The Real Cost of Poor Quality

It’s one thing to have a quality problem but the way you address it can make all the difference in the world.

You may have heard that Wal-Mart is trying to compete with Amazon in online shopping. They are offering features like in-store pickup, short lead-times and free shipping. I thought I would take a chance and try them out. I found a set of two acacia wood outdoor chairs with a five-star rating and I ordered them. I assumed the chairs would require assembly and I was ready for it.

The package arrived ahead of schedule and I was impressed. I was also impressed with the quality of the chairs. The wood was finished to perfection, the cushions were well-made and the construction of the chairs was substantial and sturdy. The assembly instructions were clear and written in perfect English. I was ready to go.

This is when the problems began.

Each chair was missing one critical structural part which made it impossible to complete the assembly. Fortunately, there was a phone number for the manufacturer and instructions to call if there were any problems. I called them right away and they picked up.

The call center was off-shore, but that was OK. What wasn’t OK was that they required all the Wal-Mart ordering details before they would even help me. This was frustrating but after searching through e-mails and paperwork, I finally found the number they needed and reported the problem.

After being placed on hold for what seemed like an eternity, the support associate told me that they didn’t have the parts and they couldn’t send them to me. I was surprised by the response and suggested that they go to the warehouse and open a complete box and send me the missing parts. I was placed on hold again. When he came back he said they would not be able to do that. I asked him what I should do with these chairs and I was placed on hold again.

After another long delay, he offered me a $20 discount if I just bought the parts on my own. I was confused and asked him where I could buy these parts. He suggested going to Home Depot and buying a piece of wood to manufacture the replacement parts myself.

I was shocked by this answer and I offered the following observations to the young man on the phone. First, I wasn’t sure if Home Depot sells acacia wood. Second, I have no idea what these parts actually look like. Third, if I could carve chair parts out of solid wood, I probably wouldn’t be buying chairs from Wal-Mart. I asked him for another option and I was placed on hold again.

After another long delay, the associate offered me a $40 discount if I just “made” the parts on my own. This just seemed like a desperate response from a company that didn’t really have a plan for a missing part. I told them their options were unacceptable. I was placed on hold again.

This was the longest delay of the phone call. Eventually, he returned and told me they would send two replacement chairs and I could keep the other chairs. Yes, that is correct. They couldn’t send me the replacement parts from a box in the warehouse but they could send me the complete box.

This was probably one of the most bizarre support calls I had ever made and there are some interesting lessons here about the real cost of quality.

Make sure your quality is right. Getting things wrong costs money and a loss of goodwill with your customers. It is mission critical to do whatever it takes to make sure your products are right the first time, every time.

“Quality is never an accident. It is always the result of intelligent effort.” – John Ruskin

Have a plan when things go wrong. If things go wrong, have a plan to take care of the customers. Make things easy for them because they are already frustrated. Make sure your processes don’t create more irritations. Be genuine, apologetic and generous in your solutions to fix the problem.

“Quality is free. It is not a gift, but it is free. What costs money are the ‘un-quality’ things – all the actions that involve not doing jobs right the first time.” – Phillip Crosby

Listen to your customer’s suggestions for solving the problem. Your customer may have a solution to fix the problem that is better than your plan. Listen to them and do what you can to accommodate their requests. Give your support teams the authority and flexibility to go above and beyond for customers.

“Customers don’t expect you to be perfect. They do expect you to fix things when they go wrong.” – Donald Porter

In the end, the combination of poor quality, poor planning and poor support is deadly. The real cost of poor quality is leaving your customers feeling confused and frustrated. And frustrated customers look to your competitors for their next purchase. I don’t think Wal-Mart is ready to compete with Amazon yet. In my opinion, they still have a lot of work to do. I think I’ll stick with Amazon for the time being.

If you are looking to improve quality and create a workplace culture where employees are absolutely obsessed with customer service, I recommend this book: The Service Culture Handbook by Jeff Toister.

