The Mystery of Poor Customer Service Explained

In December 2008, the respected pundits at Forrester Research published a survey of customer satisfaction across 12 different industries. Of the various types of telecommunications service providers included in the study, the wireless faction came in first, followed by Internet service providers and then TV/cable companies - and all of them were ranked below "Airlines" for customer service quality. How does one make customers more dissatisfied than the airlines? Even worse, the only industry segment ranked below cable companies is the private health insurance cabal, where "death panels" really do exist.

From the perspective of consumer scales, the entire telecommunications arena scored from "Very Poor" all the way up to "Mediocre." Armed with this information, William Band, vice president and principal analyst for Forrester, interviewed 100 telecom operators worldwide to discover why they are so bad at servicing customers by asking these three questions:

1. What are your most important customer management goals?
2. What capabilities are included in your definition of customer management?
3. How strong are your current customer management capabilities?

The two most highly rated responses for Question #1 - almost evenly matched - are "keep customers" and "reduce costs." This seeming paradox is actually a Machiavellian strategy that will be explained shortly. The other questions elicited responses solely focused on software, specifically all software that is customer-facing. This includes call center customer care, online customer service, revenue management, service and support management, product and lifecycle management, marketing, sales and installation, and technical service and support. Band determined that the operators needed new, better software. Instead of the old concept of best-of-breed - the integration of packages from multiple vendors - they needed best-of-suite, an amalgam of code provided by a single developer. But there are dissenters to this idea.

Stanford's Jeffrey Pfeffer, in chapter two of his book "What Were They Thinking?," chastises companies who invest in customer relationship management software as the be-all, end-all for managing relationships with their revenue stream. Instead, he directs them toward purchasing human resource software that identifies the right people to hire, who will then in turn create a better customer experience. Pfeffer assumes that companies are deceived into believing that CRM software is a synonym for managing customer relationships, something that only another human can do effectively. He writes as if companies are stumbling around in the dark, investing huge sums into sophisticated software that is no replacement for the human touch. And with regard to telecom operators, he is wrong. They know precisely what they are doing, but they just haven't perfected it yet.

You see, I was a telecom CRM insider, someone who was in charge of the product management for a suite of software designed to integrate all customer-facing actions into a cohesive whole. I have presented to and spoken with wireline, wireless, cable, and Internet providers to learn their needs and strategies, something that Pfeffer can only guess. He is outside the veil looking in, and if he had asked me, he too would know the truth. In the interest of revisionist history, I'll recreate the "lost interview" with Professor Jeffrey Pfeffer.

Pfeffer: So, Mr. Guggenheim, if you say that operators know what they are doing, why are they investing so much money into CRM when it has not improved customer service?

Guggenheim: Hey, Jefferino, you're from Stanford and I'm from UIS, so as equals why don't we drop the honorifics and just get down to business? CRM covers a wide swath of software applications. That is, there is no "singular" CRM investment. The question you need to focus on is "what aspect of CRM is receiving large investments?" And the answer is artificial intelligence-driven customer analysis.

Pfeffer: My question still stands then, "why make the investment if it doesn't work?"

Guggenheim: Because the technology hasn't matured yet, and investing in Version 1.0 is a sure-fire means to accelerate research and development in achieving Version 2.0 - the version where the payoff occurs. As you saw earlier, operators are most concerned with both keeping customers and reducing costs, two seemingly paradoxical foci. But with enough intelligence in your software, you can do both.

Pfeffer: How's that possible? You have to spend money to keep customers happy.

Guggenheim: And there's the rub - operators are not concerned about keeping customers happy. In fact, they want to let a relationship degrade until just before a customer churns. At that point, they will offer a substantial promotion, which secures the customer for another subscription period. The key is that the promotion will cost far less than maintaining a happy customer over the same period of time.

Pfeffer: You mean the telecom operators want to let customer satisfaction erode?

