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20 October 2018

The Decline of Customer Service

Tag(s): Marketing, Politics & Economics

The Annual City Lecture is always an important event in the calendar of The Worshipful Company of Marketors and last week’s was no exception. I have known the speaker Guy Daniels for over 25 years since he joined the marketing department at Sony Consumer Products where I was Managing Director. He was part of a highly effective Market Research team which I regarded as one of our secret weapons. Their analysis of both quantitative and qualitative data was first class while their forecasting of the market was eerily accurate. Regular readers of my blogs will know that I rarely have much faith in forecasting as it is usually wrong but Guy and his colleagues were exceptional. We would use their analysis both upstream in negotiating better terms with the Jigyobu, or business groups, and downstream with the retailers.

Guy went on to ever more senior marketing roles in other technology businesses including IBM, Fujitsu and now Cognizant where he is Head of Corporate Marketing, Europe. He observed that the current wave of digital technologies, including Artificial Intelligence, the Internet of Things and Big Data, will drive an existential change in Marketing: facilitating a paradigm shift in insight and intelligence about customers (and in turn enabling customers better to understand their suppliers).

In Guy’s opinion, Marketers in the 21st Century will either engage with and drive this change or become obsolete. But he is not advocating an entirely mechanistic approach. Indeed he recommends that we hire anthropologists, sociologists and the like to truly understand human behaviour.

His talk was liberally illustrated with stories as the best lectures are, and one of these, judging by the questions in one of the best Q & A sessions I have ever attended, struck a particular chord with the audience. Guy had moved house earlier this year and needed to transfer his long-term contract with Sky to the new address. But their system made this simple transaction with a loyal customer extremely complicated and time-consuming. It involved long waits on the telephone listening to meaningless recorded messages; then a reference to Facebook Messenger. Guy uses this App but again got no immediate response. Eventually Sky offered the new service in several weeks’ time. He switched to Virgin and had an immediate response.

But Guy is not saying that Sky is a bad company. It’s very successful and made a £1bn profit last year. It’s just that like a lot of technology companies it doesn’t get that bit of marketing which is about customer relations. Its bias to all things tech makes it automate processes that should remain human.  Guy did not say this but I’ll bet that if he moves house again in a few years’ time he’ll have similar problems with Virgin while Sky, treating him as a newly acquired customer, will give him a great service. Guy gave us an estimate of the lifetime value of his Sky contract which it had thrown away with this clumsy behaviour.

Guy has only worked for such technology firms and is a supreme marketing person but he recognises their common and collective failure in this aspect of consumer marketing. He acknowledges that in so-called Fast Moving Consumer Goods companies like Procter & Gamble and Mars the emphasis on the consumer is deeply rooted in the DNA of the Company. My formative years were spent at these two companies and I knew no other way until I too spread my wings and worked with some tech companies and constantly ran into this hurdle.

Guy advised us at the beginning of his lecture that he would not be talking about the marketing of toothpaste or chocolate. Well, I have marketed both of those. I was involved in Procter & Gamble’s launch of Crest toothpaste, the first fluoride based toothpaste in the UK, and later in my career with Mars I marketed a range of Mars confectionery products in South America including the iconic M&Ms, chocolates in sugar shells so they can be sold in hot climates without melting.

In other words FMCG is also led by technology. New products are usually based on some well-researched performance benefit. But the research will be as much  into consumer usage and attitudes as into technical product development. Tech companies tend to think such research is a waste of time because their technology is ahead of the consumer’s understanding. But when I led the marketing effort at Sony for ten years in the UK I saw my role as explaining the benefit of the technology, not how it works but how it works for you.

That fundamental is not changed by the explosion of new digital technologies. Methods change and marketing folk must change with them, but they should still be seeking answers to the same questions.

At Sony I also introduced the idea of calculating the potential lifetime value of a consumer. In those days our biggest sellers were Trinitron Colour TVs. On average a consumer would purchase a new TV every seven years or so. In the time since they last purchased one the market would have changed with a whole series of new models with new features and benefits. Probably it has altered somewhat since then in that consumers tend to have more TVs around the house so may buy them more frequently but the principle is still the same. In FMCG the products are described as Fast Moving because they are bought more frequently, in some cases weekly or even daily. But they are Slow Moving in the sense of product features. Once Mars perfected the Mars Bar they never changed the basic recipe. They would just vary the formulation to take account of movements in commodity prices always trying to keep price increases in line with the Retail Price Index.

But they never stopped talking to consumers through focus groups, product research and large scale market surveys.

This distinction in behaviour seems to have led to a decline in customer service, not only in tech companies but more broadly in utilities, banks and so on. All these organisations seem driven by cost pressure to take cost out of their dealings with the end user. Not only have I had poor experience with Sky - it took six separate engineer visits early this year to sort out our system despite our apparent VIP status with them as we have had a contract at the same address for over 20 years - but we have had similar experiences just this year with BA, BG, BT, and BEverybody else. To B or not to B.

In the past great Marketers, soaked in the principles of consumer marketing at the leading FMCG Business Schools of Procter & Gamble, Unilever, Mars, Cadbury, Beecham and the like,  were hired by the Banks and the Utilities to sprinkle some of their magic. But it did not work because they weren’t put in charge of dealing with consumers; they were stuck in a corner dealing with a few of the tools of marketing, i.e. Advertising & Promotion.

My bank has just closed my local branch. We live in a prosperous suburban town. How can that make sense? It makes sense only if you base your decisions only on cost control. Threatened by challenger banks that don’t have the legacy costs of a physical branch network and the running costs of keeping an antique legacy IT system going, they respond by trying to be the same. But the traditional local branch structure was an essential party of our economy. Savvy bank managers with a degree of autonomy knew their local businessmen and knew how to nurse them through the inevitable cycle of ups and downs. Now that has gone, so the local business, where much of the growth in the macro market comes from,  will go too.

Some of these banks are still owned by the tax payer but the people who represent us have totally failed to understand this critical role. A decline in customer service will mean a decline in the economy.

Copyright David C Pearson 2018 All rights reserved


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