May 2001 Managing/Customer Service Ignoring Customers Like Santa with a database, more companies know whether a customer is naughty or nice Increasingly, bad service is no accident. It’s the result of a management decision – facilitated by technology – that some customers are worth the trouble it takes to care for them and others are not. The best treatment is often reserved for the best customers. And it’s easier than ever to determine which ones pull their loads dollarwise, thanks to easily accessible computer databases, says Business Week magazine. Examples are legion. GE Capital charges a $25 annual fee to its MasterCard holders who don’t rack up at least that much in interest charges. Charles Schwab’s Signature clients – those who have at least $100,000 in assets or trade 12 times a year – never wait longer than 15 seconds to have their phone call answered; others can wait 10 minutes or more. Maytag provides premium service to buyers of its top-of-the-line machines, including a dedicated staff of “product experts,” an exclusive toll-free number and speedy service. Competitive Necessity Businesses espousing this philosophy say it’s necessary because of tougher competition. Gross margins have shrunk 5 to 10 percentage points in many industries (though they’ve increased slightly in the jewelry industry, based on Jewelers of America’s Cost of Doing Business Surveys for 1995-1999). And labor costs are higher than ever. Businesses have to respond, and special service for special customers is one option. Those catering to the well-heeled even find customers are willing to pay a premium for such service. Continental Airlines says its 43,000 gate, reservation and service agents can quickly check a computer screen to learn the history, value and preferences of its customers, 47% of whom now pay higher-cost unrestricted fares in exchange for better service. The Four Points Hotel in Lubbock, TX, boots a lower-status guest to make room for a “platinum” customer. It’s willing to lose business from one customer to get more from a better one. Some predict a time when the trade-off between price and service will be more explicit, allowing customers to choose where they wish to fall on the continuum. In essence, customer service will become just another product for sale. – by Mark E. Dixon