Archive for January 26th, 2009

Quick Takes from the Weekend … Geithner, Stimulus, Infrastructure

January 26, 2009

Is it just me, or is this stuff getting nuttier and nuttier by the day?

The very same people who are railing that the TARP hasn’t worked (I agree), say that Geithner (one of the plan’s key architects) needs to be confirmed because he’s the best man for the job (really?) and provides needed continuity (for a plan that they say isn’t working).  Huh?

Geithner — who will head IRS as Treasury Secretary — testified that he does his own  taxes using TurboTax (that’s good, I guess) and blames the software package for not prompting him that he needed to pay self-employment taxes.  And not a single Senator burst out laughing.

I really do think that cheating on your taxes is disqualifying for a job heading up the IRS.

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The Congressional Budget Office says that less than 25% of the proposed stimulus package will impact 2009.

Geithner’s answer: 1/3 are refundable tax credits.  When it was pointed out that less than 12% of last year’s tax rebate checks provided any stimulus to the economy, Geithner replied “yes, but that will just be the first installment of a continuing program that (candidate) Obama promised the people”.  So, if it doesn’t stimulate, why’s it in a stimulus package?

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Conservative critics are having a field day with some of the specifics, e.g. “aid to contraception clinics”.  An administration spokesperson said that part of the stimulus plan is geared to rebuilding the U.S.  infrastructure … and that the infrastucture is both physical (like bridges) and social.  Talk about Trojan horses. 

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On the plus side, critics are opposed to the gov’t replacing much of its auto fleet with new cars.  I like that idea since it’s immediate, helps the auto industry, and can get some more fuel efficient cars on the road (provided that the replaced cars are taken out of service).

Also, there’s much opposition to sweetening unemployment payouts and food stamp programs.  Even if they are usually subject to abuse and usually become permanent entitlements, I say that it’s worth the price to help folks who are really struggling.

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Recession Batters Law Firms … a silver lining ?

January 26, 2009
    Excerpted from WSJ, “Recession Batters Law Firms”, Triggering Layoffs, Closings, Jan. 26, 2009

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    “Law firms are not the kind of companies that do well in adversity”

    After upending a succession of U.S. industries, the recession has arrived for U.S. law firms, which have long seen themselves as partially insulated from economic downturns. Profits, on average, were down 8% to 12% across the industry last year, after 15 years of consistent profit growth. Throughout the industry, business has dropped off in such key practice areas as mergers, public offerings, and corporate finance. Litigation, often counted on to carry firms through downturns, has become less profitable as clients increasingly settle big cases, forgo lawsuits altogether, or pressure firms to discount their fees

    Pay cuts and layoffs are becoming commonplace …   New York legal giant Cravath, Swaine & Moore announced it was reducing year-end bonuses for junior lawyers, and that it wouldn’t raise its billing rates in 2009 …  Latham , one of the nation’s highest-grossing firms, said that associates would not get raises in 2009 — a move followed by many other firms.

    The glimmers of hope (for lawyers): Some practice areas, such as bankruptcy, are robust … [and, the new administration is tight with trial lawyers}.

    Full article (with an interesting case study):
    http://online.wsj.com/article/SB123292954232713979.html?mod=testMod * * * * *

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Managing the customer experience … from "delight" to "good enough"

January 26, 2009

Excerpted from the McKinsey Quarterly, “Maintaining the Customer Experience”, by Adam Braff and John C. DeVine, December 2008

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Stinting on customer service is a common and sometimes costly response to tough economic times. By managing the customer experience more rigorously, companies can maintain quality while still saving money.

How can consumer businesses make necessary investments in service while facing the pressure on revenues and costs? One key is to minimize wasteful spending while learning to invest in the drivers of satisfaction. Specifically, companies should challenge their beliefs about service and test those beliefs analytically. Many will discover that long-held but seldom-reviewed assertions about what customers really want are wrong.

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Consider service levels, specifically average time-to-answer, which is one of the most common metrics used in call centers. Companies that closely manage the customer experience have taken a rigorous approach to resetting service levels and, in some cases, are saving money without degrading them or customer satisfaction. In short, these companies have carefully measured the “breakpoints” to find their customers’ true sensitivity to service level changes.

