Customer-Operators: Not Paying Them Doesn’t Mean They’re Free

May 6, 2009

People, it turns out, are desperate to be helpful.  Verizon has discovered this and joined the growing ranks of companies using what I call “customer-operators” to do the work employees used to do, everything from generating new product ideas to servicing other customers when those product ideas fail. Betting on the hope that all these customer-operators need in return are the intrinsic rewards of serving others and the status associated with becoming experts, Verizon is primarily making a cost play by inviting customers to perform routine customer service functions. The company has stumbled on some additional perks of engaging these “super-users,” like their knack for good improvement ideas, but this value is seen as peripheral.

At this point in the experiment, Verizon only sees the upside in recruiting and deploying an army of customer-operators. Before the company doubles down, I want to offer two points of caution:

First, customers are different from employees in ways that matter operationally. In general, they’re more difficult to manage, measure, recruit and fire.  Just because you don’t pay them, doesn’t mean they’re free. The price may be worth it to achieve radically higher levels of quality (Wikipedia) or a radically lower cost structure (eBay), but the tradeoffs aren’t as clear for traditional business models.

New management systems must be designed and maintained once you bring customers into your operations. And the effort may require more than a few “feedback stars” to measure and maintain quality. Reputation is a powerful incentive for good behavior, but it’s not all-powerful (see John Edwards). Have a plan for when the customer you’re relying on to provide good service doesn’t respond to another customer’s inquiry for days.

Second, those feel-good emotions of service and status may not be enough to compensate your most active (and valuable) customer-operators as time goes on. A lesson from many organizations is that when you ask customers to donate their labor, they often feel entitled to a seat at the decision-making table. Back to those feedback stars, I spent some time on the outrage of eBay customers when the color of their own stars was changed in an HBR case. Outrage may be too weak a word. There was an electronic revolt.

I’m with Verizon. I think customer involvement is a tremendous opportunity for many businesses. But I want to add a few caveats — customer-operators aren’t always easy to manage, and they aren’t always willing to stop at the operational boundaries you propose.  You may invite them on to the shop floor, but some of them are taking the elevator up to the C-suite.  Have a plan for what happens next.


Service Excellence Defined (and Illustrated)

April 7, 2009

Service excellence can be hard to define — it often falls into the “know it when I see it” category of vague, but important distinctions.  Part of the challenge is the subjectivity of a word like excellence. Not all customers value service attributes in the same way. The intimacy you enjoy with a waiter who asks about your children and remembers how you like your burger may feel intrusive and jarring to me (hypothetically, of course).

I’d like to ground the definition of service excellence in the idea of reliability.  Service excellence is the consistent delivery of a high value/price experience, day after day, year after year, regardless of who happens to be on the front lines of the delivery process. It is the systematic output of a service model that is designed explicitly to produce it.  It is not the typical way we consume good service today, which is when entrepreneurial employees take it upon themselves to meet our needs in spite of the system.

In the spirit of know-it-when-I-see-it, I’m starting a highly subjective, incomplete list of service organizations that have reliably offered me (or people I know) excellent service.  I hope this brings the concept to life a bit. I also hope to learn from you. I would love to hear about other organizations you’d add to this list.

  • Lexus Service Centers – incredible that this level of service is possible and its competitors are choosing not to do it.
  • USAA – very difficult to find an unsatisfied customer
  • Zappos – very difficult to find an unsatisfied customer or employee
  • Wine.com – two-day shipping, scheduled at your convenience (including evenings and weekends), for $49 per year
  • Progressive Insurance – offers differentiated features such as Immediate Response vans and Total Repair
  • Four Seasons – unobtrusive excellence, if you like that sort of thing
  • J. Crew – straightforward excellence in the retail stores (thanks Kristin!)


Think Celebrities in Rehab with the Rest of Us

April 2, 2009

The NYT coverage of Facebook offered another example of a common source of customer tension — not all of your customers want to hang out with each other: 

“People usually spend a lot of time trying to be separate — parents and children are a good example,” says Danah Boyd, a social scientist who has studied social networks and now works in the research department of Microsoft, which has invested in Facebook. “You are already seeing young people sitting there thinking, ‘Why am I hanging out with my mother who is reminiscing with her high school mates?’ You are seeing some reticence with young people that wasn’t there two years ago.”

This is a particular risk for brands that compete on youth and glamour. In the market to feel young and vigorous again, Grandpa shows up at the nightclub and ruins it for everyone.  But the tension between age groups can work both ways, as Build-a-Bear workshops — a highly successful toy service — discovered when the 12-year-old customers stopped playing nicely with the 6-year-olds.  The younger crowd was thrilled to be able to mingle with the older kids, but the older kids were horrified. 

Tiffany’s learned a similar lesson when it tried to serve both mass market and high-end customers. The high-end segment did not necessarily want to spend time with the masses, since it ruined all of the elite fantasies wrapped up in the little, blue box.  

If there is a separate physical location for each segment, this problem is easily solved.  But if a single location attracts multiple segments, then the challenge becomes reducing the antagonism between segments, which typically runs in only one direction (think celebrities in rehab with the rest of us), or tailoring the service away from one segment. The act of actively dissuading customers, often profitable ones, is anathema to most senior management teams. The trouble is, in certain contexts it is essential to maintaining service excellence. Facebook may be one of them. 


