Service and the Economy

Last updated on: May 14, 2008 at 4:29 pm by Desh Kapoor

Service and the Economy 2008-05-14T16:29:38-05:00 Desh Kapoor

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By Bob Livingston author of How you do…What you do (with special permission)

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We are a service economy. Close to 80% of our GDP is service based. In a marketplace wrought with problems and concerns over the economic downturn, one must wonder how we will pull ourselves out of this fiscal malaise, when our primary source of business results from how we service what others manufacture.

Never will service be a more considered factor in securing and maintaining business relationships. In these troubling times relationships will be tested, and I predict only those who have served customers and clients well, will survive well. With ferocious competition for limited client attention and business, how we serve will become a means to compare and judge.

Competitive differentiation, which is lasting and enduring, will prevail in these turbulent times. We are seeing it already. Retailers and suppliers who have treated their customers and clients badly are feeling the pressure now. Business is falling off, and trying to change in the midst of an economic crisis may be a daunting challenge. People are being let go, locations closing and these two factors, connection and convenience, are at the center of any service strategy.

Those who have been paying attention to how they serve their customers and clients all along will get through these difficult times hurt, but perhaps not crippled.

Let’s explore this notion:

There are many great companies who come to mind as examples of how service has defined them. Four Seasons, Marriott, Charles Schwab, General Electric, Container Store, Wachovia, Southwest Airlines and Apple are just a few. These companies have used service as a bridge to loyalty and competitive differentiation. They place their customers first, train their associates on how to do that and make certain that their service culture is monitored for consistency in performance and reward, and recognize those who serve well.

Let’s focus on three companies who are benchmarks in Service Excellence in their competitive set and are recognized as such by those they serve:

– The Ritz-Carlton consistently ranks at or near the top in guest satisfaction among luxury hotels.
– eBay is one of the most trusted companies in the United States for customer privacy.
– Saturns are consistently among the top-ranked value-priced cars for the car industry.

Each of these companies was among the first in their respective industries to identify service as a differentiator and set their corporate direction accordingly, and developed a Service Excellence culture. As service pioneers in their fields, each of these companies were able to define the benchmarks against which service for that competitive set would be judged, further enhancing their competitive edge. This determination positions them well for an economic downturn.

There is another important point to recognize here as well; and certainly considering the dismal state of service in America, there is an opportunity to stand out even in these troubled times. Those who are the first to embrace a change by how they conduct their business are the ones who will achieve a competitive advantage in their fields—and it’s always preferable to be the first to the game, make the rules, and bring your own ball. Here is a great model to follow.

FedEx Kinko’s

They are a time tested example of the first-adopter theory in their competitive set. UPS and the Post Office were the significant factions in the package delivery business in 1971. Fred Smith formed FedEx in that year out of his frustration with the service he received when mailing packages. He determined that the time to deliver, lack of reliability, and methods used for shipping were unacceptable. He also realized that the business environment was changing so fast and assured delivery of packages was increasingly becoming an absolute requirement for businesses of all sizes. He was a visionary as much as he was a problem solver.

Thus FedEx became the first company in the package delivery industry to create a business plan based on understanding current customers’ needs, envisioning future needs, and developing an approach to satisfying needs and by reliably delivering packages to customers the very next day. (Reliability and speed) Furthermore, this was a breakthrough approach to both hard and soft needs of potential customers.

By how he did what he did, Smith changed an industry and defined the service benchmarks, and their competitors had no choice but to follow. The FedEx example illustrates an important approach to serving customers on understanding client needs. I believe that the approach they developed considered that customers and clients had two distinct sets of needs; hard needs, satisfied by what he did, and soft needs satisfied by how he did what he planned to do. FedEx understood that, first; people need their mail, packages, and products to reach their destinations swiftly. In the FedEx operating model design of overnight delivery, satisfying that need was, and is, a hallmark of their business. It is a need that is satisfied by what they do. That is the satisfying of a hard need.

However, FedEx went further and also understood that many people had a second need that was perhaps even more significant. This was a need to feel confident, certain, and assured that packages would be delivered within the agreed-upon time frame. This need for worry-free delivery, which is really an emotional need, is satisfied by how they do what they do (a soft need.)

We believe that just about every relationship with those you serve is based on these two sets of needs: hard needs, which are satisfied by what you do, (FedEx will deliver your package by 10:00 tomorrow morning) and soft needs, those intangible, emotion-based needs, which are satisfied by how you do what you do. (FedEx makes you feel certain that your package will arrive the next day, enabling you to be worry free once it’s in their hands)

In many instances today, due to the economy, the choices customers and clients make to balance things out are perhaps less concerned on what a product or service delivers and more drawn by how the experience makes them feel about how they are treated. Sadly the cost reductions associated with economic downturns compound the service dilemma. Embracing a service strategy in these times supports customer significance and gives them a reason to stand by you. These are great times to buck the tide and differentiate yourself by how you do what you do…

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