Guggenheim: Absolutely. It's a basic actuarial analysis, and it's easy if the customer is on a subscription plan, but the trick is to recognize when the customer is about to churn from a month-to-month. Because most defections are not preceded by a complaint, it takes very elaborate artificial intelligence mechanisms to predict with certainty, say, one month before a customer opts for another provider, who, by the way, is just as bad as the one they left. At that moment, you offer two, three, or even four months of free service in exchange for a two year contract, and the cycle starts all over again. In this business, Jeffsky, maximum profitability is based on a saw-tooth wave of customer satisfaction.

Pfeffer: That's diabolical!

Guggenheim: Hey, Jeffo, you've been teaching business in the Ivy League for 30 years, did you think it was all touchy-feely? This is business-in-the-trenches, baby.

Pfeffer: Well, I guess I'll have to rewrite that chapter.

Guggenheim: And next time, do more research.

The HOG comes to India

Harley Davidson (ticker symbol HOG) announced that they will be selling their entire line of bikes - everything that roars, screeches, and screams - in India, the second largest motorcycle market in the world. I have traveled extensively throughout that country and at one time held an apartment in Kolkata (previously Calcutta), so I am no stranger to the vehicular situation. And it's important to note that most of the motorcycles in India seem to be pre-war 250cc Hondas and mopeds (WWII, that is).

Something tells me that the traffic is about to get much crazier than the current state of "Brownian motion with vehicles." How is something like this...



going to maneuver around traffic like this?



or this?



At least on a Sportster that sounds like the second coming of Vishnu you can outrun those black-smoke belching heavyweight trucks with I-beam front bumpers, emblazoned with the farewell "Tata" across the grill - an adieu to the afterlife if you've seen what happens when one of those lorries strikes a pedestrian. Actually, I predict that Harley Davidson will enjoy much success in India, provided that an aftermarket for custom accessories is in place shortly after the product line launch. Given the volume and variety of Indian symbolism, the Hogs sold on the sub-continent should be worthy of a show at the Guggenheim

Personally, I might return and buy a Sportster with a chrome statue of Ganesh residing above the headlight...

Reach Out And Touch Microsoft

Disclaimer: While I have done extensive coding for Windows machines (Visual Basic, ASP.NET, and Prolog AI language), I have personally used a Macintosh since 1986.


In July, Microsoft announced that it is building retail stores around the world, starting with Scottsdale, AZ and Mission Viejo, CA, which will be opening this fall. The behemoth from Redmond has stated that it will build stores close to Apple, and will incorporate such features as a Mac-like "Genius Bar" to provide expert support and advice. Which begs the question, will they provide video entertainment while you wait in line ala Disney World, or will they just let you fume and vent with your fellow travelers?

Unlike Apple, Microsoft doesn't produce its own platform, so how will they distribute table space to computer manufacturers? Strictly high bidder or will other "backroom" negotiations determine who gets to showcase their hardware running a crappy OS like Vista? And I defy anyone at a Microsoft store to demonstrate all 1500 features of Word! Of course, they could always get on the phone to tech support in India, if you don't mind the wait.

Is Microsoft ready for developers to show up in their stores, asking arcane questions about Visual Studio? The Microsoft Developers Network website is about as easy to navigate as a super-monster WalMart on Black Friday, and MS computer geeks are known to be confrontational heavyweights. Who can blame them - they are a product of their environment, just like inner-city crack dealers. Maybe that's why Microsoft calls their customers "users?"

Are they prepared for an Apple guerrilla marketing campaign? Because many of the stores will be in high-traffic malls, I would have a person sitting on a bench in front of the MS storefront, playing with her 17" MacBook Pro running the new Snow Leopard OS (7GB lighter and much, much faster than Leopard) and showing off some real whiz-bang applications. Then, I would have another person enjoying their iPod and another watching a WiFi-connected AppleTV on a portable video screen. The visuals should be antipodal - clean, fresh, and happy models cavorting with their Apple products compared with the depressed, irate, and hunched-over Microsofties trudging into the store as an endless stream with a litany of complaints.

