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What Business Are You In?

by John Tschohl    

Sixteen-year-old Matthew was in El Paso, Texas, climbing at Waco Tanks State Park. Rather than drive back to Minnesota with a friend, he decided to stay another two weeks and take a Greyhound bus home. His father, John, called Greyhound and said he wanted to purchase a ticket for Matthew, but was told he could not make that purchase by telephone; he would have to go to a bus station. 

At the station, John was told he could not write a check for the ticket; he must pay cash or use a credit card. When he said he wanted the ticket issued in El Paso, where Matthew could pick it up before boarding the bus, he was informed that Greyhound would add a $15 charge to the $135 ticket price for that service. 

John then went home and called Greyhound in El Paso. He said he would like to give Matthew his credit card number and have Matthew order and pay for the ticket at that terminal. That won't work, he was told; Matthew must have the credit card with him when he purchases the ticket. 

"I asked if I could send Greyhound a check for the ticket, and the clerk said I could," John says. "But, after thinking it over, I decided against that, because I was afraid they would get the check, then say it's no good because it's not from a local bank. So I called a friend in El Paso and he agreed to go to the Greyhound terminal and purchase the ticket for Matthew." 

That friend was Alejandro Burgos, president of El Paso Total Quality and a consultant to Service Quality Institute in Minneapolis. When he went to purchase the ticket, Burgos told the Greyhound ticket agent that he wanted to leave the ticket at the terminal, where Matthew could pick it up four days before boarding the bus. 

"They said I would have to pay an extra $14 or $15 for that service," Burgos says. "What kind of customer service is that? I can pre-pay for a ticket with any airline and pick it up in any city in the country, but Greyhound doesn't have that kind of service." 

Rather than pay the extra fee, Burgos purchased the ticket, then spent an hour driving to Waco Tanks State Park to hand it to Matthew. "It was an inconvenience," he says. "It's an example of what happens when a company doesn't have a customer service philosophy." 

The experience left  both Burgos and John frustrated and angry. "After that experience," says John, "Greyhound will be the last resort for me and my family, when making travel plans." 

John is John Tschohl, founder and president of Service Quality Institute in Minneapolis, Minnesota, and is the author of Achieving Excellence Through Customer Service.  "Greyhound doesn't realize that it isn't in the transportation business; it's in the service business," he says. "It makes it almost impossible for customers to do business with the company. Its policies and procedures are designed to drive customers away. It certainly drove me away." 

Over the years, Greyhound has driven many others away, as well. Although the company reported revenues of $199.9 million for the quarter ending December 31, 1997, and $771.1 million in yearly revenue, it was on the brink of bankruptcy just seven years earlier. Between 1993 and 1994, its stock dropped 73 percent, and ridership fell almost 10 percent during the first six months of 1994. 

"If Greyhound doesn't improve the quality of its customer service, it could revisit its past," says Tschohl. "In order for Greyhound to continue to operate in the black, it must become more customer-friendly." 

When establishing policies and procedures, company officials should make customer service and satisfaction a priority. Too often, Tschohl says, company officials institute polices that mistakenly serve three purposes:  to make doing business easy for the company, not necessarily for the customer;  to protect the company from unscrupulous customers who might take advantage of it; and to protect the company from incompetent employees who cannot be trusted to make appropriate decisions. 

Those companies would be better served by developing policies and procedures that make it easy for the customer to do business with them. That includes training and empowering employees to do whatever they have to do, on the spot, to take care of a customer to that customer's satisfaction--not to the company's satisfaction. "If the customer doesn't win, the company loses," Tschohl says. 

Unfortunately, too many managers think that empowerment means giving employees the authority to make decisions to take care of the customer--as long as the action they take follows the rules, policies, and procedures of the company. "That is not empowerment," says Tschohl. "True empowerment means employees can bend and break the rules to make sure the customer is satisfied." 

Every company will occasionally have a disgruntled cusotmer, but what the company does to rectify the problem and regain that customer's loyalty is what will determine whether or not it succeeds. Company officials, who think the loss of one customer won't make much difference to the bottom line, should consider this: Frederick Reichheld and W. Earl Sasser, writing in the Harvard Business Review, say, "It is common for a business to lose 15 to 20 percent of its customers each year. When defections are cut in half, the average growth rate more than doubles. A 5 percent change in rate of retention swings profit increases from 25 percent all the way to 100 percent." 

Patronage by loyal customers, who buy again and again because they like the service, yeilds 65 percent of a typical company's volume, according to a study by the American Management Association. When Woolworth's of England did nothing but change its level of service, it saw sales increase by 30 percent. "Satisfied customers buy more--and they buy more often," says Tschohl. 

The best way to ensure customer loyalty is by providing quality service. Poor service is responsible for 40 percent of customer defections, according to a study by Booz, Allen & Hamilton, Inc. Good customer service, on the other hand, can bring back those customers back. A study conducted by the Technical Assistance Research Program for the U.S. Office of Consumer Affairs found that, when a customer has a problem and the company resolves that problem to the customer's satisfaction, 9.9 percent will buy more and 84 percent will buy at the same rate. 

"Good service can be a company's salvation," says Tschohl. "It restores customer loyalty and confidence and results in increased sales and profits. The competitive edge will go to those companies that provide exceptional customer service."


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John Tschohl is president of Service Quality Institute, speaks all over the world, is author of four best-selling books & a leading authority on customer service. TIME refers to him as a "customer service guru." Contact John at www.customer-service.com