Yesterday, I received the message below in an email from a blog reader:
Ever since I passed your blog to my store manager… I have gotten the vibe that (my interest in improved customer service) is viewed like a puppy…cute but meaningless to the Corporation’s ideals… Profit for the shareholder is the requirement of all actions… The image I see is the company has a system it says works. As much as I would (or even my Store Manager would) like to improve Service, unless there is a clear vision of profit in doing so, it’s only a cute puppy…
I understand what he’s saying. I have experienced it personally as an employee, as I suspect most of us have.
Too often, managers with P&L responsibilities see customer service as a soft skill with little impact on the bottom line. Instead, these managers tend to rely on hard data such as revenue, profit margins, and forecasts to influence the operation’s financial success.
This becomes a self-fulfilling prophecy whereby managers tend to consistently value and critique “the numbers” while neglecting soft skills like customer service. Employees receive mixed messages: “The posters in the cafeteria tout the company’s commitment to World Class Customer Service but the only feedback I receive pertains to labor and productivity figures.”
It’s as if managers are operating with a day-to-day or week-to-week mentality as opposed to considering the long-term impact of their decisions. And when managers manage this way, employees usually follow their lead.
Just last night at my local Safeway, I witnessed the following confrontation between a cashier and a customer:
As I waited in line, the customer ahead of me was attempting to obtain a rain check for a sale item that was out of stock.
The cashier refused to issue the rain check on the grounds that the sale had ended the previous day. The customer, clearly frustrated, maintained that the sale was valid according to the date published in Safeway’s sales circular.
A line of customers had formed behind me and, as we waited, the customer left the checkout lane in search of a circular to prove his case. About the time he obtained a copy of the ad, a store manager approached him and together they scrutinized the ad’s fine print. As it turned out, the customer was right. The sale was scheduled to expire the following day.
The enlightened cashier then validated a rain check for the out of stock sale item but the damage was done.
I’m not sure what Safeway’s total cost will be to honor the rain check but I can tell you this with certainty: It will be a drop in the bucket compared to the lifetime value of this customer.
I’ve read that the average lifetime value of a supermarket customer is $250,000 (source: V. Kumar, University of Connecticut). This customer looked to be in his mid-40s, presumably with plenty of grocery store purchases in his future. This particular Safeway store is located directly across the street from a competing supermarket, King Soopers, and about a mile away from a second competitor, Albertsons.
This customer has to eat—and within about a five-mile radius he has multiple options to buy groceries that, in addition to the stores listed above, include Walmart Supercenters and SuperTargets as well as specialty grocers like Sprouts and Sunflower Market.
Why on earth would anyone want to jeopardize tens of thousands of dollars in future sales by refusing to issue a rain check for an out of stock sale item? This makes absolutely no sense—regardless of whether or not the sale had expired.
It is well-documented that one of the most effective ways to boost a customer’s lifetime value is to increase customer satisfaction. Research has shown that a 5% increase in customer retention can increase profits by 25% to 95%. The same study found that it costs six to seven times more to gain a new customer than to keep an existing one (source: F. Reichheld, Bain & Company).
Hard data and soft factors do not have to be mutually exclusive. They can be complimentary elements of the same goal: To maximize profitability.
In addition to hard data such as profit margins, market share, and customer retention rates, managers must recognize the influence of soft factors such as customer satisfaction, loyalty, and word-of-mouth testimonials from delighted customers.
They also need to look beyond the near-term operating statement in order to make decisions that will benefit the long-term success of the organization.
When they do, these managers will come to realize that even cute puppies have teeth.
