Blog, Misc - Monday August 18, 2008 - 9 Comments
How Technology Is Costing Companies Millions . . . Maybe Billions
It’s 11:45am on a sunny summer day in New York. In just a few minutes, promises will be broken, years of trust will be betrayed and a high-value customer and millions of dollars will be lost.
This is the story of a very expensive customer loyalty program that worked flawlessly for two decades only to be derailed by several remarkable misuses of technology.
It’s 11:55am. The executive admin for a very high net worth individual vies to get her boss’ attention as he heads out for lunch. She tells him that today is the deadline to complete the air miles transaction for his Christmas vacation. Only one problem, he’s short 20,000 miles.
No issue he says, I paid my credit card bill ten days early and you should see 39,000+ miles show up in the account … in fact, you should have seen it already, I did it at the beginning of the week. Just give them a call and check on it.
A bit of background: This particular executive, I’ll call him Charles, has had an airline affinity credit card for almost twenty years. As a relatively high net worth individual, he pays his $25,000-$35,000 per month bill in full and really uses the card just to get upgrade miles on his favorite airline. Purchases are worth a mile per dollar and, when added to the actual miles flown, his account usually has over 200,000 miles available.
Back to our story, it’s 2:05pm and Charles’ EA is still on the phone when he returns from lunch. Charles overhears one side of the conversation, but he knows exactly what is happening on the other end of the phone. “Is there anyway you can expedite the transfer?” “But we don’t have four business days.”
Charles listens for a few more seconds and mouths to his assistant, “Are you talking to a supervisor?” She nods, yes.
Charles asks her to transfer the call to his desk and he begins. “What seems to be the problem?” The customer service supervisor on the other end of the phone tells him that his miles can be transferred for free on his upcoming statement date or, he can pay $35 and have the transfer expedited. However, the expedited service will take four business days. Unfortunately for everyone on the telephone, Charles needs that transfer done right now.
Here we have the first horrifying use of technology. How is it possible that an electronic transfer takes four days in 2008. American Airlines can transfer miles in and out of your account while you’re on the phone with them and you can see the transaction by refreshing your browser. You would think that a bank would have more robust transactional software than an airline, wouldn’t you?
To make matters worse, the supervisor, #XYZ234 is reading from a script on a computer screen. (Technology Failure number two). She has no authority to speak for herself. Is she any more valuable than an IVR (interactive voice response) computer? Not really, for the next five minutes, she listens attentively to Charles and then repeats the exact same thing. Sometimes, to spice things up, she adds, “I’m sorry you feel that way …” to the front of her pre-packaged script.
Charles has had just about enough of this and he uses the only technique that is guaranteed to work with a customer service supervisor. He tells her who he is, asks her to look at his account for the last 20 years and then says, “As you can see, I am a very high-value customer. I am also a businessman and I know your company spends over $1.1 Billion annually to advertise to people like me. I have a problem that someone at your company can easily solve right now, you are obviously not that person, I really need to speak with that person because if you cannot solve my problem, I am going to stop using this credit card and you will lose me as a customer. If, however, you can solve my problem, I will be very, very happy to stay with you for the next 20 years.”
Supervisor #XYZ234 simply repeated the words written on her script.
Charles is right. Advertising Age estimates that CitiGroup spent $1.135 Billion on advertising in 2007. That same year, MasterCard spent $1.08 Billion on advertising to acquire 116 million new customers. According to Frederick Reichheld, an analyst at Bain Capital, acquiring a new customer costs six to seven times more than retaining a customer. How could a problem this simple end a 20 year business relationship?
2:25pm. Charles was pretty angry, but still felt that he had some loyalty to the brand. So, he did what anyone in 2008 would do. He spent ten minutes on Google looking for someone at the credit card company to call. All he could find was a number for the parent company. (Technology failure number three). There was no way to determine from online search who the responsible parties might be. (Technology failure number four). In a last ditch effort to get his problem solved, Charles dialed a number that looked promising. He had found the name of the CEO and felt sure that someone in the CEO’s office would rather help him than lose him. After 14 minutes on automated hold (Technology failure number five) and a short, hard to navigate IVR tree (Technology failure number six), Charles was connected to an operator.
