Gary Eckstein

Many years ago (I’m starting to sound old!) I worked in luxury hotels. There are many luxury hotels and all offer similar levels of comfort and are priced similarly (although low price usually isn’t a good selling point when it comes to luxury). What really distinguishes the top hotels from the rest is great customer service. The importance of customer service becomes part of the hotels culture as formulated in a Customer Service Strategy and all employees are trained continuously in this key differentiator. A one time slip of service can result in thousands of dollars in lost future revenue and the inverse is also true, where great service can mean attaining a new customer or increased spend by customers.  Basing customer service decisions on potential future revenues is a great means of gaining a sustainable competitive advantage over competitors and a good means of understanding what an organization should be doing regarding customer service is to have a Customer Service Strategy. What follows are two examples of customer service that illustrate the importance of every employee being empowered to provide great customer service whilst understanding the potential future value of the customer.

In most countries, no fee is charged by the seller when the customer pays by credit card (Visa, MasterCard, Amex, Diners etc.). The Australian government allows for retailers to charge an amount when people pay by credit card. Although this is favorable for retailers, consumers are against this premium charge.

A while back I attended a convention at a premium hotel. On one of the nights a few of us had dinner at the hotel restaurant. It was a quick dinner and so as we sat down we each ordered a pizza without taking too much notice of the menu. When the bill arrived, and a Visa card was provided for payment the waiter advised that 1½ % premium would be charged for payment. We felt ‘ripped off’ as we’d spent considerable sums of money at the hotel during the convention and now the hotel was trying to take an additional $1.50 off us which, we felt, was totally petty. We mentioned our displeasure to the waiter and he advised that even all service stations charge a premium for use of a credit card which is blatantly incorrect (I always pay for fuel by credit card and have never been charged a credit card premium). I then spoke to the restaurant manager who pointed to a small sign near the POS which noted the additional charge and he also mentioned that at the bottom of the menu was the notice of the additional charge (note however that people pay from their tables therefore don’t see the tiny sign at the POS and many people order by glancing at the menu rather than reading the tiny notice at the bottom of the menu). Was profiteering by $1.50 really in the best interests of the hotel? Shouldn’t the waiter (or the manager) have been empowered to waive the $1.50 in the best interests of future business?

What was interesting is that many people at the convention had many similar gripes about the hotel so there is clearly a large customer service problem.

We recently went to buy a leather lounge sofa. We found one we liked at one of Australia’s biggest furniture, computer and white-goods retailers. I sat down with the salesman and gave him my name, address and so on and he stated that it would cost $65 to deliver. Then however came the deal-breaker … by now I have agreed to purchase the sofa worth over $2000 and am sitting with the salesman, with him already having entered my details into the computer system.  He then asks for a required delivery date so I advise that an afternoon on a certain date is preferable. The salesman then says that he can only give a date for delivery and not an approximate time (i.e. the customer has to be available at the delivery address for a whole day). I explained that I cannot be expected to spend a whole day waiting for a sofa to be delivered and that I wouldn’t purchase the sofa if neither a morning nor afternoon for delivery can be agreed.  Anyway, the salesman said that I’d have to accept that I’d have to be at my house the whole day for delivery so the sale was lost by the retailer and I’ll be spending my $2000 somewhere else.

Why couldn’t a half-day time slot for delivery be provided by the retailer? Why couldn’t the salesman give a small discount to keep the sale and perhaps then I’d agree to the whole day delivery waiting time (the salesman had the sale and just had to make me feel like I was getting a good deal)? There are so many things that the salesman could have done from a customer service perspective to both get the sale and ensure that I’d feel positive about the purchase. The retailer has lost a customer because they do not value their clients’ time.

A person expects far more than ‘just’ a product when they buy something. They are expecting a certain level of service too. Of course, the amount and quality of service expected varies according to customer expectations (e.g. a person spending $150 on a haircut expects better service than having a haircut at a budget hair salon). It is critical that a Customer Service Strategy is formulated and communicated within the organization. Your employees must know what they are empowered to do relating to customer service as well as what customer service expectations are.

