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Goodwill

Question: how do MBA courses teach their students to handle Goodwill? And specifically, customer goodwill?

I was prompted to wonder about this last Friday when, due to an ill-advised sequence of use, my Visa card was frozen. (A three-digit purchase from a German online store followed immediately by an attempt to re-up my car insurance apparently caused the bank's mainframe to flag my card as stolen or something.) Unfreezing the card was a simple but annoyingly long-drawn-out sequence, involving fifteen minutes on the phone, an interminable voice menu tree, and then a call centre where they speak English with a non-British accent.

Call-centre outsourcing is of course one of those familiar nuisances of modern life, as is the voice mail menu system from hell. We're familiar with the justifications for it: Indian call centre workers are cheap, voice mail menus save money (robots are cheaper than humans) and so on and so forth. But we're also familiar with tales of family and friends reduced to incoherent piles of quivering rage by failed interactions with systems that don't work and people who are unable to communicate (because there's more to effective communication than simply sharing a language). What do the corporations who go in for these systems think they're achieving, if the cost savings are counterbalanced by loss of customer goodwill ... and an eventual loss of custom as the terminally pissed-off turn elsewhere? (There's at least one major bank in the UK that makes a selling point of not having call centres, but putting calls made during office hours through to the account holder's local branch office. The way it used to be, in other words.)

Here's a secondary loss of goodwill scenario: I am informed that the menu at Cheesecake Factory — a chain of American diners — now carries advertising. Not advertising for the restaurant chain in question, or their schwag, but advertising for designer jeans and other random products. I can almost see the marketing conference in my imagination, the guy in the boardroom saying, "hey, we've got a captive audience for the fifteen minutes between them placing the order and getting their meal — how can we monetize this?"

Well, the answer is that you can monetize it right up until the moment you piss off the customers, at which point they stop being a captive market and become someone else's market instead. Some people find advertising annoying, and piggybacking ads on a restaurant menu is a new level of intrusion into what was formerly a social space: it won't piss most people off enough to walk out the first time they see it, but it may deter some fraction of them from coming back.

But here's the rub. Goodwill is only significant in iterated small-scale transactions. Retail stores live or die by it: consider the damage John Mackey did to Whole Foods Market's brand by using it as a springboard for a controversial political intervention on healthcare; or if that's too ambiguous, how a single misplaced sentence by Gerald Ratner wiped £500M off his company's market cap. Consumers notice when a retailer starts taking the piss, and they don't like it. From a different angle: Circuit City's suicide by downsizing. They fired their highest-paid retail staff and replaced them with entry level employees, to save costs, not realizing that the highest paid staff were highly paid precisely because they were the ones who generated the lion's share of sales.

On the other hand, customer goodwill counts for zip when (a) there are no repeat transactions, or (b) the price is so steep that the customer needs accountants and lawyers to ride herd on the stack of zeroes. Estate agents don't need to worry about goodwill as much as, say, a grocer, because most folks don't do repeat business with them on a weekly basis. And Boeing or Lockheed or BAe Systems don't worry about goodwill when tendering for multi-billion military procurement contracts because governments don't run on goodwill, they run on oversight and accounting. (This glibly tap-dances around some more questionable issues — wining and dining key committee members, for example — but at that point, cultivating goodwill begins to fade into bribery and corrupt practices.)

Anyway, back to the original question: how do MBA courses treat goodwill? Because it seems to me that many of the annoyances of everyday life (outsourced call centres, intrusive ads in inappropriate places, and so on) spring from a fundamental failure to understand the importance of goodwill in businesses that live or die by repeat custom. Patterns of customer interaction that are appropriate to large enterprises are a very poor fit for daily life, but that's what seems to be filtering down from above. And I'm wondering how much of the stress of contemporary life is the result of this — of the routine imposition of management practices that damage goodwill.

89 Comments

1:

I have thought about this - my cards have been frozen several times recently, sometimes at the most inconvenient moments. My conclusion is quite simple: as far as banks and other big corporations are concerned, it doesn't matter because they are all doing exactly the same things. So consumers don't really have any choice.

Odd, isn't it, that the Monopolies Commission (or whatever it is called this week) can charge a bunch of independent schools with price fixing and fine them £1 million - although they are registered charities - yet sees nothing odd about a set of high street banks all of whose customer service stinks in exactly the same ways?

Whatever system of nods and winks is employed - whether club dinners as in "Yes, Minister" or some kind of quantum email - the banks are clearly able to agree common policies with complete impunity, regardless of the law. Hence your dilemma - if you are unhappy with your bank you can go through the hideous inconvenience and risk of moving to a different one, but you can be pretty sure it won't improve the service you get.

2:

Excuse me, but oh yes BAE SYSTEMS do need goodwill. They are currently being bitten on the arse because they thought they could take UK gov for a ride too far; and now their name is mud.

On very big purchases you are as much buying into the service culture of the company as you are the upfront cost. If they think you are going to be a pain to work with, not support properly etc, then why not go for the small startup at half the price. At least they HAVE to keep you sweet.

3:

To an MBA, I think you'll find that goodwill is an accounting concept -- it's the difference between the asset value of an acquired company and the price actually paid, which has to be taken onto the balance sheet of the acquiring company as an asset to avoid an immediate paper loss being made as a result of the acquisition. You then write it off over whatever period your auditors will let you get away with.

What you're talking about will probably be covered under customer service and customer retention, and is unlikely to be called "goodwill" due to the potential for confusion.

4:

On this side of the pond (U.S.) you mainly see this horrid customer service nightmare in monopolies and companies so close to being monopolies as makes no difference.

People largely don't put up with it in anything smaller, or at least they don't have to. The main culprits of this over here are the telecommunication companies and the banks. If you don't think Banks are monopolies just because there's lots of them, try to finding an ATM for anything other than Bank of America over here. MMMmmm, foreign ATM fees.

Also, the cheese-cake factory menu is fairly hilarious after you get past the gag reflex. The one near us fills it's menus with ads for Diamond rings and BMWs, I'm not kidding.

After the initial sentence in this post, I was hoping we could all have a good time ragging on MBAs in general, but that doesn't seem relevant. Maybe next time.

5:

Here's an example, but it won't answer your question. Apple uses American help desk employees for their phone-in help. From my limited experience, they know their stuff. This contrasts with my ISP, AT&T, who use an Indian call center. And I wouldn't mind the Indian call center, if AT&T's people knew what they were talking about.

Apple has clearly chosen the more expensive option, knowing that it gets them goodwill. But did they do this without paying attention to the costs, or did they do this because their profits are already high?

6:

Firstly to answer you question - MBA courses teach you that goodwill is the difference between what a company pays for an acquisition, and what it's worth on the balance sheet. This is just part of the broader smoke and mirrors show where firms grow by acquisition whilst simultaneously destroying value for their shareholders.

There is of course supposed to be some connection between that hole in the balance sheet and the loyal customers of the acquired company, which is where the term comes from; but this is often tenuous at best. Nobody in accounting circles actually tries to put a value on customer loyalty - that's a job for marketing.

There are definitely shades of grey here. You may not be making your credit card company enough money, so they might be deliberately trying to piss you off so that you take your loss making business to one of their competitors. I wrote about this practice, which I labelled 'reversion marketing', a little while ago.

It's easy to see how this works in practical terms. Data mine your customer records to figure out who's the most profitable (in the credit card business this might be people who 'forget' to pay on time each month). Slice and dice - everybody has the phone answered by a robot who asks for CC no., so we know who you are and how to proceed: Top 10% - put straight through to local call centre, Middle 80% - put in the queue, Bottom 10% - dispatched straight to AVR hell. When you escape from AVR hell you are then fed to the least effective 'associate' in the call centre (established by some more data mining).

7:

Goodwill can be valuated, but unlike other intangible assets like patents or copyrights, it's not separable from the business. The money sciences deal best with tradables. So it's a conceptual orphan.

The notion of paid-for consumer goodwill is a new and rather breathtaking one. It barely existed a century ago, mainly an American notion. Case in point: when the Luftwaffe test pilot, Hannah Reitsch, visited the US in the 1930s, she was astonished that clerks were paid to be friendly to their customers. One of the things old Europe (including Britain) found disturbing at a gut level about American commercialism.

(I should note this takes its toll on service workers. See Arlie Russell Hochschild's The Managed Heart. People gripe about crappy customer service, but service workers gripe about crappy customers, and they're usually poorer and less powerful. Complaining about customer service is something of a privilege.)

8:

What Carlos said. With the minor addition that much of brand management is about preserving goodwill. I'll wait to say more. Not that any pique is involved over the refusal of British science fiction writers to answer questions posed to members of that profession over on another blog.

