The Collapse of Fulfillment ...
The Greatest of Competitive Opportunities

07/30/03 - If you are not experiencing it - count yourself as one of the few!
It is rare to find a flawless purchasing encounter these days.

The failures are rampant - in banking, in airlines, in credit card services, in restaurants, with government services, with communications, with the Internet - the failure to deliver is everywhere!

Yet when one of those rare flawless transactions comes along - you know it in a minute! Because it's so rare, you appreciate it more than ever before - and you remember it. You tell your friends. You go back for more! 

In my Wells Fargo branch bank the other day, I stood waiting for a change to my ATM card. Another customer was ahead of me with the banker who would make the quick change on his computer. I was thrilled as the bank manager - walking the floor among her customers - recognized my standing there. She came over and assured me she knew I was there, asked what I needed, and then made sure the staff member knew I was waiting for him. The banker who quickly got to my transaction was great, too. He made it a personal encounter - and let me know I could always count on him to do his very best for whatever I needed. That was one delightful experience - from a bank that is huge and growing - and very profitable.

Today's economy - for all the bad it brings - is bringing with it a sweeping change in the ways people accept being treated badly. They take their business elsewhere, like never before. Retailers - facing slow sales and less foot-traffic - are dropping prices and enhancing courtesy to the customers they have. Sale prices are everywhere.

Some enterprises are "getting it." They have willed themselves and their employees to deliver. When I say "deliver" - I'm talking about delivering the experience the company has promised - by virtue of its advertising, its face-to-face communications, its call-center interfaces and the implied warranty that its products and services will "do" what they are supposed to do. This creates a critical threat to companies among the competition who haven't willed and disciplined themselves to do the same.

Southwest Airlines - a once small player among the giants - is taking its big brothers to task. With a simple fare structure, common courtesy for its passengers, employees who can think on their feet and simple promises about what to expect - this "little" airline is profitable, growing, and respected. It's the perfect example of the new marketing model. If you have spare cash, invest in this firm.

All Southwest has to do now is wait while the giants - two or more of them already in bankruptcy - lose their clients to a better way to fly. 

The most rampant violations of trust come from the sector whose very name makes this a mockery - the service sector. This hope for America's economic growth - fast growing in the wake of a manufacturing economy that fled to foreign shores - is a mess. If they don't manufacture a thing, one wonders, "Why is so hard to get it right?"

The answer to that question lies in the fact that service organizations have been slow to realize that service quality must be as accurately measured - as anything else. They have deluded themselves to believe that customers are incapable of measuring that quality for themselves. They are wrong! The customer is a precise measurer - far better than most self-serving quality tools weaving "Emperor's new clothes" for company executives. Look for service companies to improve, and demand it.

Some industries - phone services and airlines, for example - somehow concluded that if the purchase is made so complicated - through so many options and myriad prices - the prospective customers will not be able to make valid comparisons among competitors.  Think of the last time you wanted a long-distance plan. You may have spent half your time trying to understand all the options. This mantra has now been broken by the now profitable strategy of making understandable offers, keeping expectations reasonable, and fulfilling promises. It's the new marketing model - and any company not adopting this will be a distant memory in remarkable time. The new model for long distance is unlimited calls - anywhere within the country at any time - for a simple fixed monthly fee.

Some firms craft such undecipherable offers, they themselves can not adhere to them. Let me give you one example. Not long ago - five months to be precise - I received an offer from a credit card company promising zero percent interest on a courtesy check good for the full amount of my credit line. For a $50 maximum processing fee, the zero percent rate - now get this language - "was to remain in effect until the first day of my billing cycle that included August 1, 2003." 

In spite of this data-driven financial giant being able to custom-imprint on their offer my full name, account number, credit line limit, check numbers, and other data-specific information - they were unable to imprint the payment deadline date to avoid interest charges. That information was not there for a calculated reason - to confuse!

Well, the first day of my "billing cycle" that included August 1, 2003 was on July 24th. I paid off the entire amount on July 17th, about a week ahead of their deadline.

You guessed it. When I checked my online account on July 29th, it announced I had been charged interest on the entire balance from the first day of July! When making that July 17th payment, I had even called the credit card company to confirm that no interest would be charged if I paid the full balance on the 17th of July. The gentleman I spoke with confirmed that, and he added, "You have until July 24th to make the payment so no interest will be due if you pay in full before that."