{Photo credit: IKEA}

Learning to Love Customer Complaints

Bob wasn’t happy. The product we designed specifically for him didn’t fit. After months of work creating a special component, we failed. The unit wouldn’t mount properly in the cabinet and Bob was questioning our abilities as engineers.

On the phone, we discussed various options to fix the problem until Bob exploded. He said, “You know what I want you to do? Give me a product that works!” It was pretty clear we had missed the mark.

As a team, we were devastated. This was a big customer and an important project and we had failed completely. Bob was already talking about going to the competition. We were emotional. We were mad at Bob, mad at ourselves and frustrated. It wasn’t fair.

“There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.” – Sam Walton

This story plays out every day in companies across the country. Stuff happens and customers don’t get the products or services they expect, so they complain. But that’s not the end of the story. It’s how you respond to that complaint and what you do with this information that determines how customers feel about your business.

It’s no surprise that improving customer satisfaction is good for business. Business coach and author, Rick Conlow, points to four studies that show the benefits to be gained from an improved customer experience:

  • According to Harvard Business Review, a 1.3% improvement in customer satisfaction scores results in a revenue increase of 0.5%.
  • The Profit Impact of Market Strategy’s database found that companies who lead in service have 12 times the profitability and 9% greater growth than poor service providers.
  • Bain & Co. found that a 12-point increase in the net-promoter score doubles a company’s growth rate.
  • A report by the American Customer Satisfaction Index proved that the leading companies consistently outperformed the market. Customer service leaders outperformed the Dow by 93%, the Fortune 500 by 20% and the NASDAQ by 335%.

In my experience, the best data on customer satisfaction is the customer complaint. Complaints are real. They are visceral. They provide a real-time, raw and genuine view of the customer experience. They are unfiltered, emotional and vitally important to the future success of your organization. That’s why they are so valuable.

“Your most unhappy customers are your greatest source of learning.” – Bill Gates

Complaints are like gold. They are nuggets of truth that can help your organization in several ways:

Customer complaint data can provide a window into the customer experience. A simple system to capture customer complaint data can provide valuable insight into how well the company is performing. Are complaints trending up or down? How quickly are problems being solved? What products are creating the most complaints? Which type of customers are complaining the most? Reviewing complaint data on a regular basis will help companies better understand how their business is performing and where action is needed to make improvements.

Customer complaint data can help pinpoint systemic problems. Data from customer complaints can help identify underlying problems, common failure modes and systemic issues affecting the organization. Over time, complaint data trends can reveal problems companies didn’t even know existed. Simple trending and pareto analysis by product, customer, type of complaint, department or even employee can help reveal these underlying problems. Seeing the data will help companies identify root causes and solve problems permanently.

Customer complaints help foster a customer-focused culture. When complaints are seen as a valuable source of critical business information instead of a problem, the culture begins to change. Making it a business priority to resolve complaints quickly and using the data to solve underlying problems immediately adds the “voice of the customer” to business processes. This culture can be further reinforced by communicating improvements and celebrating successes.

“In today’s world, meaningful differences between businesses are rarely rooted in price or product, but instead in customer experience.” – Jay Baer

You might be wondering what happened to Bob. As it turned out, we figured out what the problem was and we developed a simple method to fix it in the field. We then sent our best mechanical engineer on the next flight out to take care of the problem.

While our engineer was still on site addressing the issue, Bob sent us another order that was three times larger than the first order. He said that he was incredibly impressed with how we handled this situation. In the end, he was happy and rewarded our efforts with more business.

“Happy customers are your biggest advocates and can become your most successful sales team.” — Lisa Masiello

This is why I’m learning to love customer complaints. They are raw, emotional and uncomfortable but they are also a window into the customer experience. They are nuggets of truth that can help you refine your customer experience, improve your performance and grow your business.

To learn more about embracing complaints, I recommend reading Hug Your Haters: How to Embrace Complaints and Keep Your Customers by Jay Baer. In this book, Baer explains how, where and why customers complain. Baer shows there are two types of complainers, each with very differ­ent motivations and each needing a different approach.