9:

Noel: eh? What blog?

10:

> how do MBA courses treat goodwill?

Not.

Costumers are treated as fickle subjects whose purchasing behavior is mostly unknown, but can be found out through surveys and influenced by advertisement.

In Germany goodwill is a concept in accounting, as a numerical representation of brand value and similar concepts as an asset on the balance sheet. (I'm almost sure bribery is accounted as goodwill as well. I mean, those construction contracts that firms get from municipalities, no matter what competition they face, must be worth something.)

I'm not making this up.

My take on the subject is a different one though. I'd say that profit expectations have shot through the roof in the last few decades. This is forcing companies to externalize costs to their costumers in order to get high enough profit margins to get investors, credits or be bought up by Microsoft/Google or what have you.

(What does it say about the business environment, when the sole purpose of new companies is to be bought up by old ones?)

11:

I'm not sure about the MBA goodwill question but companies (good ones anyway) invest large amounts of effort in ensuring their call centres operate efficiently. It is actually quite tricky to ensure you have the right amount of staff, and more importantly the right training for those staff, available to meet the call volume.

A well designed IVR should be quick and easy to navigate and ensure that your call is answered quickly by someone that can help. It sounds to me like this was in fact your experience in this case - what use would there be in being put through to your local branch when the credit card arm is run by a different company (with your banks branding on it) and your local branch staff have no ability to unlock your card?

Fifteen minutes sounds like a long time but compare it to the Good Old Days where you'd have to walk to your branch, wait in a queue for at least fifteen minutes and receive a new card by post in a couple of weeks.

I don't dispute that inserting advertising into your hold time is irritating and damaging to goodwill but frankly any half decent company will be tracking their abandoned call rate and if that went up when you added the advertising then you can measure pretty accurately what the effect on goodwill is. More importantly abandoned calls == lost sales opportunities.

In fact almost everything in a call centre is measured like this with the imperative of driving down costs and improving customer experience, the ultimate philosophy is that you should get through to someone who can fix your problem (or sell you what you want to buy) on the first attempt, quickly and resolve the issue on the first call - repeat calls cost not only goodwill but actual money as your agents waste time on something that should have been fixed already.

Bayesian analysis is even being applied on machine transcriptions of call recordings to work out what your customers want, where the business isn't delivering or to identify unexpected trends (like "your competitor is offering this new product and your agents don't know what to offer instead).

So while the question of Goodwill is an interesting one, it makes business sense to maintain it and call centres employ an awful lot of pretty incredible technology to do so. But measuring and maintaining goodwill are not very far removed from measuring and maintaining profit which is, after all, what businesses are all about.

12:

Mike Scott (3) got the summary of Goodwill; several others state similarly below.

The other part is one of the Metrics that is supposedly measured: costs of gaining a customer, repeat customers, customer turnover, and all that get measured and reported, but rarely hit headlines. (When they do, they are often misused, as in the early days of Netflix where turnover was around 12% annualised because there were still multiple other choices for video rental.)

They get reported, and middle managers lose their jobs over them, but it's unlikely (which is wishy-washy for "I can't remember a case of it happening, can't imagine a case where it would for any company that had more than a handful of major clients or products, but it might be possible in a work of fiction") that the Executive Suite will be changed.

(As an aside, the accounting Goodwill was finally changed in the U.S. to the point of requiring a change in its reporting if it is clearly "impaired." This was after several mergers where the Exec Suite Severely Overpaid, but the "Goodwill" remained on the books at the old levels. Even FASB couldn't keep a straight face with that one, but they 'compensated' for it with another rule that made the companies appear stronger in other ways.)

13:

Over at Disney's theme parks they call Goodwill "Excellence in Guest Service." This is part of the show of the parks (most of which are designed to make the customer feel like they're leaving the real world and entering a theater of imagination and fantasy - with lobby, curtain, red-carpet equivalents included). The show is the magic.

When Disneyland opened, the four keys to Disney's success were "Safety, Show, Courtesy, Efficiency" in that order. If something provided a better experience for the guest it didn't matter if it was less efficient for the company (as long as the over all theme park was making money - and it always has made money hand over fist - just look at the small army of armored trucks that back up to collect the days take every night). But if it was something the guest wanted that went against the show (like to ride Pirates of the Caribbean with the lights on), sorry no go.

One of Michael Eisner and Frank Wells innovations was to take the concept of Excellence in Guest Service and apply it to the rest of the Walt Disney Company. This resulted in the 'Disney Model for Guest Service' being prized among all others and taught around the world (it's still taught by the Disney Institute today). A great profile of the company at its peak can be found in Tom Peter's "In Search Of Excellence" book.

Alas, the Walt Disney Company standards have fallen since then, struck down by the flurry of arrows that was launched by Wall Street's greed. The Four Keys are now taught as "Safety, Courtesy, Show, Efficiency." And unfortunately, placing Courtesy in front of Show is Management-speak for 'efficiency'. I believe this change is at the root of most of the complaints about the theme parks these days, and also the rash of poor maintenance and increased incidents of death and injury at Disney's theme parks.

14:

I have joined what I think is a growing band of people who have sworn that they will never fly with a certain well known Irish budget airline ever again. Ever.

It adds insult to injury by charging the aggrieved customer an arm and a leg to be put through its AVR hell.

I wonder how many of us refuseniks - in percentage terms - would it take to persuade such companies that good and friendly (and low-cost) customer service is important?

PS: My recent lengthy waiting period at the airport did enable me to finish "Saturn's Children", and the story's description of what budget transport could be like cheered me up no end!

15:

The call it Net Promoter score and teach it like this

http://en.wikipedia.org/wiki/Net_Promoter

16:

Jamie@11:

One of the problems with immediate metrics like abandoned calls is that (as with the menu example Charlie talks about) the reaction of the customer is probably not to abandon the call -- they need to get through this time -- but to provide an increased willingness to switch service to a competitor, later. Or simply not to provide repeat custom. (Similarly, there are lots of people who won't even reduce their tips at a restaurant for poor service because of principle, but won't come back to eat at the place again.)

The motivations of employees are frequently different from that of the company. The simplest example is sales staff paid by commission, where they get paid for making a sale now (using pressure tactics if need be) and have no investment in the customer's willingness to return down the road. A more subtle variant of this is the business-to-business services arena, where the company may have an official policy of trying to be as helpful to the customer as possible, but the sales rep is paid on sales, not on recommending a competitor's product which better suits the customer's need (and which may generate a longer-term positive view of the company by the customer). Call-centre metrics are frquently based on how fast the turnaround on the call was, not on how well the problem was addressed.

There's an immense amount of pressure placed on employees in most organizations to be "customer centred", but the immediate motivators are frequently to show high volume and low turnover time, or in some cases the opposite (e.g. making sure that you can maximize the hours spent on a consulting contract may lead to pushing unnecessary complexity, bells-and-whistles, etc.).

One problem with voice mail/call centre systems is that they are frequently set up for the most common case: "we satisfy 90% of our customers more quickly with the new menu/routing system" may hide "but we've just degraded the experience badly for the remaining 10%". In good times the company might not notice, with the resulting turnover lost in the churn and the frustration masked by good statistics: in bad times that 10% may make the difference between being in the red and being in the black.

17:

It's not. But customer goodwill, as opposed to the esoteric accounting term, is largely a function of competition. Or, as my wife - who could sell rainwater to Glaswegians - would say, it's the '$1000 dollar pizza' phenomenon. Sell a $10 dollar pizza really well the first time around and that customer will come back. Do it the next time as well as the last time, and they will keep coming back. It's monetizing the value of customer service, but it's predicated on something near perfect competition, and high frequency of per-customer transaction.

Monopolies and virtual oligopolies, and low-frequency service suppliers (such as your example of Estate Agents, or solicitors, or even automotive garages for that matter) can usually ignore the effects (in the short term).

Re the specific issue of the credit card, you could also argue that this is a cost, with the benefit that their monitoring systems will pick up atypical transactions that are fraudulent. From my POV, having experienced my credit card company phoning me twice with queries about transactions that did prove to be fraudulent, I'm happy with the cost...

18:

Interesting thoughts. In writing my response, I came to wonder if the MBA problem is really an error of categorization. Is goodwill being treated like a key performance indicator (like sales figures or profits) when it should be a leading indicator (see below)?

First, my perspective/bias: I am a Business Analyst (a relatively new profession even though the skills and tasks have been around forever). Given the descriptions of MBAs in this post in some ways an MBA is an anti-BA. BAs help our businesses define their business capabilities, particularly in terms of the benefits and value for the customer. "Value" overlaps with "money" but there are other important components too, as Charlie noted.

