Service with a Snarl

'No one packs my bags at the supermarket any more.'

'Is anyone going to let me check out of this hotel today?'

'What do you mean you want the table back at 9pm?'

In affluent countries across the world, the complaint is the same. Banks, airlines, supermarkets, restaurants and hotels just don't offer the service they used to.

Ratios of cabin service staff to passengers have fallen at most major airlines; full-service petrol stations, once common in Europe, have all but disappeared.

WHY SERVICE GETS WORSE

There is a long-term, fundamental reason for these declines in service levels. In advanced countries, most people work in service industries. They also spend most of their disposable income on the services those industries provide. Each year the wages people earn rise faster than the prices they pay for goods and services. (That's why our standard of living keeps going up.)

Most of the cost of providing services is the cost of the people who perform them. So as wages rise, the profitability of services is squeezed. And so the management of those services have little option but to cut the number of people performing the service, or hire cheaper, less committed people. As a result, each year the quality of the service goes down.

This Happens Fast

In a country with wages rising 3% a year faster than prices, each year the wage bill of a service company goes up 3% more than the price it can charge its customers for that service. That 3% a year builds up over time. Over five years, the wage bill rises by 16%; over a decade by almost 35%. Very rapidly, every service either becomes unprofitable or has to cut its service offer. And if you cut your service offer, customers don't take long to notice.

There's Not Much Anyone Can Do About It

In modern service economies, dentists would like more attention from their hair-dressers; hairdressers would like more attention from the waiting staff at their local café; and the waiting staff at the café would like more flexible appointments and more attention from their dentists. But in a society where all these people expect to earn more in real terms every year for the services they provide, but expect to pay no more in real terms for the services they consume, it's not going to happen.

Everyone wants better service; everyone ends up with worse service. It's a fact of life in a modern service economy.

What About Increasing Productivity?

Sure, employees have become more productive over the last few decades: flight attendants have learned to serve 70 meals an hour rather than 30; call centre operatives have learned to cut their customers off the moment they have made their sale.

But all this has happened at a price. As the number of customers dealt with per hour has gone up, the time allocated for smiles and customer care has gone down.

WHAT IT MEANS FOR MANAGEMENT

The end result is that managing a service is about managing declining service standards:

• Q Can you bring a drink up to my room?
• A Can't you use the mini bar?

• Q Can I have a wake-up call?
• A There's an alarm clock by your bed.

• Q Is my rental car ready?
• A Please just wait in line sir.

• Q Can I have a newspaper?
• A You should have taken one from the rack before you boarded the flight.

The Critical Issue is Marketing

The real problem doesn't lie in the management of services. As far as managers are concerned, customer dissatisfaction is a day-today issue, and one they can cope with. The critical issue is the marketing of service brands, because if you look at the marketing plan of any bank, airline or hotel chain in the world, you will find at its centre a promise of excellent customer service – a promise they break year in year out. And a promise that is slowly destroying their brands.

THE DAMAGE DONE BY BROKEN PROMISES OF SERVICE

Marketing a brand means making a promise to customers. Keep that promise over time and you end up with a strong brand. But break that promise repeatedly, and customer loyalty, satisfaction and your brand all crumble.

Every year, as a service chips away at what it offers, it breaks the promise of excellent customer service it has made. The result is a weak service brand.

The Evidence

In general, consumers feel markedly less positive about service brands than they do about consumer goods brands. The prime measures of a brand are its levels of differentiation, relevance, esteem and knowledge amongst the public. We have looked in the US at these measures for 1407 product-based brands from juices to motor oils, and compared them with 300 service-based brands (see Figure 1). Services are weaker on all four measures, but are particularly weak on differentiation. (see Table 1)

This is crucial; a high level of differentiation is the vital first step to building a strong brand. Without it, brands cannot signal to their prospects that they offer something different from the status quo and attract new custom.

But My Service Brand is Strong

Of course, many service companies may question the idea that their brand is weak. If so, they ought to consider the following.

1. Do you have a Brand – or Just a Site?

Many service companies have research saying they have loyal customers who keep coming back. From this they infer that their brands are strong. But many of these services are retailers. And much of what retail research measures as loyalty comes from a retailer's local monopoly in the area close around their store. If you live two minutes' walk from a supermarket, you are loyal to that supermarket, no matter how little you feel for it as a brand.

