After looking at a half dozen stores for my first TV purchase since 1991, I grew tired of negligible customer service. At this particular store however I found young salesmen and store managers willing to converse with my wife and I (over several visits) to answer all the questions we had. I bought from them because they were the only ones that put in the effort to make the experience pleasant.
Posted by: LarryF | December 7, 2007 12:56 AM
Thank you, and God bless you sir ! I work at a "big box" hardware store which tells us during our initial "training" that the customer comes first, and that we are to greet every one of them and ask if we can help. However, if we do that we are in danger of using up our valuable time needed to do the house work of facing and fronting the items on the shelves and mopping the floor. In addition, every closing manager tries to push us to leave fifteen minutes or more ahead of our scheduled time to leave, further cutting into the time we can use to get the store ready for the next day. It basicly tells us to, "do as I do not as I say" not quite the way we always heard the old saying. Too bad, I think that three letter hardware store is going to join circuit city.
Posted by: Name withheld for personal reasons | December 7, 2007 1:51 AM
Dear Mr. Josephson: Thank you for addressing this issue and your tireless effort to remind us that "Character Counts".
My wife and I have been shopping at IKEA since our college days. Mainly for their modern designs and cheap prices. However, our recent experiences at their Costa Mesa (at corner of Harbor Blvd. & 405) store changed our view and we decided never to shop there again. We were in the market to purchase furnitures for our home office. We made many trips to IKEA. We found out there was one part-time older gentleman, unfortunately, he seems to be the only one in that store who was both knowledgeable and helpful. We went there only when he was on duty. We eventually bought almost $1,500 of tables and file cabinets, etc. Among all the products, one $69.95 file cabinet had a defect and could not be assembled properly. When we brought the assembled file cabinet back to the store. The Customer Service (?) Manager used every trick in the book to deny it was their problem and refused to take care of it. For the two and a half hours I was there, I witness three other angry customers trying to get some justice but were in vain. We eventually returned some of the unopened boxes to them and vowed never to shop at IKEA again.
Just like the previous listener said, IKEA is joining the Circuit City quickly too.
Posted by: Ed K. | December 7, 2007 10:35 AM
the name of the game is service. I have tried to instill that in everyone I talk to. it falls on deaf ears. our population is more interested in teir bottom line rather than customer service. character counts as you say
Posted by: yosh n | December 14, 2007 7:03 AM