Jamie (#11): Measuring sales is relatively easy, as are most direct measures. It's a lot harder to measure the benefits of a good customer experience because it's indirect; dollars don't do it justice. This immediately puts measuring and maintaining good relationships with your customer in a whole different decision category from measuring and maintaining profit. You can't pay dividends in goodwill, and your staff can't cash that cheque. In times of stress most people take a short-term stance (of necessity), so anything one stage removed from the bottom line is in danger. Sad reality.

If your organization can think of goodwill as a leading indicator of profitability it may be more acceptable by MBAs and bean-counters. For example, you might measure goodwill in terms of a net promoter score (how willing your customers are to recommend your products to friends and family) or loyalty (your customer will still come to your store instead of a competitor despite greater distance / lower prices / faster purchase time / etc.). At the same time, rewarding staff based on these measures may help drive useful behaviour in your staff for longer-term profitability.

Chris (#6): Perhaps paradoxically, a company has their greatest opportunity to build goodwill when something has gone terribly pear-shaped. Companies that treat a customer-in-trouble as a person-in-need build a non-contractual relationship between the brand and the person. Customer segmentation is important for effective operations and good customer service, but most companies do a terrible job of it by only considering short-term or immediate profitability for that customer. For example, "disabled"* people - blind, deaf, wheelchair, whatever - are generally a very low profit segment for banks: they often don't have the same earning power as the people who are otherwise in the same demographic. A first-order segmentation would deal with these people as cheaply and quickly as possible. A second-order segmentation might determine that these folks have a huge impact on their family, to the extent that most of their family will put their money, investments and loan applications in the bank that treats their relative like a person instead of a burden.

Interesting post and comments. Thanks Charlie.
____
* I'm never sure of the "right" term anymore.

19:

Joel Spolsky explains why it's a bad bargain to do customer support badly, or outsource it. "Yes, the cost of a single incident might be $10 instead of $50, but you’re going to have to pay $10 again and again."

20:

On a not exactly related issue - estate agents are the people that help you buy & sell real estate, right? If so, customer goodwill can be the difference between being a break-even agent and a successful agent. Yes, they don't get much repeat business, but a LOT of their business can be word of mouth. There's one here in Minneapolis that is involved in buying or selling a fair amount of property with the local fannish community - that's because the first fan he dealt with liked him a lot, and referred other fen to him as we started buying property.

21:

Charlie,

The concept of "goodwill" as it appears on the balance sheet of a company is largely an accounting exercise. In my experience, it's mostly an unhelpful number that only auditors, IRS Agents and the like care about. Unlike real numbers that one manages to (like revenue, gross margins and net profit) it doesn't reveal a lot. It can also dramatically understate the proprietary advantages of a business.

Accounting definitions aside, I think that all *good* CEOs realize the value of long-term customer relationships. The "built-to-last" companies are the ones that do this really well (although it is ironic that Circuit City, one of the companies that you mention above--was literally one of the _Built_to_Last_ case studies--ah, how the mighty are fallen!)

I recently sat in on a lecture by Richard Tedlow, a business history professor at Harvard Business School. He made a point that I thought was very important: in almost every business that survives long-term, the CEO's *character* is what is tested. A good case study is how JNJ handled the Tylenol-poisoning disaster through integrity, directness and and forthright conduct. Sometimes companies DO get it right, and they're the ones that last... but it isn't the sort of thing that manifests within an accounting-geek's "goodwill" number.

22:

The Raven has consulted with an old acquaintance, Clipcoin, a minor demon of House Mammon, who has this to say:

At all times, and in all ways, take advantage of your customers. Remember that you are superior to them. Their time is not on your balance sheet. Make sure to hire people who have no social connection with them--indeed, have reason to be hostile to them.

Demons amaze me. They feed on hominids while they are still alive. Us corvids have to wait.

23:

Charlie: As others have pointed out, Goodwill is an accounting term. The issue at hand is more about customer service.

Regarding your examples.

Cheesecake Factory. I was there just 2 weeks ago and did not notice any advertising on the menu. In which case it is as unobtrusive to me as text ads on gmail.

It's been a long time since I used estate agents in the UK. In the US, realtors rely extremely heavily on referrals for business. The good ones take customer service very seriously. Of course the transaction fees for house sales are 6% and much higher than the UK (although it includes the conveyancing fees).

US retailers OTOH are far more customer centric than teh UK. Returning goods, especially clothes that have been worn once or twice is allowed by most retailers without question, practice that was unheard of in the UK when I left in the late 1980's. Very few US stores can get away with the "return for store credit".

Best example of anti-customer service I have seen in a while. Satellite tv service provider Dish Networks started popping up messages in the middle of programming about needing to pay the bill now or service will be stopped. These messages appeared the day the statements were mailed to the customer. Dish networks were in financial trouble, but this stupidity will do them in by increasing the number of customers who will cancel their services for this behavior.

"I'm wondering how much of the stress of contemporary life is the result of this — of the routine imposition of management practices that damage goodwill"

I think you might be surprised at how much people will tolerate if the service is made cheaper. It turned out that a segment of the population will tolerate 30 second audio ads interrupting their voice calls if the cellphone service is free. The annoyance of frequent, loud advertising in tv programming in the US takes acclimating to for UK viewers. Yet the US as a culture has accepted this as a price for "free" tv and as a result are possibly more accepting of/oblivious to advertising that might be considered intrusive elsewhere.

24:

Wasn't it Sam Wall (or one of his contemporaries), who said that people will walk over broken glass to get cheaper goods?

c.f. my comment above about tolerating intrusive advertising for free cellphone service.

25:

I'm not sure how much Mackey cared about the goodwill of Whole Foods customers. He sold 50,000 shares of the company (worth over a million bucks) five days before the editorial was printed.

26:

Hi Charlie,

I'm a recent MBA graduate from Georgetown. If you don't mind my narrowing the scope to "How did *my* MBA program treat goodwill", I'm happy to try and answer your question. (Speaking for all_mbas_everywhere seems a little presumptuous.)

Several commenters have pointed out the definition of the accounting concept of Goodwill. That's fair, but it's not what I understood from your post. I parsed your term "Goodwill" as "Customer Satisfaction" and the related idea of "Economics of Customer Loyalty". ECL is a framework we used to understand that happy customers are long term economic powerhouses. They're cheaper to serve, refer more customers, and buy more things in larger quantities. All companies should always do everything they can to have more of them.

The problem is in the incentive system. Picture yourself as an upwardly-ambitious manager who wants to make an impact in his new job, get recognized, and climb the ladder. The Economics of Customer Loyalty are great, but provide long term benefits - it might be half a decade before you're rewarded. However, some "decisive" short term moves (outsourcing, changing providers, restructuring, etc) might provide really compelling short term results. And then you'd get a big raise and a promotion in the next year or two.

Smarter companies have better incentive systems that help minimize the problem. And they have loyal customers - I think most people can name a company or two that's really taken good care of them. But the power curve applies everywhere, and not every company is that smart or great.

If I might suggest, vote for the good ones with your purchases (even if it seems more expensive - remember your time is not free), and don't buy from the bad ones. I'm not suggesting organizing boycotts or anything extreme, but make purchases intentionally and if people ask, tell them why. Consumers are so much more powerful than they tend to realize - you can change how companies operate.

27:

The only thing MBA programs are really effective at is filtering for psychopaths who are obsessed with their next bonus and their ultimate golden parachute.

Psychopaths don't care about customer service.

28:

I'd like to offer an alternative perspective on the subject of offshoring of call centre work to India. I work for a life insurer on a project and we have two call centres based in India, and a smaller one in the UK, while I work in a back office role. If any of the call centres have a case that they're stumped by, they can call us for assistance, but we've got our own work to be getting on with.
Really the call centre should be able to handle routine queries while they only contact us for minor matters. Instead, we are constantly deluged by requests for assistance which mean that not only are we having to spend our time helping them, it's also highly disruptive to workflow. On Monday I had about 25 calls - it's incredibly difficult to get your work done under those circumstances.
The real pain is that most of these are in fact fairly routine matters where the call centre rep just doesn't feel confident enough of the answer.By contrast, our UK-based call centre hardly ever contact us for assistance, and when they do it's for a tough case.
This therefore means that in the back office I spend a significant portion of my day answering very routine queries for the call centre, who often should know the answer. I'm one of the most experienced members of staff in my team and my knowledge is constantly required by colleagues, and for technical matters, but I'm wasting my time on trivial questions. I sometimes manage to get only an hour or two of work done in a 7-hour day. Also, my time is a lot more precious to the company than the call centre reps - my salary is around 5 or 6 times what they earn so if I'm answering trivial questions for them it may well be a false economy to offshore the call centre.
I think half of the problem is the way that the Indian call centres are set up. I'm reliably informed that ours operate a three-strikes-and-you're-out policy for even the most minor of mistakes. Demand for these jobs is incredibly high - typically two thousand people will apply for one job, all of them graduates, so they can always find someone else to fill a particular role. Under the circumstances, I really feel they aren't given the chance to develop because they aren't given the freedom necessary to make their own mistakes and learn from them, and they're very likely too frightened to do so for fear of losing their jobs. They clearly aren't stupid but they're reduced to parroting standard Q&A's when it would be much better if they understood it at a deeper level and were given the freedom to put things in their own words.

