V S Mahesh: Caveat service emptor

Last Updated: Fri, Jan 04, 2013 19:51 hrs

In the old world, where buyers purchased products, two rules that governed transactions were “caveat emptor” (beware buyers) and “caveat venditor” (beware sellers). The rules were easy to apply since both the buyer and the seller could demonstrate, with physical evidence, whether or not a product met the promised specifications. Alas, those comfortable days are gone. This is because when one buys a product-service bundle from organisations such as hospitals, doctors, hotels and real estate agents, or pure service from financial services, management consultants, educational institutions and entertainment providers, it is no longer easy to demonstrate failure in a manner that could satisfy a third-party adjudicator like a court.

The nexus between a few pharmacies and medical systems suppliers on the one hand and doctors/ hospitals on the other has been recently highlighted in the press and TV. Unsuspecting patients who seek professional medical service are misled into buying inappropriate medicine and treatment due to this unholy nexus. Sellers gain at the expense of buyers in the short term, with buyers unable to prove that they have been sold short. Though research in service management demonstrated time and again that sellers would lose out in the long run when word-of-mouth publicity of their duplicity spreads, the short-term mentality of everyone down to the sales incentive-driven medical representative ignores such findings — for the simple reason that they are not going to be around to pay the penalty when the time comes. They would have most probably moved on to some other patch, after having collected their incentives.

Further, we appear to be living in a world where the fear of being punished for one’s crimes seems to have almost vanished — from major crimes like rape and murder to petty ones like driving two-wheelers with no helmets on the wrong side of a road, quite often with a family of three or four. What is worse, when one collides with such a person, the wrongdoer verbally abuses the law-abiding citizen.

Given this new world, where there appears to be no protection worth the name for those who are wronged, cheated or abused, everyone must learn the art and skill of survival. The only real rule is that of “caveat emptor”. In this column, let me focus on the implications for the service customer, with a few tips for survival.

First, beware the sellers who incentivise current customers to procure new ones. Cash offers and discounts on future purchases make a few current customers partners in such crimes. Do your own reference check from reliable third parties who would not provide a false referral just to make a buck.

Second, evaluate the actual cost of use rather than the cost of purchase before you buy. For example, the cost of time and effort that one has to incur in seeking effective after-sales service. The costlier and more critical the after-sales service, the more effort you need to take to evaluate this aspect. Seek answers to questions like whom to call or email for help, who the head of customer service is and at what number he/she can be reached. The answers will provide you with adequate information on how well their service recovery systems work.

Third, understand the implications of the claim made by service management gurus that 94 per cent of service failures are caused by faulty procedures, rules and systems and not by people delivering service. Getting angry with a front-line employee when you receive poor service is counterproductive. Try empathy. Take time to understand the plight of the front-line employee and communicate your appreciation of her plight. A few years ago, when I was among the 20-odd passengers who were being denied a boarding card owing to “overbooking”, I found myself among a justly irate set of wannabe passengers. I played the role of pacifier and tried to help the check-in employee. The grateful employee eventually got me a seat on the flight.

In this bizarre new world, what are the opportunities for a seller whose time horizon is longer than that of a fly-by-night operator? A fundamental rule in management is to identify the most common irritant to customers and work systematically to alleviate that irritant, gaining a reputation that the organisation in question differentiates itself from others on this count.

Some years ago, when I was involved in advising Thomas Cook (India) on growing its leisure traveller market, my initial market research revealed that the general feeling in the market was that all travel agents deliberately hid charges and made promises on the price of the holiday knowing full well that customers would eventually pay about 20 per cent more. By addressing this single issue and collectively achieving the reputation of an agency that charged “honest prices” with no “hidden charges”, Thomas Cook achieved a remarkable turnaround. When the market went down by 17 per cent the following year, Thomas Cook’s market share went up by 23 per cent.

I used this example when chatting with my late, octogenarian mother, a musicologist and classical musician whose understanding of the business world was about that of a seven-year-old child. For the umpteenth time in conversations ranging over 40 years, she asked me yet again to explain in simple words what I actually did during my engagements with clients. I launched into a mini-lecture, beginning with how service companies ought to differentiate themselves from competition, starting with being reliable, that is, delivering on their promises right the first time and every time.

My mother started laughing and asked, “Do people really fly you around the world and pay you for telling them to follow this simple principle of doing what they promise to do”? My simple answer of “Yes” got her into a giggling fit again.

Alas, this is the world we are living in. The simple lesson for sellers is to gain a reputation that they are relentless in ensuring that everyone in their organisation would honour promises made to customers, delivering their promises right the first time and every time. Customers do not like to constantly think of the “caveat emptor” rule. They prefer to trust a service provider who voluntarily plays by the “caveat venditor” rule.

The writer, a former corporate executive, was the founder-director of the Centre for Service Management at the University of Buckingham, and is now MD of Chennai-based VSM Consulting Services.

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