Truth #2: Someone has to pay for it

Service excellence must be funded in some way. Either find a palatable way to charge your customers more, reduce costs while improving your service experience, or get customers to do some of the work for you.

Case: FedEx

FedEx-boxBy empowering customers with smart technology, FedEx figured out how to reduce costs and improve service at the same time.

FedEx had a cost driver that was screaming for attention—the “where’s my order?” call. The industry economics are such that if a company has to handle one of these calls with a live agent, it loses money on that package. Each time a customer phones in to track a package, the company experiences a loss. FedEx knew it had to find a way to cut back on the number of calls, but it approached cost reduction as a search for improved service. Would it be possible to reduce these costs while simultaneously improving the service experience?

First, FedEx allowed customers to track their packages online. One immediate advantage in providing online access is that it enables both company and client to cut and paste the sixteen-digit code used to track the 650,000 FedEx packages that go flying around the world each day. Having someone at a call center read that number out to the customer, or vice versa, is problematic enough, even before you factor in the multiple ways that spoken English can be accented. But the real revolution was the company’s next move—automating and proactively sending tracking information by e-mail or text (whichever the customer prefers) so that no one ever needs to wonder and certainly never needs to call. FedEx set out to reduce costs and ended up making customers much better off. With the old system, customers had to proactively call to check on the status of a shipment. Now everyone can rest easy knowing that FedEx is on top of it.

Even when things inevitably go wrong. FedEx innovated again with exception reporting, alerts that let customers know about the infrequent cases in which a FedEx package is going to be late. Again, these alerts eliminate the need for anyone to pick up the phone, reducing both customer anxiety and company costs. Again, FedEx is on it. Sorry for screw-up, but we’re on it—we’re giving you better information, at a faster rate and much lower cost than staffing a high-service call center.

Wednesday, February 15, 2012