29:

You are talking in part about viral marketing. Look at this example, a customer upset enough about an airline customer service (United Airlines in this case) to have written his own response to United:

5 million hits and counting.

http://www.youtube.com/watch?v=5YGc4zOqozo


Will forward this thread to a couple of people in the industry (uplifting call centers to web 2.0).

30:

As to Boeing not depending on goodwill for repeat sales, you might wish to speak with Senator John McCain about that. He was so incensed after spotting a dodgy deal in the 2002 budget that he's spent years torpedoing Boeing's efforts to sell tankers to the Air Force.

On another subject, goddamn United Airlines have been a lousy operation for well over a decade now, and they cannot go away soon enough. It's a marvel how they can stay in business when everybody hates them, but they signed gate arrangements at enough airports to block out competitors. Roll on high speed rail - maybe that'll kill the zombie airline.

United's continued survival points to the problem of local monopolies: in the US right now: crap companies like UA, AT&T, and Bank Of America can survive for a while because their presence squeezes out more viable competitors.

31:

One of the reasons that MBAs and the corporations they run have so much trouble with the concept of "Goodwill"* is that it's difficult to extract a numeric measure for it from the standard numeric analysis of corporate activity. So there's a tendency to downplay it or even deny its existence.

But there is a simple way to measure it, one that's very similar to the way that security is measured: hire someone to try it. You need a department of the company or a subcontracting company that's tasked with (e.g.) calling up and trying to navigate the AVR digraph** and reporting on its quality, and that's an operating cost with no potential profit, so the need is often ignored.

* I prefer the term "Customer Satisfaction", myself. Apart from the confusion with the accounting term, it includes the word "Customer", which too damn many of those corporations would like to forget.
* Trees they're not, in general. And one of the simplest mistakes I've seen made in AVR systems is to forget that the links are diractional and that just because the caller got to some node doesn't mean they can get back, or even get out.

32:

About 90 minutes ago I got a call from Capital One. Yes, they're decreasing my credit line by about a quarter. I was expecting this because Congress has made rules that don't let CO increase my rates. I still don't like it. I don't expect it will happen with USAA.

33:

Profit maximization, an obligation of a public company in the Anglosphere, destroys value.

Value is the ratio of benefit to cost; profit maximization acts to reduce that ratio. (Either selling less for the same price, or the same for a greater price.)

Goodwill does not translate into profit; it translates into business. Goodwill is generally based on perceived value, but that doesn't translate into profit, either. So it's rare for a company to be trying to increase goodwill at the expense of profit. Hence the purely monetary and often badly done on a monetary basis decisions about things like call centers.

The Canadian airlines WestJet (employee-owned after a bankruptcy) and Porter (privately held; business model built on convenience and good customer service) are interesting examples of companies that do try to optimize for goodwill.

But you can't be a public company and do that; you're supposed to be maximizing immediate return to the shareholder. I would suggest this is pretty good evidence that the current implementation of a public company is broken.

34:

I guess they don't talk about goodwill, but about a. brands and brand value, and b. trust building and customer relationship management (or something the like).

But the really interesting question - and I don't know if it is a question MBA courses touch upon - seems to be: is a trust-based relationship (or "goodwill") scaleable in a big corporate market. Are bureaucratic organisations maximizing profit able to value goodwill, trust, CR - or is it impossible because they are bureaucratic organisations with the objective of maximized profit.

Some suitable case study "brands" could be Apple, Google, Starbucks and IBM.

35:

Adrian @14: I didn't know Jetstar ran in Ireland.

36:

Jamie A Thom @ 11:
Call center staffing versus volume is a tricky beast, but unfortunately it is also a high failure proposition. This is especially true in support queues, where technical outages can cause huge spikes. This leads to centralization, so that more overall staff are available to handle impact. The adverse impact is to local operations, and having a closer understanding of local variables.

Speaking as a tech support representative who is not the primary support tier but an escalation tier, there is a lot of run around. Our outsourced call center is in the Philippines. Customers end up trapped in a loop, being transferred from person to person in the Philippines or the initial support tier here in the US, never getting to the people who can fix them. Or only reaching us after an hour or more on the phone for a simple, five minute fix to either the authorization on their modem or an easily determined PC issue. It is rare for us to have a truly 'happy' customer - they may be satisfied with the support my department provides directly, but they are unhappy with the company and service as a whole due to the difficulty of addressing an issue.

IVR designs may be idealized as easing the customer experience, but they often end up causing more frustration than assistance. People get frustrated easily and end up punching buttons, landing in the wrong person's lap, and are put back into another queue to wait more. The advertising is horrible as well - I have to listen to it myself, and I would honestly hang up on our own call queues if I was given the option.
Call abandonment is not blamed on the IVR or the advertising but on the support staff for not being fast enough to get to their calls. Call times are tracked and limited, especially for the 'first tier' or front line support staff.

Bayesian analysis being applied to machine transcriptions? Maybe at a few of the largest companies, but not the majority. Machine translation is far too failure-prone, too many calls are not recorded correctly in the first place, and the resources that would be required for such operations are not 'budget friendly'. Most companies rely on Quality Assurance personnel and impact-reports from the call floor supervisors to see trends in problems or identify and report weakness in the company's competitive offerings. Additionally, the levels of translation from front-lines to the boardroom lend themselves to both time lag response and misinterpretation of the issue.

Honestly, my cynical view is that in a call center the driving metric is cost. Controlling the cost-per-customer. The service fee is a favorite. Charge the customer for paying over the phone. Charge them for changing their services over the phone. For some companies, charge them for going to a 'priority service' queue, a new trick for some software support centers. It's far worse in the financial services industry than mine, but still present. When I have a horrible experience while attempting to address an issue, and then an attempt to up-sell service to me is made, I want to choke people.

Once loyalty is lost, the primary reason not to switch I've heard is that the cost barrier to switching services is too high - or equivalent services are completely unavailable. Moving bank accounts, or credit cards, simply isn't possible or affordable for many people. Let us not mention contract lock-in (yes, cell phone industry - I AM looking at you).

Customers who are loyal to your service will evangelize for you. But so too will customers with problems evangelize against you, twice as viciously. We recently had this issue with an attempt to institute a monthly bandwidth cap based on the customer level of service on the internet. Though only a small group of customers would have been impacted, the reaction was entirely outside the scope of the impact, especially on the internet.
Offending your loyal customers or evangelists is a bad, bad idea.

37:

Chris L @35: please tell me you've heard of RyanAir?

Assholes. Utter assholes. I will not give Mr O'Leary a bent penny: the man's an utter flaming asshole who publicly gloats about his contempt for his customers.

(Plus, the vague rumours about their blasé approach to aircraft maintenance do not fill me with optimism.)

38:

As everyone else has said, 'goodwill' has a technical meaning. In fact, in intellectual property law it has a slightly different technical meaning - it's what you might call 'positive brand awareness'. You have a lot of goodwill as an sf writer, which would be significant if someone tried to pass of their work as yours, or yours as theirs.

With regard to low-return high-value transactions such as buying houses, this is why we have consumer comparison sites, Trading Standards and good-old-fashioned rumour. When we were looking to buy a house we asked our friends in the relevant area which estate agents they would recommend, and which they wouldn't. Needless to say we didn't go with the one memorably described as "only deal with if wearing NBC gear".

And as for government contracting, few companies have only one contract going at a time. Indeed, the bigger the contractor, the more likely it is that they have a whole ongoing series of business relationships with HM Government, and having been involved in contract tender assessment I can confirm that past performance can be an important factor in scoring bids. A certain (formerly) Very Large Defence Electronics company which might have been named after an Italian managed to run itself right out of customer goodwill with HMG in the late 1980s...

