Why Service Sucks

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Author Richard Worzel, C.F.A.
Date Published September 01, 2005
Original Publication IF Research

Poor customer service and what to do about it.

Have you ever gotten really lousy service, then wondered how the restaurant, phone company, Internet service provider, or store that gave it to you managed to stay in business? The answer, unfortunately, lies in Darwin's poorly understood theory of natural selection, driven by the rising tide of competition produced by globalization and technology.

You would think that rising competition would weed out the incompetent and the surly, whereas it seems to be multiplying them. And, perversely, there are also pockets of service excellence in odd places, like Wal-Mart's and Disney - global behemoths whom, you would think, could more easily get away with lousy service because they are so big. The answer to this riddle is that these seemingly contradictory trends actually harmonize to create the lousy service we experience too frequently today. To explain why, I'm going to have to take a detour in an unexpected direction.

My brother is a software wizard with a patent in an arcane field called genetic programming. His software mimics the process of natural selection to create software that evolves solutions that get better and better, and comes up with answers to difficult problems (with human guidance) substantially faster than people could on their own, and invents answers that might never occur to people because they involve weird or unexpected patterns. His company is currently doing work for pharmaceutical companies, helping them identify and prove new drugs faster and more cheaply than they could on their own.

In the process of inventing and patenting this software, he learned something that is not obvious about the way evolution actually works. Based on what he told me, Darwin's theory of natural selection shouldn't actually be described as the "survival of the fittest," but rather as the "extinction of the worst." The difference in emphasis seems picky, but it's actually of immense importance. Just for purposes of illustration, consider that survival of the fittest might mean that 90% would die off, and the best 10% survive, whereas extinction of the worst might mean the worst 10% would die off and the rest survive. In terms of the quality of service, this would mean that only the 10% of companies that are real stinkers die off, but that 90% of service providers get to stick around and keep serving us at their own levels of mediocrity. The result is that bad service on its own is usually not enough to kill a company.

Now let's look at the force that's driving service evolution: the steady, rapid rise in competition.

Most of the increase in competition comes from globalization combined with new ways of competing resulting from technological advances. Offering people more choices from more companies around the world means there's more competition for every sale - hence higher levels of competition overall as globalization kicks in. And technology offers people new ways of doing and getting things that have never been possible before, or have never been cost-effective before. Hence, the Internet means you can read news from all over the world without subscribing to the newspapers and magazines from which such news originates. And Amazon and Chapters offer millions of books without having to stock them all, so they can offer them to you at prices, including shipping, that are cheaper than the bookstore around the corner from your home.

The rising levels of competition that result from globalization and new technologies means that, to keep their customers, companies are forced to move out of the comfy rut of the way they used to do things. Many of them change by trying to cut expenses in order to cut prices. In the process, they wind up giving poorer service. Telephone companies are a prime example.

When phone companies were monopolies, there was a positive incentive for them to build big, expensive, reliable systems with lots of customer service people, because their regulators typically allowed a rate of return that was a percentage of their costs. The bigger their costs, the larger the dollar profit they made.

Now, though, in a deregulated environment, there are no rewards for building an expensive system. Indeed, the general public has shown, through their buying habits, that they will generally choose cheaper phone service over more reliable phone service (think, especially, of cell phones). And phone service that's cheaper than your rivals comes, up to a point, by skimping on customer service; jamming bills with things that your customers may not have asked for, but then again, never refused either; and by cutting back on the reliability of their networks. And this works for a time - at least until you reach the bottom of the Darwinian pile, where you are worse than enough of your competitors that you go out of business, at which point you stop bothering people with your lousy service.

Of course, companies are living organisms and respond to pain. If they see that their sales are being seriously hurt by lousy service, they'll spruce themselves up, and announce a "bold, new customer-comes-first initiative" that may persuade enough people to stay that they avoid being trashed - at least for a while. It also means their customers will get mildly better service for a while, although still not the level of service they might want.

So for the average service provider, rising levels of competition generally means that giving lousy service becomes a way of business.

But does it have to be extinction of the worst that rules, rather than survival of the fittest? Generally speaking yes. First, the best 10% of providers couldn't serve everyone in every market and every niche. There's room for a lot of competitors in a global market. In automobiles, for instance, Toyota, which is often identified as building the best mass-production cars, is straining to achieve 15% of the market. So companies generally aren't big enough to provide great service to enough of a global market.

And in the second place, if they did, they would almost certainly become complacent, and start acting like monopoly providers. My big beef with Microsoft, for instance, is that I think they could do so much better than their current offerings with the resources they have. But they are one of the rare companies that has enough of the marketplace that they can afford to sit back and turn out what are, in my opinion, mediocre products. The few times when they've been truly spurred by competition, as with web browsers, they've produced outstanding products, like the original Internet Explorer. The rest of the time, the world has to settle for whatever Microsoft chooses to produce, no matter how mediocre it may be compared to what it could be.

So, because of competitive pressures, the enormous size of the global market, and the natural tendency for successful big companies to move towards mediocrity, business runs according to the true Darwinian law: extinction of the worst.

So that's why service sucks; not enough bad companies die off. But what can we do about it? Unfortunately, there are no new answers here, but there may, perhaps, be some useful insights.

First, don't accept bad service. If you get poor service, point out what's wrong and what you'd rather have. This is generally a low-satisfaction game. When my wife and I have done this, the answer we often get is, "Well, no one's ever complained before!" This may be true, in which case it means that consumers can't be bothered and just walk away without the hassle of providing feedback. Try to provide the feedback in a non-threatening, non-confrontational way, as if you were advising a friend on how they could get more business. That may make it easier for a service provider to listen. Fairmont Hotels responded positively when I sent them some criticisms, and we wound up in an extended dialog that, I believe, benefited both sides. Acting angry and hostile when you get bad service may be warranted, but it will also tend to get your message ignored. If you've provided feedback and still don't get good service, stop patronizing them, and be sure to tell your friends.

Next, avoid bad service providers, even if it means doing something or going somewhere inconvenient. If you raise the bar, it may mean that collectively we can increase the extinction of the worst to 20% from 10%, which may cause the rest of the herd to smarten up as well.

More constructively, it's important to tell people what you like when you get good service, and be specific so they can do more of it. In the service industries, the highest form of praise is generally silence. Good service is what we expect, so when we get it, we take it for granted. But as I've just said, good service is an exception, not the rule, so when you encounter it, compliment the service provider, and tell others about your experience. Help build the reputation of good service providers.

Extinction of the worst as a rule also holds important lessons for companies that want to thrive in a global economy - but I'll deal with that in the second part of this article.

© Copyright, IF Research, September 2005.

Re-printable with permission.