9/13/2018

Double-Down or Half-Down?

A well-known local American motorcycle gear company is, like everyone in that industry, experiencing a severe down-turn in the business. Motorcycles are not looking like the wave of the future right now. In fact, if I were forced to bet one way or the other I’d have to bet that motorcycles will be solely for recreational use by 2030 with no or limited access to public roads and with almost no affordable options for liability insurance. It’s that serious. Many of the companies that have wallowed in easy money for the last 30 years are now struggling to maintain any sort of visibility or customer base. As the last of the Boomers moves from a Harley or BMW to electric wheelchairs, motorcycle sales is drawing down fast; especially in the high end market. In my Geezer with a Grudge column and blog, I’ve been predicting this decline for at least a decade and if I weren’t a motorcyclist I’d be happily saying, “I told you so.” I did (tell you so), but I’m not happy about it.

jacketsI’ve been buying expensive commuting and touring gear from my friend’s company since the early 1980’s and, mostly, I’ve been a huge fan of the gear this company makes; even though they are almost always the most expensive equipment in their market. Today, with all commoditiesof the Chinese-made ROW-marketed similar-to-equal motorcycle equipment available it is getting harder to justify spending the extra money for made-in-USA gear, simply because it is made in the USA. There is only one thing that can make a company stand out from the pack when the pack is large, well-funded, and quickly becoming a commodity. That thing is customer service.

retail-pricing-perspective-9-728[2]Unfortunately, mismanagement often takes their eye off of the customer service ball too early in the competition game. Like quality, customer service shouldn’t be a profit center subject to simple accounting measurements. Quality and customer service are items that are as hard to quantify and appraise as design and originality. Unlike labor, materials, manufacturing equipment and facilities, the sales force, marketing costs, and management structure and personnel, customer service is one of the intangible things that customers use to assign added value to the products they purchase. Many of the once-great companies in recent history have risen and fallen with their commitment to customer service. People will pay a premium for a product they can assume the manufacturer and dealers will stand behind and they will expect extreme discounts on products without that support.

While company executives often whine that customer loyalty no longer exists, the evidence that it does is overwhelming. The problem is that corporate loyalty is even more rare. The key to loyalty is that the people who most benefit from it have to give the most of it. What a company gets from customer loyalty is the ability to price goods and services at a price that provides a decent profit. What they have to give to get that privilege is beyond-the-expected customer service. Without that expectation, customers view practically every purchase they make as a commodity: a good or service that has many equivalents and deserves no regard to who produced it. Once you are in that bracket, the only thing you have to offer is low cost. Getting back out of the commodity market is thousands of times harder once you’ve dropped into that category.

clip_image004I created this illustration in a lame attempt to get across this point. The basic concept ought to be pretty obvious, but it isn’t to most executives. A zillion years ago, I taught quality courses for the Phil Crosby Quality is Free–based “Quality College” training program. One of the examples we used that I’m going to have to make up the numbers for (because I can’t find this reference anywhere today) related to the restaurant business. The rule is something along the line of “it takes $5 worth of advertising to attract a new customer, 5 seconds of poor service to send them away, and $5,000 in advertising to get them to try you again.” If you look at my illustration, you’ll see there are several nodes where that “5 seconds” thing can happen and what happens next is that your customers will try everyone else before they give you another shot.

For example, I recently paid as much to have some of my gear repaired by the local company as I would have spent on a new Chinese-made equivalent. When the repaired gear arrived, I discovered a good bit of the equipment was in worse shape than it was when I dropped it off for repair. I spent a couple hours  repairing the repair. If I have to buy similar equipment again, I won’t be able to forget that experience. That’s 40 years of customer loyalty possibly blown up with a single half-hearted repair job.

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