2. Can your Customers Leave if They Want To?

Banks in many countries argue that their customers are very loyal – indeed they point out that their customers are more likely to get divorced than to move their current account. A cynic might point out that a divorce involves less paperwork.

3. When the Going Gets Tough, Your Customers Get Going

Consumer goods brands are tough – they survive crisis after crisis, decade after decade. Many of the leading consumer goods brands in America in 1923 – for example, Wrigley, Gillette and Ivory – are still leading brands today. How many service brands from that time are still strong today?

WHAT IF SERVICE BRANDS WERE STRONGER?

If service brands were stronger, many good things might happen. For instance, strong product-based brands frequently make successful line extensions into other areas. Vanilla Coke and Snickers Cruncher both owe their success to strong parent brands. Weak service brands have much greater difficulty extending themselves. For years banks have been trying to extend themselves into being financial services supermarkets, but their brands are so weak that few consumers are keen to buy the insurance and investment products they offer. If their brands were stronger, banks might find cross-selling easier.

Similarly, many retailers and other service brands suffer from razor-sharp price competition in their markets. Strong product-based brands rarely suffer from this: whether you choose a digital camera from Sony or from Nikon depends more on what you think of Sony and Nikon than on small fluctuations in their relative prices. If services had stronger brands, they might be able to trade less on price too.

So What Should Services Do?

Consumer goods brands are strong because they keep their promises every year – and more. But service brands tend to be weak because they leave a trail of broken promises behind them. Those promises, be they about employee empowerment, standards of customer care or responsiveness are basically promises about service by people.

Perhaps they should therefore simply stop making them.

SERVICE PROMISES THAT WORK

Probe into a service long enough and there are always quite a number of other promises it can make.

1 Promises Made on What Computers Do

While employees get more expensive every year, computers keep on getting cheaper and more powerful – and are likely to continue to do so for the next two decades. Promises based on what computers do can therefore be sustainable promises for any service – and therefore the basis of strong service brands.

Marketers of services shouldn't be embarrassed to make such promises.

• Service that comes from machines can be more consistent than service from people. Many younger people prefer to do their banking online because it's easier to see their financial situation than from a garbled conversation with an employee.
• Service from computers can also be more comprehensive than service from people. Ask for an obscure book in a bookshop, and it'll take a long time for an assistant to track it down. It takes seconds on Amazon.
• Service from computers can also be more friendly than service from people. Financial services computers never try aggressively to cross-sell you unwanted insurance policies. Financial services customer care staff do it all the time.

Of course, we're not saying that any form of computerisation is a benefit. Send your customers into a voicemail maze rather than to a nice receptionist and they will quite rightly hate you for it. But do bank customers need to visit their branch to find out whether their monthly salary has been paid into their account? Most are happy with an automated SMS alert. Services should look at the benefits that their computers offer for a branded point of difference.

• Twenty years ago, frequent-flyer schemes were just dumb cards for people who had bought a lot of tickets. Today, the airline system recognises frequent flyers at check-in, gives them the seats they prefer, gives them special meals, warns the cabin staff to be extra nice to them, ensures they never get bumped and looks after them if the flight is delayed.

Most airlines regard their frequent-flyer scheme as completely separate to their main brand. But frequent flyer schemes, intelligently run by empowered computers, are a much more sustainable promise for an airline than smiley flight attendants. Perhaps they should now become central to airline brands.

• When banks talk about customer relationship management, they are thinking of the relationship between their customers and their staff. Perhaps it's time they cut their people out of the loop, and started talking about building trust and relationships with their computers.

2 Promises Based on Tangible Things

Over the past ten years, mobile telecoms service providers have suffered from weak brands compared with the brands of handset makers Nokia, Motorola and Ericsson.

The two international service providers that have broken out of this low-strength ghetto – and two of the most valuable telecoms brands in the world today – are Vodafone and Orange, who just happen to be the two operators who insisted on putting their logos on their handsets.

Vodafone and Orange understood what the others did not: that consumers have difficulty relating to things they can't see and touch – and that if you want a strong branded business, you have to offer consumers something tangible.

If every service encapsulated its qualities in a tangible item, they would strengthen their brands massively.