39:

Charlie @37:

Not just maintenance. There was a story a while back about them demoting of a captain for refusing to do the final leg of the day. As this was because he thought he was too tired to pilot the aircraft safely, it does not bode well for their safety culture...

40:

Chris L @ 35

Having had family members deal with Jetstar I'd have to agree they are a pretty bad budget Australian airline. Although from what I've read about RyanAir, they seem to be much worse than Jetstar. Publically considering charging for toilet access on flights suggests that customers are considered to be cattle.


Julian @ 18

I'd agree that the best time for a company to build goodwill is when things go pear-shaped for the customer. Satisfactorily fixing customer problems will build goodwill, while failing to do so will reduce it. When combined with the internet, customers can quickly inform others and poor customer service can easily create a PR shitstorm, further reducing goodwill among potential customers.

41:

In most cases it's a matter of balancing how pissed people will be about one thing vs. how pissed they'll be about the other. And how much goodwill you can buy to offset losing goodwill.

To use your visa card example, what you ran into is a stolen card/identity theft protection. They are balancing off the minor annoyance you experienced against the possibility of major annoyance and anger you would experience if false charges were being made on your card. They've decided than annoying a large number of customers a little is better than really angering a small number who might get vocal.

To counter this they have to buy goodwill. We're discussing this as part of a business ethics class I'm taking, one of the major arguments for things like Corporate Social Responsibility is that it buys customer and employee goodwill. Under the traditional ethical view best formulated by Milton Friedman, it would be unethical for CEOs and managers to spend company assets on philanthropy or anything that doesn't increase profit (that would be theft). However, if such acts make customers happy and serve to draw in customers then it is ethical.

Now, how much a company values goodwill is another matter. There are a large number of consumers who will buy on price alone (they may have no other choice). So some companies can get by with no sort of concern for goodwill or anything else as long as they have the lowest price. Others will sell high with higher profit margins and can do so by convincing customers that buying from them is somehow good -- either reliability (Toyota), trendiness (Apple), or social responsibility (Whole Foods). Some lucky companies can manage 3 or 4 of those (IKEA).

42:

Leper@40: Jetstar have recently started running in New Zealand, where they're rapidly gaining a reputation as "not worth the effort". Passengers bumped off over-booked flights on the excuse that they'd missed check-in, multiple re-schedulings of the same ticket, a hard and fast 30-minute check-in cutoff with a side-serving of attitude (even if you're only a few minutes late and don't have any baggage), cabin staff who couldn't care less... you get the picture.

Charlie, I'd heard of RyanAir but I didn't know they were that bad.

43:

Testing... 4th try.

44:

Micah @43

You need to preview each reply before posting. If, like me, you keep forgetting, the browser back button will revive your pearls of wisdom ready for preview and post. At least on Google Chrome.

45:

Regarding RyanAir: holy hell there's your example for business models without good will or customer service. My experience with them, with my wife on our honeymoon no less, from stanstead to treviso outside Venice was our first and last with grubby pieces of shit. Not enough bad can be said about that business to enough people. Allegations of treating their customers as cattle are exactly correct.

Second, in my experience Circuit City always sucked. I always found their stores to be undersupplied and disorganized. Firing their senior sales force only made that blindingly obvious, though I agree with your fundamental point.

Third, the Cheesecake Factory has had adds in their menus for awhile. But, given that. All I've had to do to avoid them is close the menu, they aren't even a nuisance. Now, the day they have waiters informing me of the special of the day in other stores is the day I walk out on a meal.

Fourth, I do reward good customer service and I know several businesses locally that stake their business on it. For one, the tobacconist I frequent has more than earned my continued patronage. The employees there know me by name, what I like and how much I feel comfortable spending. They even know my wife by name who only occassionally accompanies me. And these are people that I have no other connection to than that store. I also used to teach martial arts and I cansay that's another business that still makes it's money on it's customer service reputation. Point is, those businesses are there, butthey tend to be smaller businesses ithink.

When you starttalking about international banks and such I think it makes a lot more sense to them to engage in some pretty cold calculations. And while I don't necessarily approve, they must be pretty good at determining the over under on exactly what customers will tale as they continue to be in business. At least those that didn't hopelessly screw themselves with other decisions, like ridiculous overinvesent in the derivitaves market.

My experience with having my card shut off whilst abroad has been frustrating. On the other hand, when my account has been hijacked twice before their response was more than just adequate. I triedto keep that in mind while I made an international call together my account turned back in so I could pay for my transportation so I could my time sensitive theatre tickets.

It was a call center that initially botched my informing them of a coming international trip just to avoid such a situation.

But pennies and dollars saved on every transaction, or company interaction with a customer in any capacity, times the easily hundreds of millions of such transactions a year add up. That said I'm not sure it's quite an example of collusion when every bank acts the same way. These situations and razor thin margins evolve into being. Now maybe that's somethig to prevent, but I think it's much less sinister than an international secret banking syndicate drawing up next years competitive business model.

46:

In theory, if you make a separate business out of your support operations, they should:
- initially get much worse
- improve over time as managers learn from their mistakes and apply quality management techniques

This assumes that they are measured on more than cost. In my industry they are.

This is closely linked to brand management. (That is, the promise you make to the world, and how you are seen to stand up to that promise.) There is a whole ecosystem of blogs on marketing which address this stuff.

But at the moment they seem to be talking about other stuff. Here's a warning about MBAs instead: http://nicholasbate.typepad.com/nicholas_bate/2009/08/how-an-mba-can-but-neednt-give-a-distorted-view-of-the-world.html

47:

Funnily enough new budget airlines are created using Ryanair as a template. The Singapore based Tiger Air wants to become the Asian Ryanair for example. They've been operating in Australia for about a year now and the customer service is apparently non-existent.

48:

On the subject of advertising, I feel that advertising/management types tend to underestimate how much this annoys people, because they themselves are so desensitised to it.

There was a move a couple of years back towards televisual advertising in Edinburgh's buses and taxis (with sound and all). The prospect infuriated me, and I swore to change bus service rather than put up with them. Thankfully, they appear to have gone away again. Woo!

As far as Circuit City goes, I think firing all your higher-paid employees is merely an admission that you have *already* failed.   8^P

49:

42: This is because RYR was set up using Southwest Airlines as a template. (I also refuse to fly with them; not only horrible safety stories like Skavsta, but also the recurrent fatigue things, and there's the union busting.) What quite a lot of people don't seem to grasp about them is that RYR being unpleasant to the customers is a feature, not a bug - it's expectations management. If you expect it to be really incredibly awful and instead it's just mediocre, you'll be delighted. Further, you're meant to think you got away with a steal - that you have no right to be there.

This is why they issue press releases on slow news days about things like standing passengers and seats "in the hold if we can find a way to stop them freezing to death", neither of which would be even entertained by the IAA, JAA, CAA, FAA, or Boeing as design authority for the 737, and neither of which AFAIK were ever put to any of these bodies. BTW, the 737 hold is pressurised anyway, which should provide you with a useful index of the contentfulness of this stuff.

One of the things that worries me about those Tories who like EasyJet so much is that they think the lo-cos, and especially RYR, have "made the price of these things transparent". This is either daft or mendacious. These prices are clearly arbitrary - there is no market for them, they are suspiciously round numbers, and they bear no relation to even vaguely plausible costs of production. How many of their pax know different airlines' marginal cost to check in one pax?

Does anyone believe that it actually costs RYR anything like £5 to process an online check-in? If so their IT department wants the humane killer - £5 per TXN? In a production Web application? You what? Or £40 to process an offline check-in? The biggest cost there will be labour; how many passengers do you reckon a CSA on - say - £8/hour can process? Probably not 0.2!

Further rant on call centres; why is it that so few of them take the sensible step of having the IVR tell you what the current average waiting time is and if it's rising or falling? This is a basic management metric that all call centres fetishise and quite often display on the big board. In Asterisk it's a config file setting:

announce-holdtime = yes

50:

Ryanair was initially set up as an unapologetically cheap service with a 'you-get-what-you-pay-for' mentality, which is fair enough as it is the budget end of the market. I believe their model was Southwest Airlines in the 'States.

The real problem arises from their highly aggressive methods for killing off competition and putting in place high barriers to new competitors on existing routes (usually by running effectively free flights on the same route until the competitor gives up). They then end up being the only choice on a number of routes, at which point they have customers over a barrel. And they make no apology for it. As an example, their latest wheeze is to up the charges on checked luggage not pre-booked online, effectively making it more expensive to fly with luggage than it was 20 years ago, pre-deregulation.