Offstage haters. These people simply want solutions to their problems. They don’t care if anyone else finds out, as long as they get answers.

Onstage haters. These people turn to indirect venues, such as social media, online review sites and discussion boards to share their frustrations. Onstage haters want more than solutions, they want an audience to share their pain.

Death of a Business: The Problem with Choosing the Wrong Strategy

“The essence of strategy is choosing what not to do.” Michael Porter

When I was a kid in the 1970s there was only one place to go for good fast-food fish and chips. And you didn’t have to go far to find it. Arthur Treacher’s Fish & Chips had more than 820 restaurants across the country in the mid-70s. They were one of the great fast-food success stories and offered a tasty alternative to the burger chains.

I was thinking about them the other day. I realized I hadn’t seen one of their restaurants in years. I wondered what ever happened to them. Thanks to Google, I found an interesting article which described their fate.

The article explains a perfect storm of events that hit Arthur Treacher’s in the late 1970s: There was intense competition with other fast-food chains and the price of cod had skyrocketed due to a fishing dispute between Iceland and Great Britain.

The company was sold to Mrs. Paul’s Seafood in 1979 and that’s when the problems magnified. In order to stay competitive, executives at Mrs. Paul’s Seafood decided to replace cod with a less expensive fish, pollock. This one decision marked the beginning of the end of the company.

To be fair, many types of fish are used to make fish and chips, but the most popular fish used in traditional British fish and chips is cod. More than 60% of all fish and chip meals sold in the UK feature cod. Americans like their cod as well and they didn’t like the change at Arthur Treacher’s.

Throughout the 1980s, Arthur Treacher’s lost many loyal customers, went through several owners and quickly lost ground to competitors. Before long, hundreds of locations were shut down. Today, there are just seven stores, with only four operating exclusively as Arthur Treacher’s.

“However beautiful the strategy, you should occasionally look at the results” Winston Churchill

How do you take a successful restaurant chain from more than 820 locations to only 7 in less than a decade? You choose the wrong strategy.

When businesses are faced with challenges, like Arthur Treacher’s in the late 70s, they need to act quickly. Management often looks for a swift and simple solution. On paper, the idea of replacing cod with pollock seemed to make sense. The company would save money and no one would know the difference. The problem was that customers did know and they didn’t like the change.

What made Arthur Treacher’s special was the authentic taste of cod in their fish and chips. Removing that took away the company’s uniqueness. Implementing the cost-cutting strategy actually stripped away their competitive advantage.

In 1985, Harvard Business School professor Michael Porter wrote the popular business book, Competitive Advantage: Creating and Sustaining Superior Performance. There, Porter outlined the three primary ways companies can achieve a sustainable advantage. They are cost leadership, differentiation and focus. Cost leadership means you provide reasonable value at a lower price. Differentiation means you deliver better benefits than anyone else. Focus means you understand and service your target market better than anyone else.

Executives at Mrs. Paul’s Seafood chose cost leadership as a strategy when they should have considered differentiation or focus. They had a business model that was already different and special. They had a loyal customer base that liked their product. There was room in the market for an alternative to the burger chains. They chose the wrong strategy which led to the rapid decline of this once popular brand.

As a business leader, you will be faced with many similar challenges. When competitors are lowering prices, your first reaction may be to match their actions to try and take over the cost leadership position. But that isn’t the only answer.

Porter shows us there are other ways to compete and maintain a competitive advantage as well. Like Arthur Treacher’s, our businesses are unique and special. We can leverage that uniqueness to deliver better benefits than anyone else with a differentiation strategy or we can service our target customers better than anyone else with a focus strategy. In the end, it is important to look at all possible solutions to choose the right strategy. Choosing the wrong strategy can have deadly consequences.


If you liked this post, you’ll love my new book, All in the Same Boat: Lead Your Organization Like a Nuclear Submariner.

You can find it HERE or on Amazon.