He asked for the CEO by name and was told that that gentleman didn’t work at that office, but – remarkably – he had called the right office for his problem. The operator asked Charles who he wished to speak to. Charles responded, I’d like the highest-ranking officer in the building. The operator responded that she didn’t have titles of the people in the company directory (Technology failure number seven or policy Failure, depending upon who you ask) and that she could not help him without a name.
2:59pm. It was over almost as fast as it started. A high-value customer gone, no one responsible for customer acquisition will ever know. No one responsible for customer retention will ever know. Thousands of dollars wasted, millions lost – all of which could have been avoided by a half-way decent CRM system or a little bit of SEO, SEM and an XML wrapper or two. How unbelievably sad for the credit card company — how inconvenient for the customer – what an object lesson in applied technology (or lack thereof). Customer loyalty is a terrible thing to waste.
Shelly Palmer is the host of MediaBytes a daily news show featuring news you can use about technology, media & entertainment, Managing Director of Advanced Media Ventures Group LLC and the author of Television Disrupted: The Transition from Network to Networked TV (2006, Focal Press). Shelly is also President of the National Academy of Television Arts & Sciences, NY (the organization that bestows the coveted Emmy® Awards). He is the Vice-Chairman of the National Academy of Media Arts & Sciences an organization dedicated to education and leadership in the areas of technology, media and entertainment. Palmer also oversees the Advanced Media Technology Emmy® Awards which honors outstanding achievements in the science and technology of advanced media. You can read Shelly’s blog here. Shelly can be reached at shelly@palmer.net
Comments
9 Responses to “How Technology Is Costing Companies Millions . . . Maybe Billions”How Technology Is Costing Companies Millions: MediaBytes with Shelly Palmer August 18, 2008 | MediaBytes with Shelly Palmer August 18th, 2008 8:09 am
[...] Shelly’s commentary “How Technology Is Costing Companies
Millions . . . Maybe Billions” on the [...]
Terry Heaton August 18th, 2008 8:14 am
Fascinating, Shelly. Thanks for the lesson.
Ron August 18th, 2008 9:06 am
Right on…similar things have happened to me many times. In fact,
I would go so far as to say that it’s the rule whenever you have a
question/problem that requires human intelligence to be properly
addressed. It’s a shock when you actually get a problem quickly
resolved. I’ve often wondered about companies that spend hundreds
trying to acquire customers and then make so little effort at real
customer service…can be automated up to a point, but you better
be prepared when a human being and human judgement are needed. But
I have another theory about this Shelly… since many of these
scenarios involve customers trying to
access/retrieve/correct/recoup $, there is a cost of making it too
easy for them. If you create a frustrating, time consuming loop,
many (the majority) will give up, and the company doesn’t have to
rectify the situation/give them what they want. $$ saved. Don’t you
believe that those savings have been weighed against the lost
customers/cost of acquiring new ones and an economic determination
made that it’s cost effective to piss off the customers? Stupid
yes, but to an MBA-spreadsheet head type with no concept of brand
equity, maybe not.
Rudy Sevile August 18th, 2008 9:07 am
Very good article. This tends to happen more and more often (from
my experience, with my ISP it is pretty common). One comment
though, it’s not the technology who costs millions, it’s the misuse
of technology, people not well formed, and things alike.
Rudy Sevile August 18th, 2008 9:10 am
Ron: I never thought of this theory, it is a really interesting
idea! You could be right, trying to make consumers abort their
attempt to correct data makes them keep more cash, and it costs
also less as to properly train workers. I suppose they don’t train
workers properly to have this affect on consumers as a side effect.
Lynne Rogers August 18th, 2008 9:12 am
Shelley: Terrific! Thank heaven someone with a bit of clout is
telling this story! I thought you were writing about MY experiences
with what used to be my favorite Airline! If my call is so
important to them, why am I screaming “representative,
representative” into the phone!