Based on my limited experience of flying on JetBlue in the US, I'd love to see a similar model here. As a Scot living in Dublin since 1990 I've experienced the Ryanair service model since the beginning, and it's the prime reason why I now travel to the UK by car/ferry instead. For a family of four with luggage, it's not just cheaper it's a lot less stressful too.

Ironic that as passenger numbers and routes expand week by week, flying as an experience decays. I wonder how the impact of carbon taxes and other emissions-based charges over the next five years are going to hit home on the cost base of this industry, worldwide. Maybe customer service will suddenly become important again, as the ability to sell on low price is eroded...

51:

Alex@49: there's a world of difference between Ryanair and easyJet. The latter company tries hard to make it a pleasant place to work, and that reflects in the treatment I get from staff which is always polite, and often pleasant. I'm also reassured by their attitude towards the likes of the AAIB which seems co-operative.

I will happily fly with easyJet. I will take a longer route with extra sectors and spend more money to avoid Ryanair. Sometimes, when you add all the nonsense charges up, the competition is cheaper - Aer Lingus is almost always cheaper on the EDI-DUB route, for example.

52:

To use your visa card example, what you ran into is a stolen card/identity theft protection. They are balancing off the minor annoyance you experienced against the possibility of major annoyance and anger you would experience if false charges were being made on your card. They've decided than annoying a large number of customers a little is better than really angering a small number who might get vocal.

Andrew G, this is a false dilemma created by the banks themselves. The way credit card fraud used to be treated was (correctly) as a fraud against the bank, and therefore the inconvenience to the customer was small. To increase shareholder value, they are now tending to treat this as the invented crime of "identity theft", and the loser of the money is now the account holder, not the bank.

(We're so sorry, you appear to have been the victim of identity theft because we paid out money to someone forging your signature; you have our sympathies on the emptying of your money from our vaults.)

53:

Alex @49: as I understand it, a substantial part of a low cost operator's revenue in Europe comes from the local government paying to attract traffic.

54:

SpudTater @48 The ad men and marketers know.

Here's a short essay on the value of your customers' attention: http://sethgodin.typepad.com/seths_blog/2008/01/permission-mark.html

Of course, not everyone gets it.

55:

James @16

Point taken on only selling ones own products, but I'm pretty sure you'll be hard pressed to find any company that recommends a competitor over themselves!

Having to get through _this time_, fair enough then that abandon rate wont tell you that customer was pissed off. But if they mention it in the call "Man, it took ages to get through!" then your speech analytics should pick that up and point to any trends causing a longer wait time.

A very simple way to fix abandon from hold is to offer the option "press one now and we'll call you back!", the IVR queues the CLI of the call (or asks for the number if it was with held) on the dialler for calling back when the agents are less busy. Customer ceases to be on hold and you utilise your staff better at non-peak times.

Turn around time is very definitely not the only metric, closure on first call is also very important even if that means taking longer over it.

You are quite correct that looking at headline figures only is a good way to fail, particularly in harder times, but businesses that rely on excel spreadsheets for forecasting volumes and looking at statistics are not getting as good a picture of what is going on as is possible with more intelligent tools.

Julian @18 - couldn't agree more. Aggregating as many data sources as possible to assess how well you are serving your customers and measuring (then training) your staff is what a good contact centre should be doing.

Matthew @28 - even where there is an endless supply of potential agents (who are cheap to hire), improving and retaining those you have is bound to be more efficient than having a massive churn rate. Hiring and training new starts is expensive. It's not just your time that is wasting your company's money in this situation!

Techslave @36 - no IVR can replace a lack of trained staff and it sounds to me like there aren't enough of those and your Phillipine agents only job is to filter your call rate! Training and feedback that guides training can improve the skills of those guys. Personally I once left a UK cable ISP because my modem was broken. I knew this was the problem, I even had a replacement modem - all I needed was someone to authorize it. I spent hours on hold and eventually gave up. These guys were infamous for this no help line. They only started calling me back when I stopped the bank payments. In the intervening years since that incident, said cable company are now owned by someone else and they have massively improved their call centre operations with help from an (admittedly UK based) outsourcer.

Where your IVR _can_ help is a message: "If you are in area X there is a system wide outage that we are working on very hard and apologise for the inconvenience, please call back later for a further update." And actually make sure you update it frequently. Make it someone's job.

Machine translation is indeed currently only in the big shops, but is coming into the SME sector now. The actual transcription error rate is quite high, about 60% correct, but that doesn't mean a call can not be correctly identified as a particular type: complaint, completed sale, incomplete sale, return call, new and exciting competitors product trumping yours, etc. etc. Just like you can mis-spell "harb4l \/agre" any way you like and your spam filter will still spot it after some training. The point of transcription is not to make human readable transcripts, 95% of recordings are never listened to so why create scripts no one will read, the point is to spot trends and analyse what is happening in your calls in a statistical way.

Yes the cost-per-call is a driving factor but that is just revenue-per-call turned upside down. Revenue-per-call can be increased by satisfying your evangelists and delivering good service, as you correctly say, the goodwill that Charlie felt he was missing is valuable and the technology exists to measure it and make massive differences in delivering it.

56:

Feòrag@50: I think Easyjet is a company that actually counts on customer goodwill. Flying with them has always been a pleasure, considering that I don't expect too much from a budget airline. I think their actual motto is 'under-promise and over-deliver'.

But, unlike with banks, there is enough competition between airlines for customer service to actually matter.

57:

Jamie@54:

In the area in question (delivery of financial data / desktop integration of financial services) one of the selling points of a particular competitor's sales force was that it would recommend a competitor's product: the benefit being that this market involves long-term relationships between vendor and purchaser (the purchaser being a large financial institution) where one is not just selling individual services but providing consulting services on integrating them. The effect of being seen as ready to provide disinterested advice on what is best for the customer is that one becomes relied on as a reference point rather than just consulted as a promoter -- and that is worth a lot, well beyond retention, in that sort of market.

58:

TwistedByKnaves@53: There are only certain types of aid which are legal within the EU, where the law for dealing with anti-competitive practices is very strict, as Microsoft has found out.

For example, Charleroi Airport (owned by the local council) in Belgium was deemed to be breaking EU competition law by offering long-term cheap deals to Ryanair, and only to Ryanair. But, the Scottish Government's 12 month subsidy available to *any* airline which wishes to start a new route serving a Scottish airport is legally okay. Many of the routes continue after the subsidy goes away, too.

Part of the reason the Scottish deal is okay is because it's so strictly limited in its scope, and it's available to any airline who wants to try a new route. It's sold to us, the Scottish people, as a booster for both tourism and business, but most of us use the routes to go somewhere with more civilised licensing regimes (Guten Tag, Deutschland!).

The other kinds of subsidy which are legally okay within the EU are those to routes which are deemed essential and not commercially viable - those serving remote, otherwise inaccessible areas where people happen to live. For example, the remoter parts of the Shetlands, where the weather often makes landing a boat impossible. Basically, the authorities pay the airline to operate the service on their behalf.

59:

James @56

Oh yes, i think I remember seeing those adverts (but I'm no longer in the UK so dunno if they are still running). I stand corrected but that was certainly an adventurous and unusual avenue to pursue, I wonder how it worked for them.

60:

http://karim.gnn.tv/blogs/11333/Report_The_14_Most_Evil_Corporations

(somehow leaves out DeBeers and ThyssenKrupp).

but as far as appalling customer treatment goes, I'd agree with the other commenters who would put a lot of the airlines on the list (USAir, my local airline, is on my list because of the tiny seats), as well as computer printer manufacturers (I can't print a black and white text page because I'm low on yellow ink in the color cartridge? Come _on_.) And Best Buy.

The phone and cable companies have actually gotten a little better over the last few years, it seems to me. Perhaps competition is working.

There are some conspicuous good guys. A client of mine started a well-known local chain of banks that specifically and expressly focused on customer (i.e., consumer depositor) service-- they pioneered late closing times, Saturday hours, free coin counting machines, etc. They candidly admitted that the rates that they were paying on deposits weren't any higher than anybody else; but they offered better service. This business model was quite successful (but we'll see about the future: they've been bought up by another bank).

61:

Del Cotter @ 51: I've run into the problem of false charges a couple times. Once on a credit card -- I was able to report the false charge online and had the charges reversed in about a day. No problems, and the bank didn't penalize me at all. The other time was someone hacking a PayPal account I thought I shut down and using a linked card to buy a couple hundred dollars worth of spam emails. Again, both PayPal and the bank were easy to deal with and got the problem fixed promptly at no expense to me --- and that time was a bit more complicated since it was technically a EFT and thus wire fraud.

