Customer expecations; what to do?
Discussion
OK, so the gurus will say you should set out to exceed expectations, but my problem is the opposite way around:
We offer a service whereby we process and shortlist job applications on behalf of large organisations on either a 7 or 15 working day service. They pay a premium of about +50% for using the 7 day service as we have to 'walk' those applications through what is normally a quite automated process.
We were warned by another supplier when we started the service that the customers would try to pressurise us into delivering early and this has proved to be the case. On the 15 working day service they start ringing up from about day 9 to 'just check that things are progressing to plan', and then starting to give sob stories about the pressure they are under and is there any chance they will be ready a little earlier. We were warned that if we gave in to this, next month they would ring on day 8, then day 7 etc. and to a certain degree this has tended to be the case when we relent and deliver early. There is also a risk that they pay for a 15 day service and get something close to a 7 day service at the lower price and this undermines the more profitable 7 daty service. When we have delivered early to help them out it has meant rushing the necessary QA checks and the only times that we have had significant errors slip the QA have been when we have been doing them this favour of early delivery of 15 day results (although you wouldn't think we had done it at their request when they called to point out the errors).
So, at the moment , even if work is complete we sit on it until the due date so that customers know exactly when it will arrive and we don't get them pressurising us to deliver early. Usually the pressure is because they have failed to plan properly (or at all) or they have had too few people pass shortlisting and have re-advertised. I have not wanted to let them feel that we will work without aditional fees to make up for their slack planning and organisation, for fear they will make al of their problems ours. Very rarely they will call asking if we can switch a batch from the 15 to the 7 day service and with a bit of running around we have done this and increased the profits. We used to get much more use of the 7 day service when the premium was only 20% but the level of use meant we couldn't ensure the QA so we increased prices to manage demand. This feels a bad thing!
The piles of waiting boxes and the fact that recently we have managed to introduce a quicker system in-house would suggest that we can now deliver sooner than the 15 days without the costs and inconvenience of 'walk through' of urgent batches. It occured to me that we might think about making the standard service 11-12 days or introducing an intermediate service at 10-11 days attracting a smaller (25-30%) premium and increasing our margins. This might give them a middle ground, where they could switch from the 15 to the 11 day service and pay the smaller extra charge, when in fact we could probably then just quickly buy in the urgent QA.
So, my questions;
It feels to me like we could deliver better service by not sitting on results, and this makes me feel guilty that we are not doing all we could to make this part of the business successful. Should we 'give away' the better service or introduce an intermediate service at a smaller premium?
But how can we do this without the customer expectations starting to creep up to the point where we are back to them presurising us and effectively getting the 11 day service for the price of the 15, or the 7 day for the price of the 11 day? The narrower the service bands, the more I think they will pressurise us for early results.
A couple of things...
Thinking out of the box, the issue here is not performance per se, but perception of performance and how this meets their deadlines.
The way it is set at the moment, is that the pressure is set upon yourselves.
For example, in my business we have a 'production turnarounds' which is typically a leisurely 7 days. If we really need to we can do it in 2 days. Of course when it gets busy and jobs stack up, we do the best we can and try not to disappoint.
However, we tell customers the turnaround time is 21 days *after* they have fulfilled everything they need to send to us and their end is complete.
Thus, in usual situations we can turnaround in less than half than the standard time. This helps when for example there is a problem outside our conrtol which adds 7 days to the schedule. If we has told the customer 7 days, and we took 14, we would be a very bad company in their eyes, and produced a disappointing result. Alternatively, some people ask for a favour and cut the 21 days to 10... Which we can also comfortably do without pushing the boat out... we look good again.
In your situation, the companies are obviously under a tight deadline, and of course time is money so they put the pressure on you. As the moment, you charge more for a premium service, and no doubt the clients idea is to get the best value and go for the cheaper option... then when they realise they have not allocated enough time, put the pressure on you to overperform to the same cost.
What about if you made the 7 day the standard, and gave a 'discount' on the longer turnarounds? Effectively the other way around?
Then if we imagine someone who was currently on the 9th day to get you to perform on the 11th rather than the 15th, it would mean that they would lose some of 'their' discount. Now when the added pressure bites them financially instead of you they may think a bit more 'unilaterally' before asking you to perform quicker. Secondly, if they do you are effectively making them pay extra for it, keeping your margin up!
Although this may or may not be done at the moment, a good old 'order form' although old fashioned is a great way of focussing their mind, getting your terms in writing, AND making you more money.
