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INDUSTRY ANALYSIS

The Sales Prevention Department

Back when I sold software for a living — this would be during the last ice age — a witty software developer in my company stuck a floppy disk to his filing cabinet with a refrigerator magnet. Scrawled on the disk’s label were our flagship product’s name and the words “source code.”

A magnet applied to magnetic media, of course, is liable to cause problems, and that was the joke. Our product was riddled with bugs, but we were the market-share leader, and management just kept cranking out diskettes for unsuspecting customers. That left us holding the bag, taking calls from customers reporting problems and demanding resolutions.

Every day was like a long slog through a swamp. You can tell a customer that a fix is on the way only so many times before your credibility crumbles. Once that happened, we kissed our references good-bye. The competition sensed the blood in the water, and it was only a matter of time before the layoffs began.

But those were the bad old days. It couldn’t happen now, with all the technologies available to build better products and offer better service.

Right?

Recession

Perhaps it could. According to the annual customer experience management (CEM) report from the Strativity Group Inc., the situation in customer support is bad and getting worse. What’s most striking about the report is that many executives surveyed acknowledged their inability to serve customers. In many cases they even showed a lack of interest in doing so.

The Strativity numbers are chilling: In 2004, only 31 percent of executives said they had the tools and authority to serve their customers, down from 37 percent in 2003; 65 percent agreed that their firms’ executives do not meet frequently with customers, up from 54 percent in 2003; a whopping 83 percent said they did not know the average annual customer value; and 59 percent of senior executives surveyed acknowledged they did not deserve customer loyalty, up from 45 percent in the prior year.

Of course, 2003 and 2004 were not great years for the economy, and many businesses tried to find ways to cut costs. It’s a given in CRM that companies cut costs by automating service, allowing fewer people to do more work. But the Strativity report reveals that we’ve gone a step further, actually reducing support.

Lip Service

Although executives in the survey said that customer strategies were a high priority, the results tell a different tale. A significant majority (90 percent) of these same executives said they did not know the cost of total resolution, and 89 percent did not know the cost of a customer complaint. These are the people making decisions about investments in customer service, and their executive ignorance is showing. In North America only 25 percent of executives said that they are investing more in people than in technology, a drop of 13 percent in just one year.

Not surprisingly, this situation has had a chilling effect on employees. The mentality of cost reduction above all else has resulted in an under-motivated customer support force that is nevertheless driven by metrics with confused priorities: Only 18.8 percent of the executives said their employee compensation plans emphasized quality over productivity, down from 33 percent a year earlier.

Training Executives

Last week The Economist online published some short articles about the negative impacts that the MBA degree may be having on business. According to an article called “Bad for Business?” — which quoted the late London Business School professor Sumantra Ghoshal and others — business schools for decades have been teaching from a set of flawed assumptions. According to the article, the assumptions are “simplistic enough to allow business school academics to develop grand theories of management supported by elegant mathematical models and empirical analysis that appeared scientific, and thus earned their subject academic respectability, but were, in fact, a pretense of knowledge where there was none.”

If one of the flawed assumptions is maximizing shareholder value above all else — and it is — we can see a clear connection to the cost-cutting that has left customer service in the sorry state that Strativity found it in.

What would happen to our consumer-driven economy if consumers grew tired of maximizing shareholder value at their own expense?

It’s not an idle question.


Denis Pombriant is founder and managing principal of Beagle Research Group. An influential thought leader in the CRM industry for more than five years, Pombriant researches emerging trends in CRM and publishes research reports that can be found on the company’s Web site and on other influential Web sites in the CRM market. In 2003 CRM Magazine named Pombriant one of the most influential executives in the CRM industry. He is also quoted extensively in Paul Greenberg’s CRM at the Speed of Light, third edition. His latest report is titled “KeyFindings: CRM Market Events, Observations, and Analysis 2004.”


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