Archive for the ‘Benchmarking’ Category
Whar Can Netflix Teach Government Shared Services About Customer Service?
Organizations that excel at customer service listen and take note. They benchmark and apply the best practices and processes to their organization. They also learn from mistakes – both their own and others. To this end there is a lot government shared services can learn about customer service from Netflix.
Some background. Netflix is a streaming video and dvd by mail service. It was a favorite of investors, customers and Wall Street since start up in 2007. Its subscriber base went up quarter after quarter along with stock price and revenue. It pioneered the dvd by mail service that knocked Blockbuster out of the box and was one of the first companies to deliver movies via the internet. Investors loved it, customers, myself included, even more so. That is until July of this year. In July Netflix announced they were raising the cost of a combined dvd and streaming video subscription by 60%! The reason: customers were relying too heavily on the dvd by mail service (the least profitable method for delivering content) and not enough on streaming video (the most profitable method of delivering contemt). The price of a share of Netflix dropped 61% in 3 months as 800,00 customers left the company in the 4th quarter.
In September about the time the higher rate went into effect Netflix announced they were separating its streaming video service from its dvd by mail services with separate web sites and separate bills. Customers would search for content on one site and, failing to find it, log in and search for the same content on the other site. More customers left. It was no urprise that when Netflix released its 4th quarter earnings statement it was worse than the most pessimistic analyst projections. Netflix stock dropped another 26%. The company had lost 75% of its market value in just 3 months.
What can Netflix teach shared services about customer service?
1
Don’t blame the customer. Netflix said customers’ stubborn insistence on clinging to the outdated dvd format was the problem. In fact, I ordered dvds by mail when the content I wanted was not available for streaming. Having framed the issue incorrectly (customer preference vs the unavailability of streaming content} the solution was incorrect. Ask the wrong question and you get the wrong answer every time.
2
Don’t treat your customers like captives. In raising rates 60%, Netflix forgot that their customers had choices. A lot more now than in 2007. Treat your customers like they have a choice even if you don’t think they do. You could be wrong.
3
Service recovery is important. How you recover from a service failure can be as bad as the failure itself. To add insult to injury, Netflix followed up the announcement of a 60% rate hike with an announcement of their intent to separate its streaming video service from its dvd by mail service. Normally this would mean absolutely nothing to customers except Netflix added that they were creating a separate web site for customers to manage their dvd subscription and customers would be billed separately for dvds. At a time when all their energy should have been focused on recovery they announced their intent to inflict more damage.
4
Put yourself in your customer’s shoes or go barefoot. Apparently the executive suite at Netflix did not consider how onerous it would be for customers to manage two different accounts, use two different web sites and pay two different bills if they wanted to keep both services, They could not have. By making it harder to keep both services the company guaranteed a large number of customers would drop one or both,
5
Some humility is in order. Netflix aborted its plan to separate dvds from streaming video but the price increase stands. To the ground swell of complaints, wave of disgusted customers and 800,000 former customers Netflix had only this to say: we won’t even try to woo back the customers we lost by increasing subscriptions by 60% and our botched plan to subject the remaining customers to the laboriousness of managing two separate accounts. Our decisions were right but our timing was off. In other words, we should have waited awhile longer before announcing our second idiocy.
6
The climb to the top may have been too long but the fall to the bottom is always too short.
No CommentsWhy Benchmark?
We know why industry benchmarks, don’t we? Companies benchmark against other companies in the same sector to get better and gain market share. Benchmarking is a process improvement tool. When you benchmark you compare your key costs and productivity indicators with those of other organizations providing the same service. How does this lead to process improvements? The point is not to just measure yourself against other organizations but to look beyond to the processes, technology and business environment associated with the leading indicators. By comparing your processes, technology and environment with those typical of the leading indicators, you gain insight about how you can change your processes, make better use of technology and/or change your operating environment (to include customer behavior) to get better.
Benchmarking is useful in another way. If done well, benchmarking will high light for you the differences that prevent you from attaining the same levels of cost and productivity as the organizations you benchmark against. There are differences in the operating environment in the Federal sector compared to the private sector. These can be driven by mandates applicable only to Government, Agency policy (that may be changed given a compelling enough reason), or work place rules. They may be attributable to the risk adverse nature typical of a public trust or the all-or-nothing attitude towards internal controls also typical of a public trust. They can be because of a reluctance to make the capital investments in technology to move to paperless processing or e-invoicing, for example. But do not despair. Rather identify and quantify the cost and productivity impact of the things that cannot be changed or will not change. What is left is in the realm of possibility.
But before you run out and benchmark yourself against the best in class, consider this. In the interest of transparency and accountability, your benchmark results should be shared with your customers and stakeholders. If not handled properly, sharing benchmark results is akin to calling a strike on your own position.
No CommentsBenchmarking Your Shared Services Organization
Why Benchmark? Benchmarking is a proven tool for improving efficiency and reducing operating costs. Using common or industry key indicators for the service, an organization compares its indicators against the indicators for leading organizations providing the same service. Benchmarking tells you how your organization stacks up against other organizations. Just identifying where there are gaps is not enough. A good benchmarking study also tells you why gaps exist. It provides a road map for improvement by comparing processes, technology and differences in the operating environment that impact performance, efficiency and cost.
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