Customer Service- a flight of fancy?

Show me the money. Show me the love, people.
Outstanding customer service is often a spontaneous occurrence. Which happens only with truly empowered staff empathizing with their customers.

This piece was inspired by a recent experience with the ticketing department of India’s Kingfisher airlines. http://www.flykingfisher.com/ While I focus on the airline business, my grudge applies to every consumer centric business.

I enjoy flying Kingfisher airlines. Very polite, well trained staff, clean planes, always a good experience. I am a frequent flyer. In fact when I book for any member of my family, I book Kingfisher.

But even they slip up. Here’s what happened and why I think I am being shortchanged all the time by these marketing folks.

I booked two tickets for my parents. But instead of flying them in first from Mumbai to Bangalore, I booked them Bangalore to Mumbai as first sector. Realized the error five minutes after booking and called the booking centre to make the change.

“Cant be done”, they said.

So I asked them to advance the return sector and push back the first sector.

“Cant be done”, they said. So I asked them to look in their rules and there was nothing to prevent me from doing this.

They still refused and I promptly wrote to Dr. Mallya, the chairman.

Within a few days, I was contacted by a guest relations executive and this was sorted out. Me being given a refund in the form of a travel voucher (that lapsed last week). All this works well. No problem. And I appreciated their promptness.

But here’s my point. The re-imbursement I was asking for was Rs 1500.
I estimate that I have spent over Rs. 100,000 in flight tickets this year with KF. So I am now asking for someone to look at my expenditure on the company’s information systems and waive off a Rs 1500 without my having to bring the chairman into play. (At least the email id I wrote to says “chairman@ kingfisher.com”)

That would be true customer service.
Outstanding customer service is a spontaneous occurrence. Which happens only with truly empowered staff empathizing with their customers.

KF is not there yet. But then there are so many companies that fail on this account.

My experience in marketing suggests most consumer goods companies spend about 6-8% of their revenues in marketing related activities.

Which means Rs 8000 of my expenditure of Rs 100,000 was spent on marketing. To whom? Not me. KF does not run any print advertisements/ nor TV commercials. So where is my 8000 rupees?

Let’s say that of the 8% spent on marketing, 50% (4%) is spent on acquiring new customers. OK, so maybe that’s why I don’t see that part of the money.

But I still want to see the other Rs 4000 being spent on me. In applying the same rules to me as to someone flying once in three months, what’s my gain?

This is not toothpaste and shampoos I am buying. And I am very serious. This is big money that should be invested in me.

Show me the money! Show me the love, people.

I’m making these cats fat. And I don’t see gratitude. I see free pens and toffees. But I don’t see that they trust me, care for me and respect the business that I contribute.

Is it because they know that I don’t have a choice? Any other airline in India would do exactly this, and some do it with a bigger smile and more free pens.

This note is for companies that want to move to a new level in customer service.

Business analytics is with every company now. Last week, I had a letter from Jet airways asking why I had stopped using their services. (www.jetairways.com) I was impressed. But then turned cynical. Do I think they would have accepted that I erroneously reversed the order of a journey and wanted that changed- at no cost? Naaah!

So each company has a lot of data on its customers. What we buy, don’t buy etc. So they can surely identify and segment their customers as A,B,C or any which way they choose. Would they not then have some rules for treating these segments differently? I don’t see that.

Remember, when my family flies, I pay but I don’t get the freq flier points. Why cannot an information system track the credit card details to identify the big spenders? If airlines companies really wanted to reward loyalty, they would link the points to the “buyer” of tickets.

Sure a first class customer is treated differently. Frequent flier points give you some free-bees. But where is the differentiation in customer service for a customer that I neither carrying his freq flier card on his face, nor seating himself in first class- but still contributing heavily to business?

Everyone is looking to get new customers. Why is customer retention such a “non issue”? Is it the high switching costs?

It’s a pity. Because “customer service” is a clear opportunity to differentiate in a relevant way. Proper technology married to proper judgment is a powerful tool in producing genuine “wows” for customers.

Technology is bringing powerful information to corporations and their customer facing staff. Even the most “subjective” decisions can be quantified and modeled in order to produce objective guidelines.

We seem to have the technology.
We seem to have well trained people.

So what stops companies from treating us as the unique individuals we really are?

Venkat

The Curse of the Pyramid

The curse of the pyramid:
Should companies target value market share or volume market share?

No, “the curse of the pyramid” is not the proposed titled for a fourth Brendon Frazer “Mummy” movie. The genesis of this note comes from discussions I have had on the grounds that I believe a company searching for ”premium prices” and profitability should not search for market share as well, without defining very carefully its ”market”.

In the history of marketing, I claim, no company has been able to be a volume market share leader while maintaining premium pricing. (Market share of a leader and premium pricing are both relative to the industry, but as a generalisation, this always holds true.)