Dennis @ 59: Walmart somehow manages to end up on list of the most socially irresponsible AND the lists of most socially responsible companies:
http://www.treehugger.com/files/2009/07/walmart-the-most-and-least-responsible-company.php

62:

I had a buddy, (one Heckova guitar player) who took a few business courses in a community college. He started wearing Suits, speaking of "ducks in a row","working smarter not harder",and "capturing Marketspace". Very Horrorshow my brothers! He became a Mortgage Broker.

63:

One of the problems is that they just don't get it, and explain away the lost customers to themselves. Case in point: my previous phone company are still writing to me once or twice a month asking me to take my phone service back to them. Everything they send is written on the assumption that I left them because their competitor was cheaper.

In fact they were, slightly. But I didn't leave because of price. I left because they tried, quite deliberately, to get one over me. I'm sure what they did was legal (they have enough well paid lawyers after all) but it was certainly unethical.

They sent me a letter saying, in large red letters at the top, that they were reducing the price of my calls. They were - they were reducing the price of calls of under 1 hour duration I made at weekends from 6p to 0. In small print, on the third page of the letter, it explained that some other charges were being "revised" (isn't it odd how things only ever get revised in one direction?). The calls I made after 6pm on weekdays were going from 6p for the first hour to 5p a minute.

So if I made one 10 minute call a day, evenings and weekends (the only time I'm in, and more than I actually do, but roughly typical of my calling patterns), this would save me 12p a week and cost me £2,50 (less 30p). Some saving.

I didn't even realise they were doing it until someone else pointed it out to me.

I expect a vaguely honourable relationship with a company. I'd been with them for around 15 years then, but that was it - I play the iterated prisoner's dilemma with companies.

And, as I started with, the really offensive thing is that they measure me by their colours and assume that pure "gouge as much money out of them as possible" is what motivates everyone.

64:

More fnords

65:

If you think you had Problems with that credit-card foul-up, try handling such a thing when you're deaf & can't use the telephone.

And having a webrowser that's not cutting-edge is an additional complication when dealing with many business nowadays. (Yeah, I'm pissed-off because I have to drive to the airport to make a flight reservation, drive across most of Los Angeles to make an appointment to get a replacement prosthetic nose, or (admittably, not far) to the HMO to make a routine medical exam check-up appointment.) Customer satisfaction does not seem to be a significant factor with most businesses, nowadays. Probably because, as several people have pointed out here, most corporations & their CEOs are simply not concerned with anything like The Long View.

66:

Don, don't most of those organizations have TTY? My HMO does; I don't fly often or need a prosthesis.

67:

Nick (29) thanks for the link to the song. The first viral video about poor customer service I ever saw was this one: http://www.xdude.com/thedough/

Very well done.

68:

In the AARP Bulletin there was an article about "negative option marketing" Basically if you don't notify the company you refuse their service-you bought it! An American Bank was charging a 98-year old woman $18.95 a month for their car insurance.She hadn't driven or owned a car in some time.There were other examples. Who reads all their junk mail?

69:

The funny thing about web browsers is that my Internet Banking (useful and so far OK) doesn't officially "support" any current or near-current browser.

I suppose if anything goes wrong it will be my fault because I don't use IE5. Or Netscape.

70:

Bad service will eventually reduce the customer level to the point that the postdownsizing staff can handle at the quality level prevailing before the downsizing.

71:

Vic @67: I'm pretty certain that negative option marketing is flat-out illegal in the UK, under existing consumer protection laws. Ditto "slamming" on phone contracts.

72:

Is it me or did the universe play an ironic joke in getting you, Charlie, to write an entry on a key ingredient of our consumption society- the consumer's appreciation of how he's handed his pitiful glass beads.

About as ironic as hippies chain-smoking or, you know, rain on your wedding day, I suppose.

Still, I cry shenanigans. Of course companies care about goodwill, but selling cheap crap to a lot of people most of whom will swallow anything is simply a different business model than catering to the few people who won't.
Sure there are companies that value goodwill more, but that's because their customers value it too, the only way a company can care about- by paying a serious premium.

If you don't like it, well- you have the knowledge and intelligence to realize that happiness and self-realization do not depend on your plastic getting accepted. That even though you participate in our economy there's no need to get emotionally attached to the process. And that there are better alternatives out there.

In short; grow up. You're not a consumer.

73:

As Nick #63 points out, this is a prisoner's dilemma. http://en.wikipedia.org/wiki/The_Evolution_of_Cooperation
Game theory is applicable here - In repeating interactions with a company (or a person), reputation (and the ability of players to circulate reputation information (good/badwill) makes a big difference. It's easier for consumers in a neighborhood where word of mouth can put the local butcher out of business. It's hard where consumers are broadly distributed and unable to share information.
In this situation, it makes sense from a business' point of view to ignore reputation/customer satisfaction (#52). YouTube/twitter etc then becomes an important way to share reputation information (the united Airlines video).
If a company has it's own cooperators - a monopoly, it's bought some legislators, etc. - it's not so susceptible to reputation based pressure.

74:

As Nick #63 points out, this is a prisoner's dilemma. http://en.wikipedia.org/wiki/The_Evolution_of_Cooperation
Game theory is applicable here - In repeating interactions with a company (or a person), reputation (and the ability of players to circulate reputation information (good/badwill) makes a big difference. It's easier for consumers in a neighborhood where word of mouth can put the local butcher out of business. It's hard where consumers are broadly distributed and unable to share information.
In this situation, it makes sense from a business' point of view to ignore reputation/customer satisfaction (#52). YouTube/twitter etc then becomes an important way to share reputation information (the united Airlines video).
If a company has it's own cooperators - a monopoly, it's bought some legislators, etc. - it's not so susceptible to reputation based pressure.

75:

As Nick #63 points out, this is a prisoner's dilemma. http://en.wikipedia.org/wiki/The_Evolution_of_Cooperation
Game theory is applicable here - In repeating interactions with a company (or a person), reputation (and the ability of players to circulate reputation information (good/badwill) makes a big difference. It's easier for consumers in a neighborhood where word of mouth can put the local butcher out of business. It's hard where consumers are broadly distributed and unable to share information.
In this situation, it makes sense from a business' point of view to ignore reputation/customer satisfaction (#52). YouTube/twitter etc then becomes an important way to share reputation information (the united Airlines video).
If a company has it's own cooperators - a monopoly, it's bought some legislators, etc. - it's not so susceptible to reputation based pressure.

76:

@72:

Sure there are companies that value goodwill more, but that's because their customers value it too, the only way a company can care about- by paying a serious premium.
Nonsense. In any industry where repeat business is common, customer satisfaction increases profits, and pays for itself. If customers are given good service, a large fraction of them will prefer it, and will move their custom to a company which provides it. Granted there are business models that explicitly forgo repeat business (most long cons, deliberately selling products which cause serious harm or death, etc.), but credit card lenders and cell phone service providers don't use such models. What they have done is create an oligopoly in which there is tacit quality-of-service fixing, so that customers don't have a provider who will give them differentially better service.

77:

I left one long distance phone reseller because they bounced me (and probably a lot of other customers to a new carrier. Without asking for permission beforehand.
I called up another carrier the next day and made arrangements to transfer the service.
The old company billed me three times after I'd left them; I paid the first [legitimate] one, and the third time I wrote back and said that I had discontinued service from them on [date], and that further billing would result in legal action. No more bills from them after that. (But that's really poor accounting.)

78:

All VERY interesting....

There are, actually FOUR sorts of "Goodwill" recognised as concepts in UK Case Law, and these were set out in a case in 1934 and still used in discussions with the UK Tax Authorities.
An edited short-version follows, a bit further down.

However, there are also cases where customers are truly captive, or there is a cartel operating, effectively giving customers no choice, either.
I'll come back to that in a moment.

Case Law described the following:
The Cat, The Dog , The Rat And The Rabbit
The cat - who stays faithful to the location, not the person.
The dog - who stays faithful to the person, not the location.
The rat - who is casual and is attracted by neither person nor location.
The rabbit - who comes because it is close by and for no other reason.

