You’ve implemented your marketing strategy and things are going great. However, you start noticing some negatives in your dashboard, but you figure, hey, I’m still #1, so who cares if a few customers defect. All of a sudden, you’re not # 1 anymore and, soon, you find your sales dropping like a stone. Investigating your metrics, you find poor reviews and negative mentions likely due to service failure.
Your great marketing strategy can no longer bring in new customers through social networking, advertising, and promotions fast enough to replace the customers leaving. And it’s 5 times more expensive to attract new customers than to keep the ones you have according to Forbes.
What went wrong?
The first step in determining what went wrong is to view your metrics over time. This includes top-of-funnel metrics as well as post-purchase evaluation. I’ve worked with several Fortune 50 companies that ignored declining revenue, assuming they were viewing normal cyclical behavior and variance rather than a systemic problem that required further investigation. For instance, one firm’s marketing folks told me they had all the information they needed by just monitoring sales and chose to ignore other metrics and refused to consider the attitudes of customers, assuming sales subsumed everything they needed to know about these attitudes.
Instead, the marketing literature is replete with theory and empirical evidence that behaviors, such as sales volume, are lagging indicators of changing attitudes. Waiting to address a problem until it clearly shows up in declining sales may be too late to implement change in time to turn things around. You also face damage to your reputation that not only influences existing customers to choose another vendor but makes it harder to attract new customers.
Look at how service failure has brought down industry giants like Circuit City as one factor contributing to declining sales. When they introduced their stringent return policy that made it nearly impossible to return purchases without paying a restocking fee or facing very short timelines, it was just easier to shop at another big box store than put up with the potential hassle should you face a return situation. In an industry where your company has no strong strategic advantage, service perfection is the key to survival.
Unfortunately, most retailers and other service providers find themselves in this position where they have few if any sustainable competitive advantage. Many stores carry very similar merchandise and e-commerce adds additional competitive pressure, especially as delivery times shrink every year (new experimental drone delivery offers even shorter delivery times). Dry cleaners, restaurants, banks, hotels, accountants, and lawyers — all offer the same services with only service quality to distinguish between their offerings. Even professional services, like doctors, consultants, and pharmacists have little that differentiates them from each other except their service quality.
Service failure occurs when customers don’t get the kind of service they expect from your business. Incur enough service failures and you’re out of business. Service failure is serious not only because it drives away existing customers, but it encourages customers to retaliate against the business. Customers can do this by spreading negative opinions of the business through their social networks, posting negative reviews, creating complaint websites, or by using other means to communicate their dissatisfaction with the company — this discourages future customers from doing business with you and spreads dissatisfaction within your existing customer market.
So, how can you build a marketing strategy to reduce service failure?
First, recognize there are 2 types of service failure: systemic and transitory.
Systemic service failure occurs when policies and procedures established in your marketing strategy are NOT the right ones for your market. Transitory service failure occurs when your marketing strategy doesn’t include sufficient controls to keep service failure from happening.
More seriously, customers can create hassle and expense for your company by refusing to clear tables at your fast food restaurant or leaving the bathroom messy, they can pay for items in your express checkout with pennies. This further spreads their dissatisfaction to other customers and creates an extra expense for your business.
They can even sue your company. Happy customers rarely sue businesses.
Sources of systemic service failure
1. Return and credit policies
As with Circuit City, if you make it difficult for customers to return items to your store, they’ll likely decide not to buy them there in the first place. Credit policies can also irritate customers, especially when they believe the policies are unfair.
Recent banking and credit regulations are, in part, a result of long-standing customer dissatisfaction with the way companies handle credit. It’s a big mistake to invite government intervention by ignoring customer complaints. Government regulation and legislation often make it more onerous to ensure and prove compliance.
You can add to these other policies that have the potential to create dissatisfaction, including cancellation policies. For instance, in a recent policy dispute with Verizon, I decided to cancel the wireless account that I had with them for 12 years — of course, I have to wait until my contract is over. Lest I forget my anger in the intervening time, I found members of my social network reaching out to me with their own horror stories with Verizon. Now, even minor annoyances with Verizon send me into a renewed rage. Is it a coincidence that a recent news story shows Verizon is losing its edge against rival, AT&T?
