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The Service Crisis
A customer service crisis is building throughout the business world, and most managers don't know it. Even those who do seldom understand how to cope. The price of their ignorance will be high: by the 1990s, thousands of businesses will be shaken and even shattered by their inability to render effective customer service. The spoils will go to those few companies that both perceive the crisis and learn how to out-service their competitors.
"Crisis" is a strong word but no exaggeration. Most customer service is poor, much of it is awful, and service quality generally appears to be falling. At the same time, the penalty is growing for companies that render inferior service. Customers, both retail and industrial buyers, are getting smarter about the value of service. They're increasingly frustrated and more willing than ever to take their business elsewhere.
Consumer loyalty to many brands of durable goods, from automobiles to household appliances, has been eroding for years, in large part because of shoddy service. Industrial companies have been slashing the numbers of their parts and materials suppliers to concentrate on just a few, mainly for the sake of getting better service from the survivors. Corporate customers are pressuringleviathans like AT&T and IBM, which have difficulty achieving consistently good service. By carving out large chunks of business for relative upstarts MCI for long-distance telecommunications, Amdahl for mainframe computers these customers are driving to extract the best possible service from both the giantsuppliers and the midgets.
Paradoxically, managers seem to know customer service is essential to the health of their businesses, yet service keeps getting worse. In 1987 the Gallup Organization, working for the American Society for Quality Control, asked 615 senior executives of U.S. companies to select the most critical factor for their businesses in the 1986-89 period, from the cost of materials and labor to the availability of capital. The clear winner was service quality, ranked first by nearly half the sample. European managers have similar views, says a survey conducted jointly by Management Centre Europe, a consulting firm, and the business magazine Profile. When asked whether service would be essential in the future to successful companies, three fourths of the 322 European executives polled expressed strong agreement.
Customer service gets great lip service. Dedication to customers is the featured message of corporate image advertisements, the keynote of annual reports, the revealed wisdom of consultants. Asked whether serving customers well is a crucial weapon for winning in business, most managers will nod sagely in agreement and utter some variation on the timeless theme that the customer is "king," "key," "number one," or "the person who signs our paychecks."
Yet for all their awareness and good words, managers rarely succeed in delivering outstanding service. Is the customer king? Ask almost any consumer who has recently endured the abominations of air travel in the United States, or tried to get an automobile repaired promptly and reliably, or attempted to figure out a personal computer, or vainly searched for a sales clerk in a major department store.
Do most suppliers act as though the customer signs their pay checks? Ask the industrial buyer who has tried to get all the items in a parts order delivered at the same time, or struggled to get a new robot to work the day it arrives, or pleaded with a software company to update a program, or tried to reduce the paperwork needed to purchase almost anything. Despite the veneration business people express for their customers, horror stories about customer service have become a conversational staple, right up there with sex and real estate.
The Service Conundrum
Why the gap between managerial awareness and performance? Why so many companies appear to be at a loss in dealing with the service crisis? It's now that they lack evidence about consumer sentiment, or about the business consequences of rendering lousy service. A host of polls have shown that consumers find most service is mediocre to atrocious, and that they believe service is getting worse. Extensive research by Technical Assistance Research Programs, Inc., on behalf of the U.S. Office of Consumer Affairs reveals that at some two hundred giant companies, customer service departments are fielding over twice as many complaints today as they did seven years ago (and that people who complain represent less than 5 percent of all dissatisfied customers). Time magazine was concerned enough by the decline of customer service to ask, in a 1987 cover story, "Why Is Service So Bad?"'
The impact of this service slump on corporate performance should be equally clear. For example, Management Horizons,a division of the Price Waterhouse accounting firm that consults to retailers, cautioned in a 1986 report that rotten service was undermining customer satisfaction. "Despite an industry-wide 'customer-first' philosophy in retailing," the report concluded, "the level of customer satisfaction appears to have deteriorated substantially over the past decade" as a result of extreme pressures on profits, overexpansion, understaffing, and an obsession with shortterm cash flow." Bad service in this case, failure to deliver goods on time was a major reason that the U.S. machine tool industry lost over half its domestic market to Japanese suppliers between 1975 and 1985, according to James L. Koontz, a director of the National Machine Tool Builder's Association. "It killed us," he says. "This lack of service was the single most important contributor to the Japanese success." A specially poignant plaint recently came from the president of the American Management Association:
Sales persons at many department stores appear ignorant of both their merchandise and the rudiments of customer service. Flight attendants often seem more interested in socializing with one another than in attending to their passengers. Bank employees are confused by any but the most simple transactions and seem interested in none. Merchandise ordered by mail arrives in the wrong size or color, and the formidable challenge of getting the order corrected falls to the customer....Sadly, we are not moving toward a service economy, but a noservice economy.