What happened to service?

Your most unhappy customers are your greatest source of learning. - Bill Gates

It's not the employer who pays the wages. Employers only handle the money. It's the customer who pays the wages. - Henry Ford

More business is lost every year through neglect, than through any other cause. - Jim Cathcart

There is only one boss - the Customer. And he can fire anybody in the company from the chairman on down, simply by spending his money somewhere else. - Sam Walton

In the early ‘80s, Scandinavian Airlines (SAS) was having a tough time competing. Jan Carlzon, then president of the airline wanted to focus on improving services among other areas he found broken. In 1984 he coined the phrase “moments of truth,” in a book of the same name, to describe those incredibly valuable service interactions customers have with companies. His strategy was to manage, in a unique way, those “never-to-be-repeated opportunities” to distinguish SAS from its competitors. And it worked; SAS was turned around in record time and became one of the best-run airlines around the world. Moments of truth became the mantra of those focused on customer service. Companies like Nordstrom became famous for their fabulous treatment of customers, and their results showed the benefits of service as they were able to generate better than average profit and revenue growth than their competitors.

Nearly two decades later, after Billions of investments in new Customer Relationship Management (CRM) and other service systems, it seems like many of the important lessons learned have been forgotten or ignored. Interactions with companies today feel much more like “moments of denial” than opportunities to win a customer for life. What happened? Was Jan wrong? Is customer service irrelevant in this seemingly impersonal internet era?

Reverse Auctions and Supplier Relationships

Reverse auctions are almost ubiquitous and are being used daily to drive purchasing costs down in a variety of categories of products and services. And, the results are stunning. That is why its use has become a standard in many North American procurement organizations.

Recently I was attending a meeting of senior procurement executives during which the discussion topic focused on “myths of Reverse Auctions”. The presenter postulated that the belief “reverse auctions damaged supplier relationships,” was a myth. Members of this august group, including the procurement leaders of some of the largest and most influential North American companies, generally agreed. Rationale given included auctions were merely a device to discover “market price”, auctions are not just about getting the lowest price, in fact auction algorithms have been created to factor in other variables such as service and quality in addition to cost. And, incumbents typically win 70% of the auctions anyway.

As the lone dissenter on this question, I wondered whether the facts would support the point of view that relationships were not hurt with auctions. After all, every one in the group agreed that they did not want their company to be subject to auction by a customer.