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 number 1 so who cares if a few customers defect. All of a sudden, you’re not # 1 any more and, soon, you may find your sales dropping like a stone.
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 its 5 times more expensive to attract new customers than to keep the ones you have.
What went wrong? Service Failure.
Look at how service failure has brought down industry giants like Circuit City. When they introduced their stringent return policy, it was just easier to shop another big box store than put up with potential hassle. 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. Many stores carry very similar merchandise. Dry cleaners, restaurants, banks, hotels, styling salons — all offer the same services with only service quality to distinguish between their offerings. Even professional services, like Doctors, Attorney, 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 your out of business.
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.
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, by creating complaint websites, or using other means to communicate their dissatisfaction with the company — this discourages future customers from doing business with you.
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 spreads their dissatisfaction to other customers.
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. Its a big mistake to have the government legislate rather than policing yourself.
You can add to this 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 my 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 renewed rage. Is it a coincidence that a recent new story shows Verizon is loosing its edge against rival, AT&T?
2. Problems with ordering or delivery
Maybe lines at your checkout are too long. Maybe you’ve decided to start charging for delivery or you have so many orders your delivery is taking longer.
Transitory Service Failure
Transitory service failure may be your fault or it may be uncontrollable. Customers are more likely to forgive you if they believe the failure was uncontrollable, such as a snow storm delaying delivery. 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, they nap at work, and they take longer breaks, which means fewer people to help customers.
Unhappy employees work sloppy — they’re slow, they make mistakes, they don’t take initiative, they don’t go the extra mile to help a customer.
Unhappy employees may even steal from your company
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.
Reducing the Effect of Service Failure on your Marketing Strategy
1. Review your policies and procedures. Do some research to see if they are acceptable to customers.
2. Listen for customer complaints — for every complaint there may be as many as 20 customers who were dissatisfied, but didn’t complain.
3. Set up schedules and monitor maintenance of equipment. Test computers and websites to ensure they are working properly.
4. Institute internal procedures to bring up moral among employees. Increase emphasis on employee hiring to ensure you’re getting the right people.
5. Provide training to help employees handle dissatisfied customers. Employees are going to have a bad day if they get yelled at. Help them handle these customers.
6. 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.
7. 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.
8. Develop a systematic approach for assessing your service quality.
9. 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.