• importance of customer service in hotels

• Service as Competitive Advantage – An example
• Why Every Company Should Embrace MBO
• Five Best MBA Books

Malcolm Gladwell is a fantastic author and I have been reading the Tipping Point where he discusses what creates a sudden and large change in people’s activities. One of the recommendations Gladwell offers is to create ‘stickiness’ where the provider creates a product or service which consumers perceive as preferable to an alternative (Gladwell illustrates this ‘stickiness’ using the example of the television success of Sesame Street and all the research that went into creating ‘stickiness’). Of course ‘stickiness’ is nothing new (think competitive advantage, ‘first mover advantage’ etc.) however its importance and the benefits thereof are significant and Gladwell does a good job of demonstrating the importance of it even although the relevant chapter of the book is a bit long-winded.

So where may we find an example of a company creating ‘stickiness’? In my view, price/cost may be an influencing factor on ‘stickiness’ however does not itself create the sticky factor (Michael Porter, the management guru, described that having a competitive advantage based on price/cost alone is extremely difficult to sustain as a price/cost advantage is relatively simple for a competitor to imitate and the switching costs for consumers remain low when based on price alone). ‘Stickiness’ therefore relates to quality or features. And this is where there is a company in Australia which is exceeding …

Provision of ADSL (Broadband) to homes is a very standard product, especially here is Australia where almost all ADSL uses common copper cables and some infrastructure managed by Telstra. Price and service are therefore two of the major sources of competitive advantage for ADSL providers. It has already been discussed that price/cost isn’t good in creating sustainable competitive advantage so service remains as the key to ‘stickiness’. The ADSL market is extremely crowded (a Google search for ‘ADSL provider sydney’ returns 1,140,000 results) so even average service from ADSL providers won’t suffice; excellence is therefore called for to gain and maintain a ‘stickiness’ where consumers have no desire to move to an alternate ADSL provider.

I believe I have found a company which is leading the way is creating ‘stickiness’ in the very competitive Broadband market. I have used Internode for a few years now and on the very few occasions I have needed to call them for support my expectations have been exceeded. To illustrate how this service excellence relates to sales consider that I was using Skype with Philips VOIP321 phones and needed new phones. Because of the continuous great service from Internode my first call for new phones was to Internode with whom I signed up for their NodePhone VOIP service and purchased two Siemens Gigaset C470 IP phones.

Unfortunately after installing the new phones (which Internode had configured for me before shipping them to me) I was getting the error message ‘Provider registration failed’ on the handset after making a call. I noticed, after a Google search, that other C470 IP phone users with various VOIP providers (including Internode) were getting the same error. I therefore called Internode support and this is where Internode absolutely exceeds:

A call back from Internode technical support resulted in the technician remotely connecting to my modem/router and changing various settings for me which resolved the VOIP problems. Now my Siemens phones and NodePhone VOIP work fine.

There are two aspects of this service which I believe create the ‘stickiness’ factor for Internode:

1. The problem wasn’t with Internode nor VOIP but rather my router/modem setup with which the technician assisted even although he had no obligation to assist.
2. The technician focused on the problem at hand and resolved the error as expediently as possible (whilst being totally professional).

There are many ADSL and VOIP providers and some are less costly than Internode. Internode however deserves even further success through its focus on service quality which creates a ‘stickiness’ which makes them the ADSL, VOIP and related product provider of choice.

• c470ip registration failed
• nodephone provider registration failed
• registration voip internode

• Will a Business Services Qualification help for an MBA?
• Why Every Company Should Embrace MBO
• Why a Customer Service Strategy is Critical

Often, when applying for a job, a requirement will be that respondents have experience in the industry, product sector or some other narrowly defined specific to an industry or product criteria. For example, when applying for an I.T. role with a Mobile telephone company, it may count against you if you haven’t worked in the Mobile industry in the past. This illustrates the common belief that an industry is a ‘playing field’ with narrow and defined borders. Often, however, the innovators and real leaders in an industry are those businesses, or individuals, that are able to see opportunities beyond these imagined constraints. Take Amazon.com; Jeff Bezos thought ‘outside the box’ and developed a whole new business model for selling books even although he wasn’t an industry veteran.

I recently watched the Mike Tyson sport documentary directed by James Toback. Tyson was short by heavyweight boxing standards at 5ft 11.5”. A short height and reach is typically considered a disadvantage in boxing but Tyson turned this to his advantage; Tyson names, during the commentary, that some of the biggest influences to his ‘peek-a-boo’ boxing style came, not from heavyweight boxers, but rather bantam and middle weight boxers. Tyson realised that he couldn’t do anything about his height and reach but could use these ‘disadvantages’ to his advantage. He concentrated on his stamina, speed and mobility just like the lighter weight division characteristics which proved to be incredibly successful strategies. His taller and heavier opponents couldn’t match the atypical speed and movement characteristics which Tyson employed. Tyson brought a different perspective to the heavyweight boxing ‘playing field’ and it paid enormous dividends.