Example: Leather carry bags. Louis Vuitton is a “premium” player in the market. But has possibly les than 1% of global leather bag sales. (including non branded goods sold in open market places around the world). Does LVMH set itself volume market share goals?

While contemplating these ideas, I came across an article in the HBR by Vijay Vishwanath and Jonathan Mark called “Your Brand’s Best Strategy”.

One of the key points I understood in this article is that a company’s ambitions must be judged in line with the commoditisation of the industry it is in. Eg: mobile phones- dominated by 7 manufacturers that add to more than 70% of the market and are all focused on innovation and profitability. Each company focused on justifying a price premium. Till the emergence of the “cheap phones” market in India and China, this model was working very well. Now everyone wants to put a mobile phone in every Indian’s hand. So the average cost of phones in India has dropped quickly towards the USD 35-40 mark. Sure Nokia has gained market share. But what has happened to its average price per phone and average profitability.
Its innovations are no longer “technology innovation” but more design innovations that involve integrating a flashlight and radio in every phone. Easy to copy.

Apple in the mp3 market is another example. Apple stands out through innovation in an industry where there are a number of low priced options. A decrease in the prices of Apple will mean a decrease in its capacity to spend on R&D and hence innovate. Immediately product differentiation will suffer.

Compare this to the tyre business. Consumers are neither “wowed“ by innovation, nor seem too concerned by lower priced products. No real innovation has come to the market in the last 30 years. Is there any surprise that all companies in this business use “raw material price increase” as the crutches on which they increase their own pricing? (I use the word “crutches” since if these decisions were indeed genuine, we would all remember examples of companies that decreased prices in an era where raw material costs were coming down).


I want to continue with the Nokia example. Today Nokia has defined the category- with products from $30 to more than $1000. So far, they have gotten market share as well as profitability.


Now, lets say that the market of the “low cost” $30 phones grows 5 times more than the overall market for cell phones. Nokia will be forced to sell more in this segment. Unless it is then able to find a cost structure that allows it to have the same profitability as for its more “upmarket phones”, its profitability will fall. (not overall profits, but profit per phone).

However, as the mobile phone gets more and more “commoditised”, it is likely that cheaper manufacturers in China will be able to deliver phones at $25 without having a high cost structure due to lower investment in R&D, manufacturing costs etc.

Would Nokia be able to match this? Should it?

Or should it then refocus on businesses that value its innovations and allow it to continuously charge premiums and reinvest profits into its innovations.

As an industry matures, many consumer segments emerge. Satisfying each segment well requires specific business models. Working and synchronising among these different models different skills in a company and eventually proves impossible.

Today Nokia and Apple are masters at their game because their respective industries are still relatively new. Customer segmentation is still relatively narrow. But it will not be the same 5 years from now. Where should these companies create competencies in their business models?

Perhaps it is for this reason that in a mature industry, there has never been a “premium”, innovator that has consistently maintained strong prices and continued to gain market share.

Now let me bring in the concept of the pyramid, and the curse.

The segmentation of consumers in most countries is shaped as a pyramid, with a broad base at the bottom (signifying a mass market) and a narrow top signifying a smaller set of consumers at the premium end.

Products can be launched at both ends of the pyramid. At the top end, they are more exclusive, with cutting edge features that justify the premium pricing. The bottom end products (in the same category) tend to be cheaper, and with less technological differentiation.

In developed economies, the base of the pyramid is not as wide as in developing economies. Indeed I may argue that the height difference of the pyramid (difference in the spending power of the top end of the population compared to the bottom) is also lower compared to developing markets like India and China.

Consequently, in developed economies, servicing the bottom end does not drain resources of the company to the extant that it does in India or China. I.E to reach the bottom end of the pyramid in India requires a distribution network spanning the country. It requires a service network and a product range that is both cheap as well as innovative. With prices ensuring that the returns are much lower.

The top end by contrast, can be serviced at the top 20 cities of the country with limited investments in sales, distribution and service. By definition, targeting the top end implies reaching fewer consumers, but those that can pay high value for products. Hence higher profits per customer.

Sure, the base of the pyramid is where volume market share is built. Its where the volumes are.

But in my experience, the capabilities required to satisfy both ends of the pyramid are so different that few companies have come close to mastering them. Perhaps none in the Indian market. For example, customer support and service networks are designed to satisfy the entire customer universe. A one size fits all dominates. In fact it is the expectations of the “mass market” customer that then determine the infrastructure. What does this mean for a customer who pays 10 times the price? Should he not expect 10 times the service?

This is where the brand experience at the top end starts getting impacted. And customers become open to newer propositions.

In India, companies will have to choose which end of the market they want to target. The two ends of the pyramid are seducing in terms of the business and market share potential, but require enterprise competencies that have so far not been demonstrated.

Companies that enter the Indian market today without a clear idea of which segment they want to play in, risk losing their brand value and customer loyalty.

This is the curse of the pyramid.