Is a retail strategy a mistake for Microsoft? Even though they frame this push into the retail space as a challenge to Apple, that's a smokescreen. They're grasping at straws because Google is challenging them on all fronts: search, browser, applications, email, operating system, and development environment. All Google has to do is use a fraction of their $25 billion in cash and put up kiosks near MS stores with the sign "FREE SOFTWARE THAT WORKS."

Will the iPhone go the way of the Betamax dodo?

The iPhone has experienced extraordinary sales, even for a visionary product company like Apple. In only two years, and with only two models available, the iPhone has logged 17 million purchases. Translated to the latest quarter, Apple owns 10.8% of the worldwide sales of smartphones, a remarkable feat considering the limited product launch service availability: US (AT&T), UK (O2), Germany (T-Mobile), and France (Orange). With the availability of the iPhone 3GS, Apple's European market has driven into Italy, Spain, and Switzerland and, as of June 16, expanded into Asia with rolling country-by-country launch dates extending through August.

It's all very impressive, yet I wonder if the iPhone will ultimately become extinct? There was another product many years ago that generated a similar buzz, a product that heralded a new paradigm of entertainment - the Sony Betamax video cassette recorder.

The Betamax revolutionized video entertainment with high fidelity video quality, ease of use (if you don't try to program the record unit), and simple playback controls. And the Betamax died because it could not support a tape with more than two hours of content. If you wanted to watch a movie with 2:01 hours in length, you missed the last minute, and considering that VCR sales had a high correlation - suggesting causation - with the sales of prerecorded pornographic video tapes, missing the last minute was unacceptable to most connoisseurs of the medium. A competing tape format, VHS, could hold up to 6 hours on a single tape, admittedly grainy and of lesser quality overall, but perhaps that was part of its cachet. How long you can stay up is an important product attribute for VCRs, and phones for that matter.

Among all the problems plaguing the iPhone, none is more important than battery life. In the U.S., it's only available on the AT&T network, a service provider that is despised by millions. But this won't matter; the phone has been cracked and can operate on other networks. The iPhone is fragile; a short drop will result in a display that looks like it followed a Terex mining truck down a gravel road. But an entire industry in protective foam cases has arisen out of demand for Apple's consumer products. Some iPhones have exploded, but only in France. Stay out of France and you won't blow your head off while watching Lindsey Lohan puking on YouTube. Yet, the Betamax longevity issue remains.

The original iPhone had just enough juice to satisfy the innovators and early adopters who were willing to sacrifice basic survival for COOL. Then, Apple redesigned it for sleek lines and aerodynamic worthiness. In the process, they removed 15% of the battery volume and created a handset that must be recharged several times a day if you use the video screen, which is classified by experts as a "power hog." Another power sponge is any application that uses the 3G network, such as email, web surfing, texting, etc. The method to extend iPhone battery life is to disconnect from a 3G network and turn off the video display. Yes, if you turn your $600 iPhone into a $50 dumb phone, it will last all day.

The early majority market share must have a wireless device with sufficient battery life to accommodate being trapped in a 757 on the tarmac for 13 hours, give or take. Either battery technology must improve dramatically, which experts are not predicting, or battery recharging technology must accommodate super-fast charging cycles. If not, the iPhone may be next seen on "The Antiques Roadshow."

GM = Government Motors?

Someone hypothesized that with the U.S. government as the majority shareholder in General Motors, it is inevitable all federal vehicle purchases will be made from the same. I disagree with this notion, for a variety of reasons.

First, federal procurement regulations would have to be changed by an act of Congress, something that no politician would do at this time, given the public condemnation of bail-out funds. The regulations require that a Request For Proposal be drawn up delineating relevant requirements, and the lowest-cost bidder who meets the specifications will win the contract. Sure, there are those who would point to Halliburton's no-bid contracts in Iraq, but those RFPs were structured in such a way and with sufficient specificity that Halliburton was the only viable company that could meet the specs. I doubt that a request for a vehicle could be tailored such that GM is the only vendor with a product that passes the bar. They have competition in every segment; and those competitors have lobbyists too.

