Satisfaction Not Guaranteed

How cost-cutting can backfire when it ignites consumer rage. With tales of service shortfalls at Dell, Home Depot, and Northwest Airlines.

They have taken away your pillows, your peanuts, and your dignity. You have been sitting on the runway for three hours. The stale, cold air is giving you a headache, but you can't ask for a blanket, or even a bottle of whiskey, because they've taken those away, too. You look desperately to the flight attendant, one of the nods to service that hasn't yet been removed from the airplane, but somebody apparently hauled off his work ethic. You're met simply with a blank, soul-crushing stare.

The feeling of frustration provoked by rude service, long lines, ignored complaints, unanswered questions, and interminable phone delays is supposed to be a thing of the past. This is a golden age for consumers, right? It's the era that has spawned a 24/7 convenience economy dedicated to satisfying the time-pressed, hyper-informed, ever-demanding American public. But some companies haven't received that memo. What follows are three tales of customer service disasters at Home Depot (HD ), Dell (DELL ), and Northwest Airlines (NWAC ).

They operate in disparate industries, but each has fallen victim to a seductive fiction: that customer service and operational efficiency are mutually exclusive. For most corporate managers, numbers are friendly things. They are lucid and unequivocal benchmarks. Revenues up 3% this quarter. Good. Operating margins down 12 basis points. Bad. But customer dissatisfaction is not so easily measured. How do you account for the damage done by "When a customer is actively marketing against you, where does that show up on a P&L?" asks Robert G. Markey Jr., a partner with Bain & Co.'s customer strategy practice.

The upshot is that some companies, in their passion to drive down costs, have mangled their relationships with customers. The three meltdowns described here are all cases in which executives have lost track of the delicate balance between efficiency and service. "In the short term, most companies would say it is appropriate" to trade service for penny-pinching, says Valarie Zeithaml, a marketing professor at the University of North Carolina. "That is always a shortsighted view. It inevitably harms customer satisfaction in the long term."

Smart companies -- Southwest Airlines Co. and Costco Wholesale Corp., to name two standouts -- have it both ways. Well-trained workers equal fewer complaints. That means lower costs, a workforce free to make more sales, and happier customers willing to spend more money and tell their friends about it later.

The costs of short-circuiting that cycle are starting to become clear. Growth in same-store sales at Home Depot Inc. now lags far behind the much better liked Lowe's Cos. (LOW ). Things got so bad at Dell that in November, 3,000 callers a week to the company's helpline had to wait half an hour on hold before reaching a real person. And Northwest has continued to reach subterranean lows in airline service. The company that once left passengers locked in a plane on a runway for eight hours during a 1999 blizzard in Detroit has some customers practically begging competitors to start flying Northwest routes.

Each of the three companies is responding to its problems differently. Home Depot seems finally to realize that it needs to make a change; Dell, whose market share has already slipped, is trying to put the genie back into the bottle; and Northwest is in such a desperate fight for survival that it doesn't seem to care. While this trio struggles, savvy competitors are doing all the little things that make their stuff more fun to buy. Customer "experience matters," says Andy Fromm, president of the Service Management Group. "Most companies get it." Clearly, some still don't.

By Brian Hindo

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