2. Problems with ordering or delivery
Maybe your website redesign is confusing to customers, generating a poor customer journey, or your site contains too many pop-ups, or efforts to upsell customers, so they abandon their shopping carts. You may not integrate across mobile and desktop views of your website making it difficult for customers to use the platform of their choosing for each visit. Or maybe your pricing varies across platforms or is unclear until customers attempt to pay for items in their virtual cart.
Maybe lines at your checkout are too long in a physical store or your store layout is confusing, making it hard for customers to find items they want to buy. I always find it frustrating when chain stores don’t even make an attempt to mirror the layout across individual stores. Maybe your atmospherics make for an unpleasant shopping experience.
Maybe you’ve decided to start charging for delivery or you have so many orders your delivery is takes longer than promised. Failing to update customers regarding anticipated problems or delays is key to avoiding systemic failure.
Sources of transitory failure
Transitory service failure may result from problems occurring at the moment of service delivery such that some customers or even some visits by customers are satisfactory while some represent failure. Or your failure may result from uncontrollable, such as weather. Customers are more likely to forgive you if they believe the failure was indeed uncontrollable, such as a snow storm delaying delivery. However, when an uncontrollable occurs frequently enough, customers expect you to develop contingencies to handle these frequent failures. Thus, at-fault service failure is usually the result of poor internal policies including:
1. Poor employee management
Unhappy employees = unhappy customers
Unhappy employees miss work, nap at work, and take longer breaks, which means fewer people available to help customers, causing long wait times for service.
Unhappy employees produce sloppy work — they’re slow, they make mistakes, they don’t take initiative, and they don’t go the extra mile to help a customer. Unhappy employees don’t empathize with customers, treating them as an annoyance versus a valuable asset.
Unhappy employees may even steal from your company to increase costs and contribute to stockouts.
2. Improperly maintained physical plant
Planes break down and strand passengers. Trucks break down and can’t deliver to customers or retailers. Machines don’t work properly and damage customers’ property.
Some uncontrollable are unpredictable, resulting in customer failure that is unavoidable. For instance, after 911, the government grounded all planes. Airlines had no way to anticipate this event, so customers didn’t blame the airlines. However, when weather causes flight delays, travelers have less sympathy for the airline because they figure weather happens with some frequency and airlines should develop contingency plans to handle cancellations and delays.
Reducing the effect of service failure on your marketing strategy
- Review your policies and procedures. Do some research to see if they are acceptable to customers.
- Listen for customer complaints — for every complaint, there may be as many as 20 customers who were dissatisfied but didn’t complain.
- Set up schedules and monitor the maintenance of equipment. Test computers and websites to ensure they work properly and test with different screen sizes, browsers, etc. Install GPS on your delivery vehicles so you can update customers of impending delivery delays or allow logistics managers to redirect shipments to reduce the negative outcomes for customers. Also, use remote IoT devices to monitor the performance of equipment you can’t monitor in person.
- Institute internal procedures to bring up morale among employees. Increase emphasis on employee hiring and training to ensure you’re getting the right people and empowering them for success. Ensure equity and treat employees well.
- Provide training to help employees handle dissatisfied customers, such as role-playing and ensure they understand their flexibility in meeting customer needs. Employees are going to have a bad day if they get yelled at. Help them handle these customers so they don’t put up with poor treatment from customers.
- Establish contingency plans for transient service failures to reduce the impact of these failures on customers or limit the number of customers who experience failure.
- Don’t over-promise. If you give customers more than you promised, they are thrilled. Give them one small element less than what you promised and they hate you. Ensure you can meet your promises at least 90% of the time.
- Develop a systematic approach for assessing your service quality that goes beyond monitoring behavior to monitor attitudes. With social media, it’s easier to detect changing attitudes early by effective listening.
- Establish procedures to handle customer complaints. For instance, Marriott consistently achieves 97% customer satisfaction, yet they have a procedure calling for managers to address customer complaints within 24 hours. The system tracks complaints and provides reports for upper management so they can handle complaints that are too old and help employees who fail to respond quickly to understand how to improve. Automating digital complaining, such as using chatbots to provide customer support 24/7.
Service failure is a huge threat to your business. To reduce the impact of failure on your performance:
- monitor the attitudes not just the behavior of customers, including active listening
- address complaints quickly and thoroughly
- conduct periodic assessments of your service quality
- create policies and procedures that limit the risk of transitory failures
- motivate, monitor, and train your employees to support your customer service goals
- develop contingency plans to handle common uncontrollables
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