One company, a wireless telecommunications services provider, found that its customers had two breakpoints at X and Y seconds on a call; answering the phone immediately (less than X seconds) produced delight, while leaving customers on hold for longer (more than Y seconds) produced strong dissatisfaction (exhibit). Although customers were fairly indifferent to service levels between X and Y, the company’s average time to answer was only loosely managed between these two points.

 

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The company considered raising service levels to the “delight breakpoint” or reducing them to just above the “patience threshold.” Customer-lifetime-value economics pointed to the second option: relaxing service levels but guarding against crossing the patience threshold. The drop in customer satisfaction was negligible, but the savings in staffing were significant, and the company ended up saving more than $7 million annually.

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Other good places to look for potential overinvestment include marketing campaigns (for example, offering to move a customer to a cheaper rate plan regardless of whether the customer says cost is a problem) and excessive use of bill credits and adjustments. The business case for these “customer delight treatments” can include unrealistic assumptions about how they will increase customer referrals and retention. And often, there is no business case.

Finding these savings requires rigor in customer experience analytics: the collection of customer-level data, matching survey responses to actual behavior, and statistical analysis that differentiates to the extent possible between correlation and causation. It also requires a willingness to question long-held internal beliefs reinforced through repetition by upper management.

Edit by DAF

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Full article:
http://www.mckinseyquarterly.com/article_print.aspx?L2=16&L3=14&ar=2259

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Posted in Cost Management - Productivity, Customer Satisfaction - Loyalty, Customer Service, Mktg - CLTV | Leave a Comment »

Starbucks: Grinding to a halt ?

January 26, 2009

Excerpted from BrandWeek, “Why Starbucks Has Ground To A Halt” by Robert Passikoff, Nov 10, 2008

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Maybe you haven’t read Moby-Dick, but you’ve surely read about a character named Starbucks. It’s not a happy tale…most of its brand awareness is based not on the perfect brew, but on ill-considered breakfast sandwiches, falling stock prices, store shutterings and various attempts to boost sagging profits. Of course, Starbucks has by no means disappeared…but the Starbucks brand is facing the danger of obsolescence…

The reason for the troubles is that management ignored all the things that made customers loyal to the brand…How could the brand masters in Seattle have let this happen?…Starbucks stores were popular—and packed. So, out went those cool, comfy couches (how better to make way for lines of loyal customers?).

And of course, the service had to get faster, so why take time to grind all those annoying coffee beans? Hand-pulled shots also held up the clock, so they went bye-bye, too…the grinders stopped grinding, the shops lost that nice coffee smell…Vanished along with it was the reward of the custom experience…

In an internal company memo leaked in 2007…Howard Schultz himself admitted the streamlining that enabled the chain to grow to 13,000 units had “watered down” the brand. “Stores no longer have the soul of the past,” Schultz wrote…

Starbucks … had walked away from a successful brand position and a differentiating recreational experience and toward a door marked “Lifestyle Brand”…

Neither categories nor consumers are constant. Reasons for customers’ loyalty change, as do customers themselves. Starbucks failed to remember than the interaction that takes place between customers and categories is not static, but sophisticated and evolutionary. Not only did Starbucks help to create its category, it was responsible for educating the public about using it. Yet as…customers grew more sophisticated, the category morphed…Competition increased. Soon, a Starbucks-comparable mocha latte could be had most anywhere in the United States.

What had once been a treat is now an expectation. That’s exactly why, now, people won’t think twice about walking in for a really swell morning brew—at McDonald’s.

Edit by SAC

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Customer satisfaction drives customer loyalty and customer loyalty drives profits.  Starbucks attempts to increase revenue simultaneously had a negative impact on customer satisfaction.  The result? Starbucks profit was down 97% for the most recent quarter vs. 2007 and began closing stores in 2008.  The chain has recently introduced rewards programs to promote customer loyalty and combat this decline. 

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Full Article:
http://www.brandweek.com/bw/content_display/current-issue/e3i431ca797a370fbb20c4f3afe57081788?imw=Y

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