As quoted in the case of:
Whiteman Smith Motor Co Limited v Chaplin (1934) 2 KB 35
See below….
The cat, rat and dog classification appears to be the work of a counsel in the case,
a Mr SPJ Merlin. Maugham LJ, a judge in Whiteman, introduced the rabbit classification. When referring to this classification.
Rich J in FC of T v Williamson (1943) 67 CLR 561, 564 ("Williamson") held that "[t]he cat prefers the old home to the person
who keeps it, and stays in the old home although the person who has kept the home leaves, and so it represents the customer who
goes to the old shop whoever keeps it, and provides the local goodwill. The faithful dog is attached to the person rather than to
the place; it will follow the outgoing owner if he does not go too far. The rat has no attachments, and is purely casual. The rabbit
is attracted by mere propinquity. It comes because it happens to live close by and it would be more trouble to go elsewhere.
These categories serve as a reminder that the goodwill is a composite thing referable in part to its locality, in part to the way in
which it is conducted and the personality of those who conduct it, and in part to the likelihood of competition, many customers
being no doubt actuated by mixed motives in conferring their custom."

Then there are the cartels and the truly captive customers.
The latter include London commuters, who have to put up with the gross arrogant loudmouthed bullying incompetence of the London UndergounD station staff.
NOT the OPERATING staff, I hasten to add - they are thoroughly professional.
As in Paris, all trains and sations have PA systems.
In Paris, they use them when it is needed.
In london, they are used every 30-60 second, irrespective.
At least 95% of ALL LUL announcements are not only too loud, they are unnecessary.
You can't escape, because, without the tube, London, or any other equivalent city would grind to a halt.
Note, that it doesn't have to be like that.
So why do they do it?

79:

@78: "At least 95% of ALL LUL announcements are not only too loud, they are unnecessary."

Not for blind people they're not. That's why they are there, and the DDA makes them a legal requirement.

80:

Scott @20 – possibly you’ve never had the pleasure of dealing with British Estate agents – there are some good ones, but the quality is often appalling, as either buyer or seller. And if you've ever tried to lease property in London you'll have experienced true horrors as they put the most junior/worst staff on this. Maybe something to do with amount of training/professional licensing in the UK compared to the US? But I speculate

Greg @78 – re: criticising London Transport (TfL) station staff – generally helpful in my experience, but like all things there are exceptions. Re: the PA announcements, don’t forget the influence of the health and safety culture – particularly formal risk management training, which basically consist of

1) identify risk (people leave bags behind/slip on wet floor etc…)
2) take appropriate mitigating action (PA announcement to ask them not to)

Woe betide you if an accident happens and you can’t show you’ve taken appropriate mitigation.

It may also have something to do with a really strong culture of making sure the tube is safe (post Kings Cross fire) which results in, if not over-manned, at least very well staffed stations, hence staff in each tube station with very little to do other than record PA announcements.

81:

IANAL. TINLA. In the laws of the USA, "goodwill" has an interesting twist, in that one can depreciate it within one's business tax returns. For instance, a doctor or lawyer whose private practice goes back many years, with many clients, decides to sell her/his business to another doctor or lawyer. Besides the physical assets -- building, equipment, furniture, and the like -- one can give a valuation of the Good Will represented by estimated future revenue directly from clients, and indirectly from referrals by those clients to new clients. One may now assume standard tax codes applying to what percentage of that valuation decays away each year. One may apply that estimated loss to reduce taxes to be paid on present revenue. [IANAL = I am not a lawyer. TINLA = this is not legal advice].

82:

79 onwards.

Bollocks.

So, a few blind people MIGHT be helped - they would be helped a lot more wih a dedicated staff-member looking after them.
~ Meanwhile, the rest if us get to be deafened.

We DON'T NEED to be told 3 times at EVERY station to mind the doors, when there is an audible "Bleep", and there are LOTS more cases of this sort of insanity.
Like "this is a Piccadilliy line train" at Caledonian Road - what else is it going to be... "Tornado"???
Idiots.

As I said, the Paris metro also has announcements - when they are needed.
They DON'T deafen you non-stop from beginning to end of every journey.
I predict, sooner or later a major disaster, because there will be a REAL emergency, and no-one will pay any attention, because it is just another announcement.....

83:

79-82
The Los Angeles subway has a sound system which is garbled either due to echoes off the walls and ceilings (ridged concrete), or due to the volume being turned up to distortion level. The door-warning announcements are only run on the trains themselves (and they're necessary: you'd be surprised how many people think train doors will bounce open like elevator doors when a solid object is inserted between them as they close). If you need any help, ask a passenger; they're more common than transit employees, and more likely to help.

(One of the stations has some stalactites growing in an entrance. The longest is now more than 15cm long. I try not to walk under it.)

84:

Companies do this and they do that, except they don't. A company is a notional, sometimes legal entity and, as such, is incapable of doing anything. These decisions are made by people, mostly people who have never dealt with a customer in their lives (in my experience) and who will hardly ever have a bad experience as a customer because if they do they will shout and scream until they get to speak to their equivalent in the other company, after which all will be smoothed. These men - and they are mostly men - may have no conception of customer goodwill but they understand 'entitlement' all too well.

Just a little example. My employers, a multinational insurance company who used Richard Starkey to advertise their recent change of name, announced to us worker bees they would save £400k pa on stationary by switching to the very cheapest alternative available. Now this company uses HP printers exclusively. Those of you who use HP printers know how well they respond to cheap paper. How many engineering call outs to fix printers that have spat out their dummy because of cheap paper it takes to eat up that £400k 'saving' I don't know, but I guess we're past it by now - given the length of time it has taken to get an engineer to visit out office to fix the five dead printers (out of six) They guy who proposed this 'saving' has probably been promoted by now. In the meantime we can't meet our SLAs and service our customers because we can't even print out a letter.

It is customer service alright, but service in the way the stallion 'services' the mare.

85:

I agree martyn@84! I know at least 1 major (USA)Chain Store that won't promote a worker to even a store manager position with out some kind Degree, no matter how much real world experience. Not at my store (praise the gods!) but some of the decisions from "Corporate" do betray a lack of um...practicality?
Charlie@71 So ya'll got health care & better consumer protection laws. I'm beginning to think that the only reason we had the revolution was to save rich old white guys from paying Taxes :>

86:

If I Were Emperor (or more specifically, if I ran a phone company or other such organisation which bills you periodically and which you have to deal with via phone) I would offer two tiers of customer service.

The bottom tier would be the call centre in India, with the press-a-button phone menus, and I would make it clear to customers that I am offering this as part of a package which is price-competitive with my company's competitors.

The top tier would be a local call centre, staffed by people who actually know what they're talking about, or who are capable of very quickly forwarding you to people who know what they're talking about. This would cost customers more.

One of the advantages (besides the obvious one that people who are willing to pay more to retain their sanity have the opportunity to do so) is that people who are on the cheap plan and are getting the run-around from the misleading voice menus or the limited-knowledge minimum wagers will know that they have _chosen_ to be part of the system that sucks. That might prevent them from getting angry at my company.

87:

I just stopped at the nearest Radio Shack to pick up a replacement HP 56 black printer cartridge for my son's PC. The clerk told me "We don't carry print cartridges."

I asked: "How long has this been going on?"

He goes into the back, emerges in a minute, says "a guy will come out and help you."

The guy was the manager. With the cartridge in hand.

My wife says: "High turnover. Poor training."

The manager volunteered: give me your email address, and we'll email you a coupon good for a $10 discount on your next purchase.

I've been saying for much more than half my life that American's literally do not know the meaning of "The Customner is Always Right."

88:

JvP: that $10 gift voucher gets you back into Rat Shack, where the odds are high that you will spend more than enough for them to break even on it. It's a cheap goodwill purchase. And it's much cheaper than fixing their staff training and/or the management problems that lead to the high staff turnover.

As for "the customer is always right", that's only true until they're wrong.

The point at which they become wrong is variable, but I tend to think of it in terms of being when they start to cost you the goodwill of other customers, or to cost you more time (in the time-is-money sense) than they're ever going to repay you in future profits.

Example #1: when running a tiny pharmacy, about 25 years ago, I once had a customer come into the shop who stank abominably -- so badly that after they left we had to open the front and back doors to air the premises for half an hour (on a Yorkshire winter's day)! The stench was somewhere between stale vomit and dog shit, and it's a good thing they picked a dead patch to show up, because no other customers would have stayed in the shop at the same time!

Example #2: you can pick your own troublesome customer. JvP's voucher story is a classic example of a time/money cost. If he did it repeatedly, sucking up vouchers until someone in management noticed, and never bought anything for cash ... then he'd be a "wrong" customer, by this metric.

We've all had them: folks we deal with who require as much TLC and hand-holding as every other customer combined, and who repay it with more aggravation and demands on your time.

Customers like that ... they're not grounds for calling security, but you really want to encourage them to finish what they're doing and fuck off. You don't want to give them a bad impression of your business, but you'll be happy if you never see them again.

89:

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This page contains a single entry by Charlie Stross published on September 8, 2009 11:51 AM.

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