In that, you can 'sell' the premium services and get them to agree in writing what service they want and will expect. Although of course there is no added legality, it seems subconsciously that when things are in writing they are thought about more, then just decided over the phone. Thus, I would guess that you would get a lot less problems with them going back on their original expectations. Thus this may be even more of an impetus to go for the premium service 'just in case'.
Believe it or not the 'order form' or whatever you want to creativiely call it *does* make a difference. This year, just by reorganising my price list in such a way which subconsciously focusses the eyes on the higher value unit costs - yet making those prices look more attractive due to psychological pricing and the human need for 'round numbers' I have increased order sizes by around 10% this year.
Thinking out of the box, the issue here is not performance per se, but perception of performance and how this meets their deadlines.
The way it is set at the moment, is that the pressure is set upon yourselves.
For example, in my business we have a 'production turnarounds' which is typically a leisurely 7 days. If we really need to we can do it in 2 days. Of course when it gets busy and jobs stack up, we do the best we can and try not to disappoint.
However, we tell customers the turnaround time is 21 days *after* they have fulfilled everything they need to send to us and their end is complete.
Thus, in usual situations we can turnaround in less than half than the standard time. This helps when for example there is a problem outside our conrtol which adds 7 days to the schedule. If we has told the customer 7 days, and we took 14, we would be a very bad company in their eyes, and produced a disappointing result. Alternatively, some people ask for a favour and cut the 21 days to 10... Which we can also comfortably do without pushing the boat out... we look good again.
In your situation, the companies are obviously under a tight deadline, and of course time is money so they put the pressure on you. As the moment, you charge more for a premium service, and no doubt the clients idea is to get the best value and go for the cheaper option... then when they realise they have not allocated enough time, put the pressure on you to overperform to the same cost.
What about if you made the 7 day the standard, and gave a 'discount' on the longer turnarounds? Effectively the other way around?
Then if we imagine someone who was currently on the 9th day to get you to perform on the 11th rather than the 15th, it would mean that they would lose some of 'their' discount. Now when the added pressure bites them financially instead of you they may think a bit more 'unilaterally' before asking you to perform quicker. Secondly, if they do you are effectively making them pay extra for it, keeping your margin up!
Although this may or may not be done at the moment, a good old 'order form' although old fashioned is a great way of focussing their mind, getting your terms in writing, AND making you more money.
In that, you can 'sell' the premium services and get them to agree in writing what service they want and will expect. Although of course there is no added legality, it seems subconsciously that when things are in writing they are thought about more, then just decided over the phone. Thus, I would guess that you would get a lot less problems with them going back on their original expectations. Thus this may be even more of an impetus to go for the premium service 'just in case'.
Believe it or not the 'order form' or whatever you want to creativiely call it *does* make a difference. This year, just by reorganising my price list in such a way which subconsciously focusses the eyes on the higher value unit costs - yet making those prices look more attractive due to psychological pricing and the human need for 'round numbers' I have increased order sizes by around 10% this year.
I have experienced these sorts of issues many times and there are no clear cut answers however justinp1 makes some good points here...
For me this comes down to how much the customer values you and vice versa... if they are a good customer with potential for future business then do them a favour.. if not then stick to your guns...
The key for me is that if you are going to do them this favour, make sure you get something in return... longer term commitment, future business, references to other customers etc... if the customer is not up for this then the balance of the relationship is all wrong and you are in for a hiding (if not now at some point in the future)
Another tactic I have seen in the past is to make the process of providing a quicker service official by allowing a customer a number free 'upgrades' to be used for genuine panics and once these are used up then they must purchase a block of credits to be used in the future... obviously not all business models fit this but it could be worth a try.
Cheers
Norb
For me this comes down to how much the customer values you and vice versa... if they are a good customer with potential for future business then do them a favour.. if not then stick to your guns...
The key for me is that if you are going to do them this favour, make sure you get something in return... longer term commitment, future business, references to other customers etc... if the customer is not up for this then the balance of the relationship is all wrong and you are in for a hiding (if not now at some point in the future)
Another tactic I have seen in the past is to make the process of providing a quicker service official by allowing a customer a number free 'upgrades' to be used for genuine panics and once these are used up then they must purchase a block of credits to be used in the future... obviously not all business models fit this but it could be worth a try.
Cheers
Norb
Some observations from what you've said:
1) Quality is compromised if a job is accelerated (promised on one timescale, later requested to be pulled forward). From the sound of it, that might even apply if they pay the premium to have it upgraded mid-process (I'm thinking in a sense like asking the Royal Mail to upgrade a letter to First Class after you've actually posted it) - I'm guessing that the later the request for upgrade, the further it is inot the process, and the bigger the risk. It is logical that you need to dissuade clients from requesting any acceleration, whether or not they pay for it.
