The era of the Customer – Part 1
When I was growing up as a kid in India, there were only 3 car manufacturers (HM ambassador, Premier Padmini, Maruti 800) selling one model each. The build quality of those cars sucked and the cars were extremely unreliable. The after sales network and service of these manufacturers was so poor that there was a secondary market for service typically called the “repair shop” that co-existed and flourished. In a world where demand exceeds supply and choice (choice can also be termed as competition) is limited the suppliers win and consumers lose. Customers have no choice but to suck it up and pay the high prices and deal with the terrible customer service experience.
When I left India in 1994 to the US, I was exposed for the first time to a world that was “consumerized” which means that people had a lot of choice. A single aisle with breakfast cereals in a grocery store is likely to have more than 100 varieties. When there is so much choice, the customer is usually the king. The manufacturers of these products, have to spend huge amounts of marketing $$ to educate their customers about the subtle nuances of each product to get them to try it, and then provide them phenomenal customer service to ensure that they don’t switch to a competitors product. For example, every box of cereal in the US carries a toll free number that one can call if they are not satisfied with the product. Rising competition means that a manufacturer, seller or service provider (supplier) has to work really hard to keep their customers from switching to a competitor due to poor product/service experience faced by the customer. This led to the emergence of the human powered call centers to handle customer complaints/issues over the phone, typically to keep customers from switching to a competitor.
Fast forward to the era of the Internet…… The Internet has truly flattened the world. It has leveled big and small, collapsed physical distances, hugely improved distribution (mostly by eliminating middle men and location dependencies), sucked out inefficiencies that existed in the past and taken competition to another level by making more choices available (the world of the long tail) targeting specific needs of users. The Internet also became a channel for customers to engage with suppliers for service issues and this led to the evolution of call centers to contact centers. Contact centers are essentially human powered support centers that handle calls and Internet channels like email/online support.
The emergence of social tools and networks have also brought in two significant challenges / opportunities (which ever way you choose to look at it) to manufacturers, sellers and service providers (suppliers of the world).
1. customers can now engage directly with manufacturers, sellers and service providers very easily which will lead to the creation of people to business networks and customer communities and interest groups
2. customers now have large megaphones to tell the world about their experience (good or bad) in dealing with specific suppliers. In the social era, the customer really has huge amount of power over suppliers. It is an era where a customer who is dissatisfied with a product or a service is not just switching to a competitor but will tell everyone about it. Social Networks are designed to amplify the voice of the users and when such voice finds mass appeal, can impact a companies ability to do business significantly.
A classic case study of this phenomenon is the now famous “United Breaks Guitar” case where a musician who flew United Airlines dealt with the airline’s callous attitude by creating a song that was posted on Youtube and went viral (500K views in 4 days) causing a PR nightmare and an estimated stock price impact of 2 – 10%.
The era of the customer can be quickly summarized as follows:
1. Customers now have huge amounts of choice in all aspects of their lives primarily due to globalization and increasing levels of access (due to the proliferation of the Internet and Mobile).
2. Customer Service is becoming the key driver and differentiator of successful companies. (example: Amazon, Costco, Zappos, Southwest Airlines)
3. Customers now wield heavy weapons (facebook, twitter, youtube) to counter companies who #fail to delight their customers.
4. The companies that will survive this era are ones that will build a bridge with their customers and work hard to delight them.
So, this brings us to the “how and why is this relevant to Indian businesses?”. After being spoilt with great customer experience in the US for a decade my return to India in 2006 brought me face to face with this aspect of our life where we have to face the callous attitude of suppliers everyday. Consumer protection laws are broken and the process of dealing with consumer forums and consumer courts is mired in red tape like the rest of India.
However, in the past two years Internet adoption in India seems to be accelerating. As of November 2011, the Internet population in India has for the first time breached the 100M subscribers mark . E-commerce growth in the country is also surging with a new e-commerce startup launching almost every day ( I read about a vegetable and fruits e-commerce startup in South India yesterday – hmm, reminded me of webvan). This is great news for customers as they can shop from the convenience of their couches and get the best deals as the frenzy of e-commerce startups consumes India. However, once the market reaches its tipping point the ones that will be left standing will be the ones that crack the secret code of “e-commerce success” which boils down to 1. having the biggest catalog of products and inventory 2. being able to fulfill the orders reliably and in a timely manner and 3. being able to delight their customers with great customer service.
Let me narrate a small customer service incident that I recently faced that reminded me of why my online store of choice is Amazon.com. My Amazon kindle was starting to act up (after about a year) – frequent lockups and screen freezes. Frustrated, I went to amazon’s kindle site and looked for options on how I could get support. The forum discussions revealed that there were several customers facing similar issues mainly caused by the leather cover (an amazon accessory for the kindle ). Armed with this information I contacted Kindle support via online chat as I am in India now and did not want to make an expensive International call to the Amazon support number in the US. After 15 minutes a helpful agent jumped on the chat session and got some basic details from me about my problem. She then transferred my chat session to a senior agent who had full context of my earlier chat and spent some time trying to diagnose the issue further. He then asked me if I was using an Amazon Leather cover for the Kindle and then went on to explain that some leather covers were defective and were causing the Kindle’s to act up. He then asked me to go to Amazon and order a new cover for myself as a replacement and that Amazon would waive all the charges for this. The cover was $29 and with International shipping and handling the total was $66. As soon as I finished ordering the cover, the amount was promptly waived by Amazon as promised by the agent. Three days later the Kindle cover was delivered by DHL in India. This type of experience is what keeps me going back to Amazon every single time I think of ordering something online. They have turned me from just a “customer” to a “customer for life”. “Customers for Life” is a very interesting area of marketing where companies need to look at the lifetime potential of doing business with a customer. For most commodity businesses the cost of acquiring customers is significant and typically the first transaction with the customer is not profitable considering what the company had to pay to acquire the customer. Businesses have to then rely on cross-selling and up-selling to their customer base to create a funnel of transactions from the existing customer base. This means that to generate healthy profits a business needs to be able to churn its existing customer base for revenue while adding new customers constantly. To do this, the business needs to ensure that customers do not leave their service (churn away from their service) before the lifetime potential of the customer has been realized. The only way to make this happen is to delight the customer with great products or service and be there when the customer faces an issue to help them overcome the issue or in other words delight them.
If you are building a product or service oriented startup in India, start thinking about delightful customer service that you can offer to your customers and start designing the experience into your product or service. Think of the following:
1. How do I make my customer reach out to me easily if they face a problem instead of going to twitter and ranting?
2. How do I deal with the customer if they have an issue?
3. How do I turn the customer who faced an issue into a fan who will keep using my products/services?
4. What are the processes I need to create to effectively manage customer issues?
5. What type of people should I hire to respond to customer issues?
Last but not least, if you haven’t read Tony Hsieh’s “Delivering Happiness: A path to profits, passion and purpose“, now is a great time to add it to your reading list.
