Recently I came across a very interesting video ; the video was a summary of the research done by a Harvard professor around how companies dealt with their customers The interesting bit from the research was thinking about customers on a contiuum with Customer as Advocate at one extreme and Customer as Adversary on the other.
Lets first look at Customer as Advocate
One of the research topics was identifying companies providing extraordinary service and earning extraordinary profits in competitive industries. Come to think of it in typical price sensitive industries, just providing extraordinary service doesn't automatically translate into great profits.On the other hand , in some industries due to their nature (mono/duo/oligo poly) , its possible to earn extraordinary profits with lousy service. The research study took 3 examples of companies in diverse industries of banking, auto insurance, software products (all US companies) who have managed to provide great service & earn great profits, either by indirecly making customers pay for the service (no fooling around, customers know this) or taking some costs out of the business with intelligent data analysis and sharing it with customers or making sure that customers need to rarely contact the company for service through great products. (In the process , they have also expanded their customer base )In the process, the customer has became an advocate for these companies & these companies are able to influence the behaviour of their customers through normative approach (request / persuasion) rather than usual carrot / stick approach.An example may help to explain this point.A bank as part of its service used to reimburse charges incurred by its customers when they used other ATMs. At some point in time they realized that charges were going through the roof, they put out a note on website that customers should as far as possible refrain from using other ATMs to help reduce charges. Interestingly many customers behaved accordingly and stopped using other ATMs. Now lets look at customer as adversary The research provides example of cell phone operators in US. In many cases, the customer / company are adversaries predominantly due to the way cell phone companies are set up to deal with customers. Most of the call plans are structured in a way whereby customers are charged for un-utilized calls, exhorbitant charges are levied when customer crosses a threshold. (Companies win big time when customers lose)This may be more applicable for US cell companies but I am sure many of us have some grievance against cell phone companies in India.Customer as adversary relationship in competitive industries will mean higher churn with customers trying to find less lousy service at the same (or preferably at lesser cost)My personal experience suggests that I have more adversary relationship with companies rather than advocate, whether it is private sector banks, insurance companies, construction companies, etc and definitely public sector entities Not sure if it is unreasonable service expectations or something to do with the way companies are set up to deal with customers or just a fact of life given the environment / nature of competitive markets. (companies win when customers lose or are put at disadvantage) Some examples from personal experience, where companies make good profits but mostly with lousy service :1. Many of the IT projects carried out by IT service companies are in Time & Material mode (or sometime @ Fixed cost) with very limited connection to the actual benefits derived by the clients. IT companies win when more time / resources / module are consumed without any connection with benefit for the customers.
2. Some of the Capital equipment manufacturers make most of the money through selling spares and after sales 'service' ,i.e the manufacturer wins when the capital equipment is down.
3. Banks (esp private one) win massively when we make a small mistake of chq dishonour or delaying credit card payment by a day.
Is there an opportunity to move along the continuum and change the model so that customer becomes advocate rather adversary ? Any thoughts ?
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