Second, President Obama himself has stated publicly that GM will have to survive through product development, pricing, and promotion. A sweet-heart deal with the government would only serve to hinder their progress toward building desirable automobiles. It's a well known fact that when presented with a captive market, there is no incentive to improve quality in all its facets (fitness for use, quality of conformance, and specifications). Competition has marked the forward progress of product design since the square wheel and competition will save GM.

Besides, everyone is already dealing with the firestorm of health care reform and I doubt that any public official is ready to launch another stimulus plan, covert or otherwise, to the automotive industry.

A burning issue

Last night, Ranjan was discussing the business-speak that will be required of the class and in particular he mentioned "burn rate" as part of the lexicon to be acquired. His remark triggered a thought, a concept of two very different burn rates.

It's July 1969 and humankind for the first time has extended a slender thread to another planet. Neil Armstrong and Buzz Aldrin, cocooned inside a paper-thin, foil-covered polyhedron known as the Lunar Excursion Module, are using a computer with less processing power than an iPod to land at the Sea of Tranquility. When Armstrong looked down on final descent, he saw that they were about to crash into a boulder-strewn field. Taking manual control, and with Buzz Aldrin calling out altitude and velocity numbers to monitor the burn rate, Armstrong piloted the LEM over the rocks and touched down safely with 25 seconds of fuel left.

Fast forward to the year 2000. A group of Internet entrepreneurs have secured $260 million in venture funding based on a business plan that offered to deliver practically anything ordered over the Internet by bicycle messenger. Kozmo.com was a revolutionary concept, one that promised to change the way that people have engaged in consumer transactions since the formation of money. Arrogant and idealistic, the founders, both investment bankers, were salivating at the prospect of an IPO. They were calculating their net worth, even when the company was losing 10 times its revenue. Regardless of the massive burn rate, they spent substantial sums on company parties, treating their 4,000 employees to lavish extravagance. Their dreams of a house in the Hamptons died on April 14, 2000, the day the Internet bubble officially collapsed. When the company folded, they returned a mere $15 million to their creditors and equity holders, leaving them smashed on the crags of business failure. As to the founders, Joseph Park and Yong Kang, they landed safely. Park founded another web site, Askville, which was bought by Amazon.com and Kang has returned to his roots as an investment banker.

While dramatic nonetheless, this view of "burn rate" pales in comparison to that airless day 40 years ago.

Introduction to Me

This blog will journal my experiences, thoughts, ideas, and opinions that may erupt with Krakatoan ferocity as a result of BUS 501 - Business Perspectives, a graduate class taught by RonJon, the famous surfer from Cocoa Beach, Florida. But is he really a famous surfer? Can any "celebrity" surfer reside on the Space Coast? The coastline south of Canaveral is all beach break, with gentle waters lapping at the shore like an old hound dog at the creek; there are no curls except when a Category Three rolls up from Nassau. I think I'll call him Ranjan, the business Doppelganger of RonJon, a man who can hang ten on a balance sheet with far more acuity than a wall of water at Waimea.

I contemplated forming a bilateral relationship with my readers, a covalent bond between me - hydrogen, first in the periodic table, fusion-injected star fuel, the closest humans have come to a searchlight with E = MC squared lumens - and you - oxygen, sputtering one atom at a time from a green paint-chipped iron bottle, down a polyethylene tube and into the nostrils of a liver-spotted lifelong smoker. Together we could make the most amazing substance on this planet, two of me for every one of you. We could be solid, liquid, or gas. We could support the marketplace of ideas with our surface tension. With time, we could erode the solid rock of ritualistic business concepts into dust and build our own fluid sacrament of capitalism. But then I would no longer be the stuff of galaxies; instead of burning brightly, I would be extinguished.

So, dear reader, I cannot give your words a sounding board because, as the title says, it's all about me.