One fine day the water dispenser of my two-year-old, French-door refrigerator stopped working. No problem, I thought, as I had enough foresight to sign up for a home warranty policy literally a month prior. Aside from having a practically-new appliance break, it took five weeks and three different service visits with hundreds-of-dollars or parts being shipped to my house to fix the issue.
What led me to write this post though was the fact that two of the three technicians had no idea what was ultimately not working, were quick to order parts and disappeared just as fast as they showed up.
The last “old school” tech solved the problem by leaving my fridge open for twenty minutes so a frozen waterline could thaw. No parts required. He also told me – and this was the same problem a few years ago with a similar set of repairs – that my experience was due to two factors. First, they have no experience with or incentive to troubleshoot the most common and mundane problems as they are only after collecting the deductible. Secondly, today high- and low-end appliances fail regularly due to their design and parts quality. In a prior post, I also covered the intentional use of these by manufacturers.
As you may have just experienced an HVAC repair or are getting ready to put your house on the market for the early spring real estate rush, you may be thinking about adding a home warranty policy to your sale to sweeten the deal for a buyer. These home warranties have been a boon for the insurance industry because this segment grows 3.1% annually with two-thirds of the market being dominated by the two largest carriers. This incidentally corresponds with the decline of product warranty revenue manufacturers generate through extended coverage.
This is important to companies and consumers alike as they have an average 13.7% chance to incur a service visit for their home appliance based on a 2018 study. Even more shocking is the fact that this trend is getting worse and that these repairs occur in the first two years after purchase and many of those are within the one-year product warranty window. This also seems to be in line with a 5-year failure analysis study by Consumer Reports.
Failure by Design or Ignorance?
This brings me to ask two questions. First, is the product and service quality experience intentionally designed to be below expectations or just neglected in exchange for the latest features? Secondly, are whole product segments or specific companies with a wider-than-average expectation gap being financially punished for their (intentional) oversight? A recent academic study’s subjects seem to have been overly consumed with smart-home feature variety and ease-of-use but not much with the longevity of use.
In 1983, HBR published an article elaborating on the connection between product and service quality and why it is so intertwined with brand perception and success. It appears that little has changed in nearly forty years except for the digitization of many processes.
A recent PWC study found that the gap for services like airline tickets, cable service, etc. in terms of expected versus experienced can be as wide as 33%. The impact of this chasm is that companies or industries bucking this trend can charge a price premium of up to 16%.
As the consumer experience is rather easily transferable in today’s digital, same-day-delivery economy, companies need to bridge that gap increasingly faster. If an organization’s data infrastructure is not set up to collect and anticipate product failures, innovate into new product adaptations and learn from poor service experiences, B2B and B2C customers alike can quickly move on to alternative vendors or more costly channels. These customers also alert other customers and prospects about their experience, which creates a rapid downward profitability spiral.
A manufacturer or any other service-based organization has a difficult choice to make, no matter if it decides to close the expectation gap as a whole or only for select models or customer segments. There is an obvious cost difference but the underlying technology and process infrastructure span both approaches. Moreover, it can be easily scaled up or down depending on the strategy being used.
How to Become a Customer Satisfaction Leader
It ultimately requires a trusted customer experience. This starts with mapping an ideal customer journey and linking a clean customer profile to all interactions from campaign responses, surveys, quotes, orders and invoices to returns and recommendations on social media. Machine learning can certainly help with product suggestions and service packages to mitigate return and repair operations.
However, a harmonized product and service catalog in addition to an associate profile is also a must. It allows correlation of product defects and performance degradation to related factors taken from external (weather, etc.) and internal equipment sensors. The third dimension is the capture of service representative profiles and their performance from the first contact to resolution. Without it, cost-of-service comparisons and predictions on a per-model or per-customer segment cannot properly be measured. This will then allow companies to establish the right incentives and training plans to assure a better customer experience to reduce the bottom-line and grow the top-line by charging a premium price. Being recognized as a customer satisfaction leader is a huge PR success and cannot be underestimated.
This blog was originally posted on Forbes