2) How competitive are your 7 & 15-day turnarounds (and your proposed 12-day service), in terms of both coast and time? If 15 days is no longer competitive, you would need to consider addressing that first.
3) What percentage of business is at the 7-day, +50%premium rate. What was it when the premium was +20%.
4) How well are you communicating progress and deadlines? I suspect you have a kan-ban system, with all the paperwork sitting on your desk before you can start work. Once one stage of work is complete, the parcel moves to the next stage with a marker stating the deadline for the next phase to be completed: process control leads to quality.
Do your clients realise that the clock only starts ticking when the parcel is sitting on your desk? Of course they are taking slight liberties, we all do. But it might be appropriate to communicate job status more clearly. Perhaps an email confirming receipt: "Parcel logged-in: 14:00, 21/09/07, Service: 15-day, Delivery: am 6/10/07"
5) The nature of your service is that you need to provide guarantees, of both quality and time. What is important is not when it arrives, but that it arrives before a specific deadline, signed-off as satisfactory. You need to leverage the importance of that word guarantee. It enables you to say no. It enables you to justify the premium rate (because you had to use a courier rather than the Royal Mail).
6) You need to communicate (subtly) that acceleration is a major problem for you, and a quality risk for them. You need to make it easier for them to select the correct service, and recognise the implications of their decision. If they buy the 15-day service, they have to assume delivery after 15 days.
Proposals:
1) justin's idea of reversing your structure (running a discount scheme for low-priority, rather than a premium scheme for high priority) certainly has merit, and is worth investigating.
2) I would consider upgrading your regular service to 14-day guaranteed "as a result of process improvements". This opens an opportunity for a positive communication with your clients.
3) I would also consider revising your premium rate. First on a business-case: a smaller premium might generate more custom, more than compensating in revenue. Secondly on a process-case: can you accommodate more premium jobs. Thirdly, it also opens up a communication with your clients that allows you to highlight the problems of acceleration
4) I would recommend three layers of communication.
"Statement of terms"
You are basically saying that 15 days means 15 days. If clients have a deadline, they have to tell you. You will not compromise your final QA. Deadline changes may not be possible at all, once the job has begun processing.
"Order & Confirmation"
Rather than having the clients write "7" or "15" on the order form, have you considered adding the option of a deadline date? I can see that sometimes I would choose a service, but at other times I would want you to fit to my schedule - I want it by Friday week, you decide whether you can do it in 14 days, or whether you have to charge me the 7-day rate.
As already stated, I would suggest a formal confirmation as well. "Package received @___. Will be returned no later than ___. Issues are...(e.g must be at 7-day rate, purchase order not received, one document missing which must be received by noon today, etc.), please contact me immediately if you have any issues"
I would also suggest clarifying what delivery means. To me it would mean on my desk no later than 9.00am on the due date, not 5.30pm.
This is a subtle reminder, time after time.
"Responding to pleas for acceleration"
Have a story ready for those phone calls. Do you have a tracking system so you know which department a job is in, when it is due for release? You can then say IF a job can be accelerated or not, HOW MUCH it can be accelerated by, IF you have to charge the premium. You need to be able to say confidently that a job cannot be accelerated (reason: I cannot get the job into final QA, and therefore I would not be able to guarantee the quality), or that you can accelerate it and set a new delivery deadline. If that commitment cannot be made confidently, staff must take it away to investigate and formally reply.
Whatever happens, you should always confirm the new agreement with an email:
- Order was ___. Is now ___
- I cannot guarantee meeting your request. I can guarantee these new terms
So coming back the "Statement of Terms" I would suggest a letter to all Clients, broadly along the lines of:
- We know you are working to deadlines. We have to try to work to your deadlines, not ours.
- So we have imporved our processes. This has enbabled us to...
- If you have a deadline, you can now include it on your order.
- Deadline means it will be with you by ___, guaranteed.
- We will always confirm your order, including a guaranteed delivery time.
- We appreciate deadlines can change. If they do, call us immediately. We cannot always guarantee to meet your new schedule. We should be able to tell you immediately, but we guarantee a formal commitment within 3 hours.
HTH
1) Quality is compromised if a job is accelerated (promised on one timescale, later requested to be pulled forward). From the sound of it, that might even apply if they pay the premium to have it upgraded mid-process (I'm thinking in a sense like asking the Royal Mail to upgrade a letter to First Class after you've actually posted it) - I'm guessing that the later the request for upgrade, the further it is inot the process, and the bigger the risk. It is logical that you need to dissuade clients from requesting any acceleration, whether or not they pay for it.