Ron Evry August 18th, 2008 11:29 am
Actually, the Credit Card companies might not care for Charles’s
business. People who pay their bills in their entirety every month
earn them no interest. Racking up $25,000 a month might make them a
few bucks in “float,” and fees from businesses, but not nearly as
much as if the bill accrued interest. “Customer Service” reps call
people like Charles “deadbeats.” No kidding!
Charles H. Green August 18th, 2008 1:24 pm
Shelly and Ron, Methinks you’re actually not suspicious or paranoid
enough to explain what’s going on. It may seem stupid that company
after company behaves this way (and it is). Ron suggests a “smart,”
albeit venal, motive behind it–that this way people stay. Let me
see that bet and raise you two. The real reason is stupidity
squared. The people operating the banks, credit card operations,
customer service and operations organizations have all come to
believe that short-term performance is the name of the game. And in
the short-term, they are absolutely right to shut you down. It is
simply cheaper. It takes a referent time period somewhat longer
than a mosquito’s lifetime to factor in the effect of customer
loyalty. If all your measurements systems are geared to mosquito
lifetimes, the who gives a damn if customers leave–”it ain’t in my
measurement system.” We have raised a generation of business fools
who believe “you get what you measure” and “if you can’t measure it
you can’t manage it” conjoined with “break it down into smaller and
smaller pieces.” The result is exactly what Shelley describes. All
those front-line script readers are doing what their supervisors
tell them to do–read the script. And they are measured by daily
stats that take into account time per call–but not customers lost
later that week, much less that month. No, that would take a
bumblebee’s lifetime, and we ain’t got that much time. And the
supervisors’ bosses are measuring variance against expense budgets,
measured at least monthly. And so on up the line. What do you get?
Certainly not an organization that is in the least bit interested
in what Reichheld (or Peppers and Rogers, whose most recent book
also talks eloquently about the destruction of value by the
destruction o customers) have to say. Instead, mainstream business
operations now echo the words spoken by Wall Streeters in the last
boom: IBG, YBG. I’ll be gone, you’ll be gone. Screw the customer, I
want my weekly bonus. The rats will be fed.
Jon P August 20th, 2008 8:06 am
Having worked in telecoms (both mobile and landline - both of which
coming with attached ISP’s) and insurance companies for many a
year, the general rule of thumb is “get them in (the customer),
sign them up, take their money for as long as possible”. Sales
people (and their managers, and their managers managers) earn
terrific amounts of commission, the companies setting aside huge
chunks of revenue to pay monthy bonuses and to give incentives and
prizes and to hold sales meetings on beautiful islands so they all
can participate in the ‘rah rah rah’ and to help rally the troops.
Because obviously it’s far more profitable to get “scores on the
doors” than to keep a long term customer, right? Well, if only the
companies set aside some of this gold mine for retention of
customers or even for the poor, undervalued customer care team,
then things like this may not happen so regularly. One telecoms
giant I recently worked with had scripted responses to everything,
and as the customer care team earned a woeful wage, it often
prompted a “so what” attitude in dealing with customers. “Why
should we help the customer when the company doesn’t care about
me?” was a general attitude, new staff members would often start
with gusto and within a few months, all steam gone, they often
leave themselves shortly after. Staff turnover rates in call
centres/customer care departments are generally very high. As a
manager, I had somewhat more authority to get things done for
customers, but even still, I would often hit a brick wall
internally when dealing with other departments because of “the
script” or “the rules”, so ended up becoming deflated myself. How
could I help the customer when I can’t get help myself…so ended
up calling it a day. And companies like this often wonder why churn
rates are so high? In this day of competitive rates, and sign up
now and pay nothing till your first born son, the customer will
always be able to pick and choose, but loyalty breeds loyalty. And
unfortunately, even with all the promises in the world, many
companies just don’t shape up in trying to solve a customers
problems, which ultimately keeps the customer. It is a pity, but
many of them rely on this “wonderful new technology” to solve a
problem that more often than not, causes more.