Small Business

Productivity / Small Business — No Comments
7
Nov 09

Sandbagging

http://www.flickr.com/photos/chaimann/ / CC BY-NC-SA 2.0

A few weeks ago I took my car to the dealer for an oil change and the clerk promised it would be ready in about 1 ½ hours. Once the car was ready, he presented me with a questionnaire which asked, among other things, if the car was delivered within the promised time frame. The answer was yes, or course, but the promised time frame was 1 ½ hours, or about 1 hour more than it should really take. Sandbaggers.

Four years ago, after hurricane Wilma hit South Florida, FPL advised us that full restoration of power could take four weeks. Eighteen days later (ahead of schedule, of course) full power was restored. Sandbaggers.

Perhaps the ultimate sandbaggers are Wall Street guys, who insist they deserve bonuses in spite of piling up billions of dollars in losses (because if it weren’t for them the losses would be much greater, of course). Sandbaggers.

Setting low ball goals breeds a culture of complacency and underachievement. Setting two types of goals, regular (easy) and stretch (hard), is also counterproductive, because it allows us to claim victory even if the stretch goals are not achieved.

Every goal should be a stretch goal. Stretch goals should be hard, but achievable, and should require us to exercise creativity and effort above and beyond the call of duty. If you want to instill a culture of performance, always set stretch, ambitious goals and give people the guidance, tools and support to achieve them.

Customer Service / Productivity / Small Business — 2 Comments
13
Sep 09

Are you rewarding your most profitable customers?

Photo Credits: Kevin H
I recently went online to buy a couple of tickets for a show and got slapped with a $7.75 per ticket “convenience” charge. If I had bought the tickets at the theater’s ticket window I would have avoided the convenience charge.

That episode let me thinking: who’s convenience are you really paying for?

Let’s see: by ordering online you do all the work (you don’t need an expensive human to interact with you), and the theater receives your payment hassle-free through your credit card company. If you buy from the ticket window, on the other hand, the theater has to pay an employee for several days, balance the cash register at the end of each day, deposit cash payments in the bank, etc.

Yet, those who buy online are the ones paying the convenience charge…

Why is that so? I think it is in part because most people still consider buying from the ticket window the normal thing to do-the way things have always been. It is probably for that same reason that banks are still reluctant to charge customers for conducting business through a teller, but instead have no problem charging outrageous fees to those who get money through an ATM. Without going out on a limb, we could also argue that governments act the same way when they decide to raise taxes instead of finding ways to spend less and more productively.

For those who apply that logic, in the short term everything looks fine: convenience charges increase the theater’s revenue per guest, banks can “invest” the ATM fees in expensive lobbies and nice desks for their officers, and government bureaucrats can get easy money to finance ineffective social programs.

In the long term, however, things won’t necessarily look that good. Theater operators may start to wonder why are there so many empty seats, traditional bankers may finally start to pay attention to those pesky online banks that are stealing their business, and politicians may soon find out that the same people who pay their salaries can also boot them out of office.

Businesses should use pricing to reward the most desirable customer behaviors.

If a customer interacts with you in a way that reduces costs and results in a more efficient operation, that behavior needs to be rewarded. For example:

  • You could charge less for an ebook than you do for a real book (which requires paper, ink and complicated logistics).
  • You could offer free shipping to those who increase their order size.
  • You could offer a discount to those who put your service on automatic payment or pay you in advance.
  • You could give a better price or an internet-only freebie to those who purchase from you online.
  • Etc.

Incentives drive behaviors. Make sure you reward your most profitable customers.

What’s your take?