Quality is Free (so Invest in Service Excellence)

Customer centricity is all about doing the right thing for the customer. Doing the right thing also means doing things right and that means service needs to be excellent, all of the time. Sounds expensive?

Actually, it’s not. The main message in my last blog about the Service Recovery Paradox was that quality is free so make sure to build quality in from the start so you do things right first time.
 

The Service Recovery Paradox

By the way, the Service Recovery Paradox is a well-known management concept. It states that a service failure followed by a good service recovery can lead to more loyal customers.

Service Recovery Paradox

The only problem is that there is no compelling evidence to show that the paradox is true. In fact, the opposite is the case.

Loyalty and Repurchase Intentions do not return to a higher level after recovering well from a service failure. There is evidence to show that Satisfaction levels can end up higher than ever before if the service recovery is managed well, but customers are less likely to repurchase.

Our own experience is that this is particularly true where there are repeated service failures. Quite often, repeated failures are symptomatic of underlying issues that have never been adequately addressed. That’s why the service fails, and fails again and again.

The implications are profound. If you want to retain clients and increase revenues and profitability, you simply cannot afford repeated service failures. The good news is that service excellence is achievable for all companies. The even better news is it doesn’t cost anything but it does mean that you need to have a good quality system in place to identify, eliminate and prevent further service failures.
 

Quality is Really Free?

‘Quality is Free’ and ‘Right First Time’ are references to a 1979 book by Philip Crosby. Crosby was one of the founding fathers of the Total Quality Management (TQM) movement in the 1960s and 1970s. He had previously been a senior executive and Quality Director with the US manufacturing company ITT. In the early chapters of Quality Is Free he outlines the impact of the quality programme at ITT which at the time employed 350,000 people across the globe.

Quality is Free

Crosby’s philosophy was a simple one. It is less expensive to do it right the first time than it is to pay for rework and repairs. So focus on doing it right first time.

Much of Crosby’s work was for manufacturing companies but the principles are exactly the same for services firms. And probably more relevant. Crosby believed that manufacturing companies wasted about 20% of revenues fixing things that had been done wrong in the first place. According to Crosby, this figure could be as high as 35% in services firms.
 

Crosby’s Fourteen Steps

Crosby summarised his approach to quality in 14 steps. They are worth repeating here as they are key to retaining customers:

# STEP COMMENTS
1 Management Commitment Get senior management buy-in from the beginning. Leaders – particularly the CEO – must be personally committed to the quality programme. Without this, nothing will happen.
2 Quality Improvement Team It’s senior management’s job to assemble a team and equip them with the right tools to make the programme work.
3 Quality Measurement What gets measured gets managed. The corollary is also true. If you don’t have a measurement system, little is achieved.
4 Cost of Quality Evaluation Calculate the cost of poor quality. That provides the business case for investing in quality. Remember that quality is free if the investment is lower that the cost of rework.
5 Quality Awareness It’s all very well for senior management to know the cost of quality. Everybody in the company must understand it as well. Make sure they do.
6 Corrective Action This is where we start identifying and fixing problems – with products, processes, service levels.
7 Zero Defects Programme Set ambitious targets for 100% quality. They may not always be achievable, but the ambition must be visible.
8 Supervisor Training The concept of supervisors may be old but investment in training for management is not. And it’s critical.
9 Zero Defects Day This is related to Point 7 and makes a statement that one day each year must be dedicated to ensuring that a Zero Defects ethos pervades the company.
10 Goal Setting Crosby recommends 30-day, 60-day and 90-day goals. The emphasis is on teamwork to achieve those goals.
11 Error Cause Removal Ask individuals to describe any problem that prevents them from performing error-free work. Fix those problems.
12 Recognition Recognise and reward excellent performance. Crosby recommends that rewards for outstanding work should NOT be financial.
13 Quality Councils The purpose of these councils is to bring professionals together on a regular basis so that can share stories and best practices.
14 Do it Over Again Most programmes last about 18 months before they need to be refreshed. Senior management must sustain the focus on quality so that it becomes part of the company’s DNA.

 

Customer Centricity = Service Excellence

At Deep-Insight, we help B2B companies become more customer-centric. By doing so, they will improve retention rates, revenues and profitability. Customer centricity is all about doing the right thing for the customer. A lot of Deep-Insight’s clients think that a core part of being customer-centric is being able to bring Innovation to the table for their customers. Service excellence is more important.

Don’t get me wrong, I’m not saying that innovation is not important. It’s certainly a hot topic in boardrooms these days. That said, all of our experience suggests that if companies are failing to deliver the basics well, their customers have little interest in discussions about innovation.

You need to earn the right to talk about innovation. That’s why Service Excellence is critical. Consistently good service eliminates the day-to-day ‘noise’ that gets in the way of working with clients on exciting new and innovative ideas. Service excellence also helps improve customer retention rates. That’s the core message from the Service Delivery Paradox blog.
 

Invest in Service Excellence

Remember: service excellence first, innovation second. So do the right things, do them right and get them right first time.

Remember also that quality is free so there is no reason NOT to invest in a Service Excellence programme for your organisation. You know it makes sense.

Do contact us today if this blog sparks any ideas and you want to have a chat about improving retention rates, revenues, and profitability.
 
 

Service Recovery Paradox – Fact or Myth?

This blog is about a well-known business concept called the Service Recovery Paradox (SRP).

