IT’S THE CUSTOMER, STUPID . . . NOT SERVICE QUALITY, PRODUCT QUALITY, OR CUSTOMER SERVICE!

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IT’S THE CUSTOMER, STUPID . . . NOT SERVICE QUALITY, PRODUCT QUALITY, OR CUSTOMER SERVICE!

The issue is satisfaction. Consumers will pay for two things: solutions to problems and good feelings. When the consumer can purchase almost any product from multiple channels (TV, catalog, Internet, multiple stores) the only thing that can differentiate one business from another is the way it makes the customer feel. Businesses must decide whether they will simply be a vending machine and wait for the customer to deposit money in the slot and pick up their product / service, or whether they will add value. If businesses choose to be a vending machine, consumers will choose the cheapest, most convenient vending machine. But if businesses add value, consumers will expend effort, remain loyal, and purchase at greater margin for longer periods of time.

The issue is not simply service and product quality. Businesses can make their ‘‘stuff’’ better and better, but if it is not the stuff that consumers want, then consumers will not buy. In the 1960s, the big names in slide rules were Post, Pickett, and K&E. Each made considerable profit by selling better-quality and better-functioning slide rules—year after year after year. These three companies did exactly what the experts say is important—make quality products. Yet in the late 1970s slide rule sales disappeared, and so did these companies, not because they made slide rules of lower quality but because new companies by the name of Hewlett-Packard and Texas Instruments began making electronic calculators. Not a single slide rule company exists today. None of the three dominant companies noticed the shift. All three continued to make quality slide rules for customers who were now buying electronic calculators. Making the best-functioning product does not guarantee survival. The customer passed them by. Satisfaction results not simply from quality products and services but from products and services that consumers want in the manner they want. The side of the business highway is littered with companies that continued to make their stuff better without watching where the consumer was headed. In 1957, the top 10 businesses in Chicago were Swift, Standard Oil, Armour, International Harvester, Inland Steel, Sears, Montgomery Wards, Prudential, and the First Bank of Chicago. Thirty-five years later, the list includes only Sears and First National Bank from the original list, plus Ameritech, Abbott Labs, McDonald’s, Motorola, Waste Management, Baxter, CAN Financial, and Commonwealth Edison. These two lists dramatically show the evolution that business goes through.

The discussion of a customer-satisfaction orientation is not limited to a few select businesses and industries. A satisfaction orientation exists in profit, not-for-profit, public and private, and business- to-business, and business to consumer (see Table 3).

Return on Investment for Service-Quality Improvements

Increases in service quality and customer satisfaction have direct bottom-line benefits. According to Robert LaBant of IBM, a 1% increase in customer satisfaction is worth $275,000,000 to IBM. Reichheld and Sasser (1990) estimated that a 5% increase in customer retention yields a 20% profit increase for catalog companies, 30% for auto service chains, 35% for software companies, 50% for insurance companies, and 125% for credit card companies. Costs associated with satisfaction and service-quality improvements are not costs but investments in sales, profit, and long-term viability. Assistance in figuring the return on investment for service quality and satisfaction improvements is available in books (Rust et al. 1994) and ROI calculators available on the Web (www.1to1.com— click on tools and ideas—look for downloads; www.e-interactions.com / download.html); (www.cfs.purove.edu / conscirt / quality.html).

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