The Two Faces of Facebook

March 31, 2009

Facebook is throwing Mom and Dad under the bus. As a recent  NYT article chronicled, many of Facebook’s older users are in open rebellion against the service’s new Twitter-esque functionality that allows customers to broadcast every impulsive thought, feeling and lunch order in a real-time stream of sometimes trivial updates. This works for the kiddos, a generation that’s been putting camcorders in their bedrooms since the early nineties. The rest of us have some dignity:

“The changes just feel very juvenile,” Ms. Rabban says. “It’s just not addressing the needs of my generation and my peers. In my circle, everyone is pretty devastated about it.

Should Facebook care? Not necessarily. The company now has a classic service challenge — diverse customer segments that have outgrown a single service model. Facebook’s younger users value things the older ones find distasteful.  The company had to choose between satisfying one group and annoying the other, or trying some kind of compromise that would frustrate both.  It’s encouraging that Facebook resisted the temptation to do the latter. Most companies end up chasing the dream of making everyone happy, at the cost of a slow slide from excellence to mediocrity in the experience of their most valuable customers.

Ironically, a bit of customer “devastation” may be an encouraging sign. It may mean a company is making a clear strategic bet — in this case, on younger, more tech-savvy users.  Facebook may be able to find a way to graciously serve both segments eventually, but it will have to invest in at least the appearance of different service models.  Short of that, annoying the adults may be a terrific strategy.


A Recession-Proof Business Model (Stop Provoking Your Customers)

March 26, 2009

In a recent WSJ article, an airline analyst was quoted as saying that when everyone else is charging for formerly-free services such as pillows, it didn’t make sense that Southwest wasn’t.  I couldn’t help but think that these analysts might be part of the reason the industry is in such dire straits.

Southwest’s CEO responded that “adding fees is no way to grow an airline — customers hate that stuff.” He’s right. Despite the brave, new economy in which we find ourselves, a few things are still true. One is that it’s hard to sell things to customers who hate you. To state the obvious, this is particularly true when when they have real alternatives to whatever you’re selling. Less obvious, it seems, to companies that think their customers have no choice but to suck up the pain, is that if your customers hate you enough, those very alternatives will show up eventually.

When an industry racks up serious customer pain points — think lock-in periods for cell phones — it’s an invitation for competitors to enter and win by championing the customer.  Usually, this changes the game for everyone.  Southwest is rare in that most of its incumbent competitors (and the analysts who egg them on) have yet to internalize the full source of the company’s advantage. 

Southwest gets a lot of things right. One of those things is its aggressive commitment to meet its customers’ core needs, including low fares, direct flights, and flight schedules that optimize on frequency and flexibility. Another is its ability to meet those needs with enthusiasm and dignity. The fact that it’s pulled it off for the last 30 years while its competitors descended into toxic relationships with employees, unions, shareholders and customers helps explain why Southwest consistently delivers superior financial performance.

These are tough times. My best advice is to ignore the equivalent of the airline analyst in your own life and resist the temptation to try to survive at your customers expense. Let Southwest’s resilience in one of the world’s toughest industries be your inspiration. If your goal is to be around to serve your customers when the economy recovers, a good place to start is to stop provoking them.


Extreme Customer Service

February 24, 2009

BusinessWeek’s cover story this week is called Extreme Customer Service. The title has an aspirational ring to it, and the article celebrates examples of “extreme service,” including a UPS delivery person who is instructed by his president to defy the firm’s six-hour delivery window policy, show up at a customer’s door at precisely the scheduled time (extreme!), and deliver chocolates and dog treats along with the storage unit the customer was anticipating. As the story is written, it’s meant to be a beautiful ending, complete with the delivery person offering to assemble the unit.

Extreme Service Man looks like a hero, but he’s actually a symptom of a serious service problem. Defining his behavior as excellent service is contributing to escalating costs and plummeting satisfaction in almost every service industry.  When employees must go “above and beyond” to satisfy customers — a natural impulse in environments where dissatisfaction is rising —  it means that something is broken in the service model.  And responding with costly, ad-hoc spikes in service quality makes it harder to surface and solve the underlying problem.  Serving some clients with excellence, it turns out, increases the likelihood of serving the rest of them with mediocrity.

The goal for service businesses must be reliable excellence. Organizations that deliver truly great service build service models that consistently meet the needs of all clients. They invest in the systematic delivery of outstanding value — and treat Extreme Service Man as a well-meaning menace to the pursuit of excellence.


Feed Our Need for Control

February 16, 2009

Americans are shaken, some of us to the core. We thought we were rich, and now we’re poor. We thought the future was ours, and now we wonder, for the first time in decades. We thought our lives were capable and in control, the operational equivalent of a competent system, and now the foundation of our identity is under attack.

We are changed people in the marketplace for goods and services, and not just because we have less discretionary income and less “consumer confidence” to upgrade the washing machine. We define value differently now, and the companies that understand that difference will prevail in this environment.

We’re still getting over the shocks to our individual economics, but I believe we’re ready for the reaction to the action, ready to be coaxed out of the fetal position with news of our autonomy. We’re ready to be reminded that we are in charge of what happens now.

The shift is a clear opportunity for firms that are already in the business of control. Financial control is the natural starting place – financial services are well positioned to compete on consumer empowerment – but it doesn’t end there. Any product or service that helps us design our own destiny can have a new conversation with customers. That includes healthcare and fitness (control over body), education and training (control over mind), travel and entertainment (control over spirit). The more interesting opportunities will appear in the less obvious industries.

I spent a bit of time with Walt Whitman over the weekend. His defiance fed my own hunger to shed the anxiety – and reminded me of the genius and passion that built this country. I’m convinced that Americans are ready to be large again, to sing songs of ourselves for the next chapter of our experiment in self-determination. We will come together where we have always come together, in the marketplace, and we will disproportionately reward anyone who helps us compose that song together.