• The most emotional and memorable time of most people's year is their vacation, but do package holiday companies give you anything to remember it by? No – and so most people go out and buy an unbranded third-party souvenir instead.
• Similarly, frequent long-haul business travellers delight in leaving their free vanity kits in piles in their bathrooms to impress visitors. Which airlines did they fly with? Who knows – because most airlines don't brand their kits. Every form of premium transport ought to leave their business guests with something to place on their desks to impress their colleagues.
• Free matchbooks had a real marketing point 30 years ago when everybody smoked, and cool people would ask you for a light. But when was the last time someone you wanted to impress asked you? Restaurants need to adopt a new item if they want this mechanism to keep spreading their name.

3 Promises of Exclusivity

The cost of providing services keeps on increasing. Over time, the service has to choose either to cut people or to put its prices up. A brand that cuts people and reduces the level of service never becomes a powerful brand. A brand that keeps increasing its price risks alienating its customers – or it could become an exclusive premium brand.

Take hairdressing. In low-price salons, the skilled professional hairdressers of the past have been replaced by cheaper school leavers and trainees. No one has ever managed to build a sustainable brand in this area. But at the top of the market, a few companies have kept their commitment to staff training and development, and have built strong, exclusive brands.

In the 1960s, Vidal Sassoon was a small trendy London hairdresser. Through maintaining quality, Sassoon built his business into a globally renowned premium brand. A couple of decades later his brand was so strong that P&G licensed it to develop its global premium hair-care range.

In services, occupying an upscale niche can be a powerful, sustainable marketing strategy.

• What's the first thing people tell you about their country club? The length of the waiting list. Keeping people out can be free advertising.
• Exclusivity need not be driven purely by price. London health club The Sanctuary has built up a strong brand, but has done so by excluding men from its premises. Will they pamper you? The exclusion of men implies it perfectly.
• Similarly, Caribbean resort chain Sandals has built its brand on excluding everyone except couples. It doesn't need to tell you it'll be romantic; it's in the positioning. How many other Caribbean resort chains can you name?

4 Promise Not to do Something

How would you feel if you walked into a restaurant and there were no waiters present, there was no cutlery or tablecloths on any of the tables, and the management expected you to clear up after yourself? Or if you booked a flight and they didn't give you a ticket, wouldn't give you a seat reservation and offered no food and drink on board?

Well, the restaurant is called McDonald's, and it gets some of the highest scores for good service in the food industry. And the airline is a low-cost airline called Ryanair, and its customers love it.

Nowadays, fast-food restaurants are so engrained in the human psyche that no one would expect to find knives and forks there. Ryanair is a new brand on the way up. And its trick is to state clearly in its marketing what it doesn't offer and how it passes the savings thus generated on to its customers. So every time its customers don't get a complimentary drink, they are happy – because they can see the savings.

What you don't offer can be a powerful point of difference – and because the cost of not doing something doesn't rise, it is likely to be massively sustainable too. Mass-market services should consider how to promote what their brand doesn't offer.

• Taking service away needn't mean cheap or downscale. In Japan, downscale blue-collar diners eat 100-yen dishes served on conveyor belts to save staff. Western marketers have grabbed the idea and turned it into city-centre fashion eateries.
• Younger people are much more accepting of new concepts with reduced human service than people aged 35+. Don't try to please everybody.
• Most restaurants promise ambience. American automat chain Horn and Hardart promised no ambience, with the claim: 'You can't eat atmosphere.'

5 Talk About Your Philosophy

The Body Shop has always offered excellent customer service. But when it comes to promotion, it has focused on issues:

• While the rest of the cosmetics industry shied away from the animal testing issue, the Body Shop were champions of animal-free testing.
• While the fashion industry promoted the anorexic waif, the Body Shop celebrated the curves of the average woman.
• While its competitors developed ever more complex packages for their creams and lotions, the Body Shop campaigned around recyclable packaging.

The end result was a retail formula that created a stir, and thereby gained customers wherever it went in Europe, North America and Asia. Many other services could benefit from defining their philosophy more precisely.

• Most sports clothing shops offer quality, value, range and low prices. It's not much of a philosophy. And so the customers with the money go to Niketown, which offers them the 'soul of an athlete'.
• Many people were worried that Club Med's hippy, anti-materialist philosophy wouldn't work beyond the 1960s. Not so. It still offers exactly what many people want out of a holiday, and keeps Club Med a powerful brand in a commodity market.
• Most fashion and home stores in Sweden are perceived by shoppers as pretty much the same. Not so Indiska, a chain that uses the Indian theme of its wares and Indian philosophy to project a distinctive, laid-back atmosphere.

This article featured in Market Leader, Autumn 2005.