What’s SRP? It’s a pretty simple theory. A good recovery following a service failure can turn angry, frustrated customers into loyal ones. Service managers have known about this paradox for years.

The concept was first discussed in a popular Harvard Business Review article as far back as 1990. The authors – Christopher Hart, James Heskett and Earl Sasser – are all extremely well-respected academics and business practitioners.

But are they right? Let’s take a closer look.

The Profitable Art of Service Recovery

Service Recovery at Slack

Why don’t we start with an example.

Ever heard of the American tech company Slack? Several years ago, Slack had a major service failure:

Tuesday, November 23, 2015 started out like any other day at work for James Crenson. Coffee, check email, prep documents for weekly meeting, solicit input from co-workers on slack. Um, Slack?

Outage

At 8:50am, popular workplace messaging service Slack suffered a massive outage, leaving over a million users around the world unable to send or receive messages and files for almost three hours in the middle of the workday. Angry users took to twitter and other social messaging sites to complain about the inconvenience. The situation had the potential to explode, but Slack was ready.

The team messaging tool had a solid plan in place for mass outages. A well-coordinated group effort handled support issues including a comprehensive social media blitz to contain the negative customer experience (CX). Over the few hours that the service was down, the official @SlackHQ account tweeted over 2,300 times with humorous, thoughtful, and most importantly, personalized – responses to customers complaining about the service outage.

Response

Not only did the all-out response wow users, but @SlackHQ gained over 3,300 followers – 7x more than average – on a day that could have gone down as the worst in company history. Slack was able to quickly contain the damage, took complete responsibility, kept its customers well informed and handled a stressful situation with humor and efficiency.

Throughout this process, Slack deepened the trust of existing customers by demonstrating that the company was prepared in times of crisis. Its expert handling of a negative situation enhanced its relationships with existing customers, boosted the brand’s reputation and even served as a springboard for an expanded customer base.

This is an exceptional demonstration of the value of the phenomena known as the “service recovery paradox.”


 
The graphic below explains the Service Recovery Paradox.

Loyalty generally increases over time when service is delivered consistently well. It falls rapidly if there is a service failure but loyalty increases again when service is restored and the service recovery is handled well. In fact, loyalty becomes greater than if no failure had occurred in the first place. That’s the paradox.
Service Recovery Paradox

Fact or Myth?

The Service Recovery Paradox is generally accepted as fact. But where is the evidence for it?

Some years ago, Celso Matos decided to find out. He and a couple of colleagues from the Federal University of Rio Grande do Sul in Brazil conducted a ‘meta-analysis’ of all academic articles that discussed SRP. In total, they found 24 documented examples of recoveries following service failures. 19 of the 24 examined the impact of service recovery on satisfaction; 12 examined the impact on repurchase intentions; six looked at word of mouth (advocacy).

Their results were very interesting and not encouraging for companies with a poor service ethos.

Matos concluded that “satisfaction increases after a high service-recovery effort” but that “repurchase intentions are not increased by a high service-recovery performance.”
 

Service Recovery does NOT lead to greater loyalty

Matos and his colleagues explain that “customers are willing to make a positive evaluation of a firm providing a high recovery effort, but they are not likely to repatronize this firm”. They go on try to explain why this might be the case.

One explanation is that satisfied customers are not necessarily loyal. We know this from our own analysis at Deep-Insight. Another explanation is that people will give you a lot of credit for pulling out all the stops to recover a bad situation after a bad service failure. However, they will still doubt your ability to ensure no similar service failures occurs again. That’s pretty important when your 12-month or 10-year contract is coming up for renewal. They might give you good customer satisfaction (CSat) scores, but will they sign up for another contract?

In general, satisfaction levels do recover if a Service Improvement Plan (SIP) is put in place but loyalty does not. This does not mean the Slack example discussed above is not true. It just means that you need to go to extraordinary lengths to win back the trust and loyalty of clients when they experience a service failure.
 

The Relationship between Service and Trust

Some years ago I wrote a blog called Trusted Relationships = Consistently Good Service. It was based on our analysis of tens of thousands of customer feedback results from Deep-Insight’s database gathered over a period of 15 years. The analysis showed that of all the elements in our Customer Relationship Quality (CRQ™) methodology, Service Performance was most strongly correlated with Trust.

It stands to reason, if you think about it. What happens when you deliver a consistently good service to a client? Their levels of trust in you and commitment to your company increase. Fail to deliver the service consistently, and their trust erodes quickly. Consistently fail to deliver, and both trust and commitment levels can disappear completely. Trust and commitment also take a very long time to rebuild.
 

‘Quality is Free’ so make sure to get it ‘Right First Time’

There’s a really important lesson here. Service failures are the sworn enemies of long-term profitable relationships. That’s why it’s worth investing time and effort to minimise the chances of a service failure ever happening in the first place. You may never succeed completely but it will be worth the investment. In fact, it won’t cost you anything.

This is where the old Total Quality Management (TQM) principles come into play. In 1979, Philip Crosby wrote a seminar book called Quality Is Free. His basis message was that it costs absolutely nothing to build quality into products and services. If anything, you’ll make money by reducing the cost of re-work and failed business relationships.

Quality really is free, so if you’re in the service business, make sure to get it right first time.

If you operate in the B2B world, ask yourself the question: “Is CSat the right thing to be measuring in the first place?” Maybe you should be measuring something different.