A lot gets said about the need for companies to innovate, but not much gets said about what happens when you innovate too early. Because big ideas have small time frames, innovating too early often leads to the same end as not innovating at all.
At my last job I setup a deal between my company and another startup called Lookery. Lookery was in the business of connecting publishers to advertisers by monetizing users' cookie profiles. From my end it seemed like Lookery had a compelling offering, and they did, but unfortunately Lookery was recently forced to close shop.
Scott Rafer, the CEO of Lookery, writes on his blog:
Once we sold the ad network, I fell into a bad old habit — persuading my team to build something before the market was ready for it.
If you keep an eye on the startup scene, especially in the tech sector, you'll see a large number of companies failing because the market isn't ready. It's simultaneously refreshing and sobering to see so many entrepreneurs trying to make their ideas work. Refreshing because they are trying, and sobering because they are failing. These companies serve as a warning sign: sometimes, speed isn't everything. The first mover advantage is, in fact, not always an advantage.
Good salesmen educate their customers about what appear to be little differences. When it comes to a suit, it's not the practicality or aesthetic value of two buttons, three buttons, or brass buttons that matters -- it's the history behind the particular style, the story of the brand that made it, and the pop culture surrounding it. These seemingly little differences are, in fact, extremely important. Without them, the suit business would be in trouble.
Strategy is king. Though the internet has revolutionized our mediums and given us new tools to work with, success is still largely dictated by strategies that have been effective for years past. Yes, the newcomers are innovators, but their success stands on the shoulders of history. What works now has worked before. When it comes to customer service, the model of the day is Zappos. Zappos has great customer service, but before Zappos there was Ritz Carlton, Nordstrom, and many others. These companies were icons of customer service when new media meant colored television.
So, here's the thing: customer service is about treating people like people. That means good customer service was possible long before the internet. While our pictures of timely responses, courtesy, and going the extra mile may look different online than they did offline, these things are still the fundamentals of good service.
There is a movement building momentum in the marketing world. It's not a bad idea, but like all movements there are those pulling the bandwagon, and those who are merely riding along. The idea is that social media will humanize corporations.
Unprecedented possibilities will open before our eyes. Citizens will chat merrily with corporations on Twitter. Brands will integrate seamlessly into our daily lives on Facebook. Best of all, every mistake made by giant hungry monoliths will be made known to the masses, and the sheer power of the people (also known as bad PR, bad luck, a shitstorm, and every CEO's worst nightmare) will transform companies worldwide into loveable organizations run by real, genuine, and kind human beings instead of the evil prawns running them today.
Good customer service was possible before the internet, and bad customer service will be around long after. As long as companies believe a new medium, instead of a new strategy, is the answer to all their problems things will never change. Good customer service results from being committed to doing right by your customers, no matter the cost incurred. The medium is irrelevant.
Our society is addicted to the idea of progress. We're prone to think technological change fundamentally alters the way we do things. In reality, the fundamentals tend to endure through the ebb and flow of technological adoption.
Zappos isn't the first company to provide stellar service, and the conversations that take place on Yelp used to take place around the water cooler. As marketers, we can sometimes learn more by analyzing what hasn't changed rather than what has. There's a lot of talk about tactics and tools these days, but lets get back to fundamentals. Strategy is king.
About a year ago Delta Airlines made a decision to start charging for luggage. The plan was simple. $15/bag for suitcases under 50 lbs and a $90 surcharge for bags over 50 lbs. Delta ran the numbers and figured out it would be an easy way to drive additional revenue. Their research probably showed that the only thing people really care about is the price of the ticket, and it was probably further rationalized by the fact most trips are short enough that a carry-on bag can suffice. Charging for bags would make flights more profitable, but it would also have consequences.
The biggest consequence of this decision was expected. Delta knew customers would be upset when they had to pay $15 for baggage, so I'm not going to focus on that. What's more interesting are the consequences they didn't plan for.
A $90 surcharge on bags over 50 lbs is an extremely large fee. It's potentially a 1/3 or more of the total ticket price. Naturally people will want to avoid this fee. However, the 50 lbs mark is right at the upper limit of what a large bag would weigh, so a large number of customers will carry bags that are 51-55 lbs (especially for couples who share a single bag), and the majority of customers who encounter this fee will be barely over the "limit." These customers will try to do anything to avoid a fee of this magnitude. In fact, many customers start to unpack their luggage while it's sitting on the scale in order to try and get below the arbitrary 50 lbs limit.
The question now becomes, how much longer does delta spend interacting with each of these angry customers unpacking their bags at the check-in counter to avoid the $90 fee? A normal bag drop-off takes a minute, maybe two minutes. Each customer who unpacks their bag at drop-off to avoid the fee will generally take 7-10 minutes. One customer now takes the same amount of time to deal with as 3 used to. This an efficiency cost, and it won't be offset since the overweight baggage fee goes uncollected.
The other unintended consequence of this decision is that it encourages people to use larger carry-on bags. This means more bags must now fit in the carry-on compartments. Boarding is no longer about getting people to their seats, it's about finding space for all the carry-ons. Instead of preparing for take-off, flight attendants spend 10-15 minutes moving and re-packing carry-on compartments.
It's not that Delta doesn't understand behavioral economics, they do. And, it's not that they didn't carefully study this decisions, they did. They just failed to account for the unintended consequences. They were so focused on the potential increase in top line revenue that they ignored the hidden costs associated with it.