On July 29th I spent 45 minutes on the phone - escalating the matter from a surly woman who flatly stated the gentleman I spoke to on the 17th "had been wrong" to a supervisor who recited the accusation that I didn't understand the offer. When I mentioned this "misunderstanding" would be resolved in court - and that my three accounts with the firm would be terminated - she finally conceded that the offer was a bit confusing and she would waive the interest "as a courtesy." Bull! I countered that if this is happening to me, it is happening to thousands of the company's 51 million cardholders - and I wanted assurance that there would be a full investigation of the system that erred in charging me interest. You would have thought I had asked for her first-born child.

The chairman of the financial institution and the newly-appointed president of its credit card division will no doubt feel the same, as they receive a written demand by registered mail. If you are a Bank One cardholder, watch your interest charges like a hawk!

Update - 09/01/03 - To the Chairman's credit - my letter received a prompt reply - backed up by a phone call - assuring a full investigation had addressed every cardholder account that may have been affected by similar accounting issues. An apology was also offered for the event I experienced. Here - the top dog came through - and it was done with speed and credibility. My account remains intact.

You may think by now, "This is the ranting of an idiot." No, it is the result of a failure of a promise to fulfill a contract - and the natural result. Businesses that fail to deliver the services they promise are encountering just such profit-sapping rebellions with an alarmingly increasing frequency. And they deserve all of it.

There's an article in this month's "Links" section of this newsletter that talks about the pseudo-science of predicting which customers are going to be "worth dealing with" and which ones are to be "tossed." This ridiculous attempt at fortune telling is the sort of clap-trap that pervades some corporate thinking these days. Read the article - if for no other reason than to know what to avoid.

I'm sure some brain-child at that credit card company will take a look at my account and conclude a cardholder who only takes them up on a zero-percent offer (and then makes them live up to it) is a customer to be dropped. They'll miss the fact that on one of my other three accounts with them now (only because they just bought out a perfectly fine financial institution) generates big revenue in charges they make to merchants for accepting my card. They get nothing from me, because I pay the full balance each month.

Merger-mania is part of the problem. Because they can't keep customers, service companies are getting "new" ones through acquisition. As organizations get bigger, their corporate IQ erodes. What might have been a 120 IQ with the smaller firm, has now become a 70. One side of that corporate brain is disconnected from the other. It will take a team of expert surgeons to join the two. Meanwhile, customers are fleeing the stupidity. It's a losing game.

If your company aspires to eclipse your competition, now is the best time of all. The strategy is simple - yet execution takes skill. Make simple, understandable offers. Live up to your promises. Treat all customers (except the ones who don't pay you) as saints - destined to ensure your journey to heaven. Tell you staff members they are empowered to do the same thing. See they treat customers as they would their mothers, and let them know that anything less will not do. Reward them when they succeed.

Be a customer to your competition. See first-hand where they go wrong. Next become your own company's customer, to ensure the same things are not going wrong in your camp. If so, fix them - now. Then capitalize on your knowledge. Here's an example in a promise we noticed at a packed local restaurant:

If you don't have your order in eight minutes or less, your meal is free.

They kept their promise - and I'll return. You probably remember a little courier service that broke into the business with the promise, "Absolutely, positively overnight!" Having grown to a huge company, they still keep their promises. It's Federal Express. 

Compare them to the U.S. Postal Service - a brain-dead giant losing millions daily with a locked-in monopoly on all first-class mail. Look for big changes in the next decade, as the U.S. Postal system fails and tax-payers say "no" to continuing subsidies for this ridiculous management failure. You might not know this - but the U.S. Postal Service just spent more than $30 million supporting the U.S. winner of the Tour d' France! For less money, they could have "given" their customers 81 million free postage stamps. Did you know they sponsored the bike racer? Did you see their ads? For all its popularity - in Europe - the Tour d' France is a ho hum event to most in the U.S.A. The U.S. Postal Service's customers are in the U.S. - not in Europe. Your tax subsidies paid for the Europeans' enjoyment. Think that one over. Meanwhile, it is taking 14 days to deliver my mail after a simple address change.

The list could go on, but the plot is the same. The collapse of fulfillment is a common experience for all. This makes it the single-most important competitor weakness - a weakness to be focused upon. Their failure to fulfill touches every one of your competitors' customers, building a huge dissatisfied universe of potential new business for you. Smart companies are taking advantage of this to differentiate themselves. They are making simple, understandable offers; and keeping their promises. In the process, they are saving their customers' time, cutting the cost of complaints and building a base of satisfaction testimonials. New business is flocking to their doors.

That's it for this month. Thanks for tuning in - and if you have some comments - we'd enjoy hearing from you.



William H. Thompson
Principal

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