Management theory doesn’t ignore the advantages of innovation and ‘trying something different’;  Michael Porter in his Generic Strategies recommends niche strategies as a means of attaining sustainable competitive advantage. Other management concepts in support of innovation are First Mover Advantage and Igor Ansoff in his ‘Market Development’, ‘Product Development’ and ‘Diversification’ quadrants of the Product-Market Growth Matrix.

It’s therefore strange that organizations insist on new employees having very similar skills and experience to existing employees. Competitive advantage, in business as in sport, relies on doing something different.

• Tyson & reach disadvantage

• Why Every Company Should Embrace MBO
• Five Best MBA Books
• Ansoff, Product Development and Car Rental

It’s interesting that we continue to refer to Mobile (or Cell) Phones even although their use has clearly evolved from a ‘device that transmits and receives sound, most commonly the human voice‘.  Mobile Phones and how their use has changed over the years is a great example of the Product Development strategy as proposed by Igor Ansoff in the 1957 Harvard Business Review article ‘Strategies for Diversification’ (MBA students take note!). Nokia is the biggest digital camera maker as cameras are attached to most of their phones. What would have happened if Canon or Nikon had decided to include phones on their cameras?

Anyway here are some interesting pieces of information relating to the changed role of the mobile phone:

• ‘When is a phone not a phone? In the hands of children and tweens, today’s cell phones are primarily used as text messaging devices, cameras, gaming consoles, video viewers, MP3 players, and incidentally, as mobile phones via the speaker capability so their friends can chime in on the call.’ via A Pocket Guide to Social Media and Kids | Nielsen Wire.
• ‘According to Lyra Research, an international market research firm, camera phone shipments will exceed one billion units per year in 2011. And, they also state that by late 2008 or early 2009, the cumulative number of camera phones shipped will surpass the cumulative number of both conventional and digital cameras shipped in the entire history of photography — and camera phones have been on the market for less than a decade. In 2007 Nokia sold almost 200 million camera phones.’ via Camera Phones – First phone, first camera
• ‘Texting re-creates the brief, frequent, spontaneous ‘connections’ with members of our social network that characterised the small communities of pre-industrial times. Texting re-creates the brief, frequent, spontaneous ‘connections’ with members of our social network that characterised the small communities of pre-industrial times. via Evolution, Alienation and Gossip: The role of mobile telecommunications in the 21st century

• Why Every Company Should Embrace MBO
• Why a Customer Service Strategy is Critical
• Two Android Phones Activated Every Second

Kathmandu is a retailer in Australia, New Zealand and the United Kingdom. The company sells outdoor related gear such as camping equipment, hiking gear, backpacks and outdoor apparel. Kathmandu positions its products as higher quality and prices are relative to this positioning. Recent pricing activities spell that Kathmandu may well be doomed.

From a strategy perspective, one has to be concerned for Kathmandu. Their stores (in Australia anyway) have been offering heavily discounted products for very many months now. Even their New Zealand and United Kingdom Websites show the many discount offers (their Australia Site is unreachable right now – not good for a premium retailer!!!). The problem with continuous discounting is that if people don’t now buy something on sale at Kathmandu they begin to think they are overpaying. People no longer associate Kathmandu with quality but rather discounting. This is an extremely difficult consumer mindset to reverse (refer to ‘Positioning, the Battle for your Mind’ by Ries and Trout which is the classic book about Product Positioning and Michael Porters ‘Generic Strategies’ model which illustrates the danger of having a ‘stuck in the middle’ strategy).

Kathmandu is a privately owned company so financial information is not readily available. One has to wonder whether there are hasty strategic decisions being made to improve its stock turnover ratio. The current strategy of Kathmandu requires urgent revision to avoid further damage.

P.S. There is the possibility that Kathmandu is aiming to become a discount retailer. If this is the case there are better ways of achieving this than having constant sales.

• kathmandu retail

• Service as Competitive Advantage – An example
• Business Lessons from Mike Tyson
• Will a Business Services Qualification help for an MBA?