We talked about creating the Greatest Customer Experience Ever by focusing on five simple starting points:
1) Focus inside out and look at your business the way a customer does,
2) Listen actively,
3) Measure everything from the customer’s perspective,
4) Maximum joy is your new goal, and
5) Improve constantly. Let’s look at number 1, focus inside out, and talk about the 5% solution. Understanding the 5% solution is critical to overall financial success as you pursue the greatest customer experience ever.
One difficult emotional obstacle to get out of the way before we can achieve a full understanding of the 5% solution is that tired canard “the customer is always right.” That line was invented by a secret cabal comprised of the world’s most unprofitable customers who like the free cases of toothpaste they get by return mail after writing the Chairman complaint letters whining that their teeth didn’t seem “sparkling clean” after just three applications. This guideline should really be written as “we always treat the customer right”. That means we always provide an interaction that maximizes satisfaction while also maximizing value-more on that in another article. Extraordinary customers get extraordinary treatment. Spiteful customers are appraised soberly and judiciously. Angry customers receive an appropriate hearing, but potentially a firm and negative determination of the outcome. Self-aggrandizing frauds are placed in the non-customer category at a minimum, turned over to the authorities at the maximum. In each case the customer receives the “right” treatment, but they certainly were not always right.
Is this consistent with the creation of maximum joy? Yes, but at a very deep philosophical level. As Aristotle noted, “happiness is activity in accordance with right reason”. If you allow a customer to return a pair of socks they’ve worn 25 times then you’re applying a very short-term dollop of joy, but denying them the opportunity to learn to act in accordance with right reason. Do your teenagers want to drive drunk? At times, of course they do. Are you helping the development of their full ethical potential by handing them the keys and a beer? I can only hope your answer is, “No”. For low-cost consumer products we don’t need to dive that deep. We just tell our representatives “the customer is always right” because the time required to argue usually costs more than refunding the socks.
Now let’s get into the 5% solution. Typically 5% of your customer transactions are going to require extremely special treatment. Look at the giant banks and credit card companies-if 5% of their customer loans are problematic they’re making some money. If 3% are bad then they’re printing money faster than they can make wheelbarrows to carry it to the vault. If 7% of their loans are trouble, they either fix it fast, charge exorbitant rates, or they’re out of business.
You have to minimize the losses associated with the nominal 5% of your transactions that go painfully sideways. Do not focus, overly, on the cost of your service channel as the solution. The very best way to improve is to eliminate process defects that are driving the 5% into your service channel. Remember these five percent are the transactions where the customer is hopping made, yelling and screaming, threatening to bring in lawyers and looking for your home address. These are not information requests; these are customers who think you’ve poisoned their dog. If each adverse incident costs you $75-$500 dollars (or much, much more) to correct then getting the volume from 5% to 3% improves your costs by 40%, forever. It all goes to the bottom line-and now you’re printing money. Of course there are the normal curves associated with the distribution of errors and their relative remediation costs, so your mileage will vary, but the potential should be clear.
One quick example may help. Say you’re an insurance broker sending out the annual updates to the auto ID cards for all your policyholder’s vehicles-these are the little slips of paper for your glove compartment that affirm coverage to the police after that five car pile up on the commute home. You have one department that processes the cards and another service department that processes mail for the company. All the cards are processed and sent to the mailroom. The super-efficient mailroom gets them all sorted and stamped and sends them to the customers.
And each year about 10% of the customers change their addresses, without telling anyone, and 10% of the cards bounce back from the bad address to the mailroom. The super-efficient mailroom is paid to send mail out, not fix bad addresses. They can’t believe how stupid the other department is to send out so much mail with bad addresses. So they put the bad mail in a big box in the corner and note that someday they need to complain about this problem to someone. Meanwhile they’ve still got stacks of mail that need to go out.
Don’t laugh, I’ve seen this happen a thousand times. In a typical company each department is whipped and beaten to make sure their step in the process is as efficient as possible. As a result, they could give a damn about those other departments competing with them and it just doesn’t occur to them that maybe the customer is the one really feeling the pain. customized dress socks