2) How competitive are your 7 & 15-day turnarounds (and your proposed 12-day service), in terms of both coast and time? If 15 days is no longer competitive, you would need to consider addressing that first.
3) What percentage of business is at the 7-day, +50%premium rate. What was it when the premium was +20%.
4) How well are you communicating progress and deadlines? I suspect you have a kan-ban system, with all the paperwork sitting on your desk before you can start work. Once one stage of work is complete, the parcel moves to the next stage with a marker stating the deadline for the next phase to be completed: process control leads to quality.
Do your clients realise that the clock only starts ticking when the parcel is sitting on your desk? Of course they are taking slight liberties, we all do. But it might be appropriate to communicate job status more clearly. Perhaps an email confirming receipt: "Parcel logged-in: 14:00, 21/09/07, Service: 15-day, Delivery: am 6/10/07"
5) The nature of your service is that you need to provide guarantees, of both quality and time. What is important is not when it arrives, but that it arrives before a specific deadline, signed-off as satisfactory. You need to leverage the importance of that word guarantee. It enables you to say no. It enables you to justify the premium rate (because you had to use a courier rather than the Royal Mail).
6) You need to communicate (subtly) that acceleration is a major problem for you, and a quality risk for them. You need to make it easier for them to select the correct service, and recognise the implications of their decision. If they buy the 15-day service, they have to assume delivery after 15 days.
Proposals:
1) justin's idea of reversing your structure (running a discount scheme for low-priority, rather than a premium scheme for high priority) certainly has merit, and is worth investigating.
2) I would consider upgrading your regular service to 14-day guaranteed "as a result of process improvements". This opens an opportunity for a positive communication with your clients.
3) I would also consider revising your premium rate. First on a business-case: a smaller premium might generate more custom, more than compensating in revenue. Secondly on a process-case: can you accommodate more premium jobs. Thirdly, it also opens up a communication with your clients that allows you to highlight the problems of acceleration
4) I would recommend three layers of communication.
"Statement of terms"
You are basically saying that 15 days means 15 days. If clients have a deadline, they have to tell you. You will not compromise your final QA. Deadline changes may not be possible at all, once the job has begun processing.
"Order & Confirmation"
Rather than having the clients write "7" or "15" on the order form, have you considered adding the option of a deadline date? I can see that sometimes I would choose a service, but at other times I would want you to fit to my schedule - I want it by Friday week, you decide whether you can do it in 14 days, or whether you have to charge me the 7-day rate.
As already stated, I would suggest a formal confirmation as well. "Package received @___. Will be returned no later than ___. Issues are...(e.g must be at 7-day rate, purchase order not received, one document missing which must be received by noon today, etc.), please contact me immediately if you have any issues"
I would also suggest clarifying what delivery means. To me it would mean on my desk no later than 9.00am on the due date, not 5.30pm.
This is a subtle reminder, time after time.
"Responding to pleas for acceleration"
Have a story ready for those phone calls. Do you have a tracking system so you know which department a job is in, when it is due for release? You can then say IF a job can be accelerated or not, HOW MUCH it can be accelerated by, IF you have to charge the premium. You need to be able to say confidently that a job cannot be accelerated (reason: I cannot get the job into final QA, and therefore I would not be able to guarantee the quality), or that you can accelerate it and set a new delivery deadline. If that commitment cannot be made confidently, staff must take it away to investigate and formally reply.
Whatever happens, you should always confirm the new agreement with an email:
- Order was ___. Is now ___
- I cannot guarantee meeting your request. I can guarantee these new terms
So coming back the "Statement of Terms" I would suggest a letter to all Clients, broadly along the lines of:
- We know you are working to deadlines. We have to try to work to your deadlines, not ours.
- So we have imporved our processes. This has enbabled us to...
- If you have a deadline, you can now include it on your order.
- Deadline means it will be with you by ___, guaranteed.
- We will always confirm your order, including a guaranteed delivery time.
- We appreciate deadlines can change. If they do, call us immediately. We cannot always guarantee to meet your new schedule. We should be able to tell you immediately, but we guarantee a formal commitment within 3 hours.
HTH
Some great ideas there folks.
I will take a bit of time to read it in detailsand discuss them with my business partner.
Things tend to be a long time planing as the clients set budgets 6-9 months in advancce so changing prices/services takes some adavance notice to them. Having said that we gave 12 months notice of a 16% price increase from 1/4/7 , and they were happy with that (probably forgot we were going to do it!).
Gassing Station | Business | Top of Page | What's New | My Stuff