Compiled by PS Kar, for RIMS Rourkela

Fewer than 10% of all new products/services produce enough return on the company's investment to
survive past the third year. Why? Here's our Top 10 list of reasons new products and services fail:

1. Marketers assess the marketing climate inadequately.

2. The wrong group is targeted.

3. A weak positioning strategy is used.

4. A less-than-optimal "configuration" of product or service attributes and benefits is

selected.

5. A questionable pricing strategy is implemented.

6. The advertising campaign generates an insufficient level of new product/new service

awareness.

7. Cannibalization depresses corporate profits.

8. Over-optimism about the marketing plan leads to a forecast that cannot be sustained in
the real world.

9. The marketing plan for the new product or service is not well implemented in the real
world.

10. The marketer believes that the new product and its marketing plan has died and cannot be
revived, when, in fact there is the potential for resurrection.

What can marketers do to improve the likelihood of new product success in an age of promotion and
unprecedented competitive response? Testing the product before launch is one solution.

Typically, if a company decides to do a test market before launching the product, managers run a test
market. Traditional test markets are fraught with problems, starting with how companies select them—
often because they are easy to manage rather than because they represent the actual markets a
company wants to reach. Traditional test markets are expensive and competitors can steal ideas and
sabotage results.

A well-done simulated test market, on the other hand, reduces the risks of launching a flop by collecting
data a company needs to forecast the likelihood of success, more securely and more efficiently than a
traditional test market.
http://www.copernicusmarketing.com/univers/reasons_for_product_failure.shtml

The cost of service failure

Radhika Chadha

Good service creates a virtuous cycle - it improves the brand experience, lowers
customer acquisition costs, and betters brand profitability.
Compiled by PS Kar, for RIMS Rourkela

IN my last piece, I had talked about Indian companies having a long way to go before
concepts of service quality are internalised into every process and mindset. I also
talked about how the improvement in service levels has been powered by competition,
and not out of enlightened self-interest.

The fact is, improving service quality is expensive. Good service quality needs
brainwashing frontline people so that customer requirements dominate their thinking.

It needs an obsessive attention to processes and systems to see that goof-ups are
minimised, and that is expensive too.

It may not always need a huge investment in technology - some of the best service
providers I know are those with a good manual system for customer and service
tracking. But in today's hi-tech world, it is impossible to conceive of good service levels
in, say, cellular companies, without a high IT investment. That costs money too.

When providing service is such a huge cost-centre, and the payoff is as nebulous a
concept as a `happy customer', is it any wonder that it gets relegated to a minority
priority? Or that so called techie solutions are used as a cosmetic solution to a real
problem?

The first thing that companies need to understand is that good service creates a
virtuous cycle - improving the brand experience, lowering customer acquisition costs,
and improving brand profitability.

The second thing is that while a service mentality costs a bomb, the lack of service also
results in a cost - not easily measurable, it is true, but the impact of which is insidious,
far reaching and exponentially more expensive to correct. Service has to be
exceptionally good to be praised - but only slightly bad to be demonised. That's not fair,
but life rarely is!

The virtuous benefit of loyalty

Loyalty affects the cost of customer acquisition and customer profitability. Customers
have a choice. The more the choices, the more difficult it is to ensure that choice is
exercised in your favour. Which is why companies spend so much money on brand
support, in an effort to influence that elusive factor called loyalty.

With increasing competition, companies (and brands) are becoming more generalist
and less niche-oriented. What does this mean? In an effort to cover all bases and push
for growth, companies straddle more and more segments of products and services.

Where the company has a single brand across more products (like LG), the costs of
branding also fall significantly. Where a company offers more and more services at a
single point (like Apollo Hospital), the costs of acquisition of the customer drop when
spread over the gamut of services rendered.
Compiled by PS Kar, for RIMS Rourkela

This gives birth to a virtuous cycle in itself - a customer happy with an LG TV, would
(hopefully!) be attracted to the LG refrigerator, and then an LG washing machine and
so on.

The flip side - if the service experience for the TV is lousy, the company could lose the
entire basket of that household's potential purchases in one fell swoop.

Competition reduces switching costs

Remember the days when only landline phones were available? We put up with lousy
phone connections, unexpected disconnections, indifferent service at the exchanges,
flash strikes by operators, and startling bills. Then cell-phones arrived and the world
changed. Did the landline monopoly wonder why people were shifting away from it,
even if it meant paying far more? Not till recently!

In turn, the third and fourth players arrived in cell-phones, and the world changed yet
again. Have the existing companies thought about why almost all the growth in the
user base is being taken by the new entrants, and practically none by the existing
leaders? And why some consumers are shifting services even if it means changing
phone numbers?

As an international survey of complaints has verified (see box), customers vote with
their feet when unsatisfied with service. The more the competition, the more the
choice, and the easier it becomes to reject an option that fails to meet the mark.

An unhappy customer is an ambassador of ill will

The other day, while waiting outside my son's school, I heard one mother animatedly
informing a captive audience of other mothers about the rotten time she had at a local
hospital with her sick child. How they gave her a runaround from one department to
another, how the staff was so rude and unfeeling. You can be sure of one thing: none of
us listening to her that day would take a chance with that hospital in the near future.

One survey indicates that every dissatisfied customer, who may not complain to the
company directly, talks to a minimum of 22 people outside of her experience. Word of
mouth matters even more when there is a high cost of bad service: where health is the
issue, like in the above example, or where religion is involved (last time I had
mentioned a pizza chain delivering non-vegetarian food to a vegetarian household). In
decisions like this, where the emotional cost of service failure is high, the impact of ill
will is very far reaching.

If urban legends are anything to go by, such anecdotes get suitably embellished with
each retelling (Do you know what I heard the other day?'), till the later auditors of
these Chinese whispers get a fully negative picture of the service brand. Companies
spend so much on brand-building and communication: remember, each customer
carries with her a brand experience. Will your brand of service improve or suffer with
the retelling?

In the accompanying box, I have summarised some of the results from TMI's latest
international survey. What comes across is that despite some regional differences, the
Compiled by PS Kar, for RIMS Rourkela

way people feel about complaining is universal. The bottomline: address the problem,
and you will be rewarded with loyalty. Get it wrong, and they will vote with their feet
and tell the world about it. How you improve service, and how you handle your
unhappy customers, will be a crucial competitive advantage in an increasingly service-
oriented world.

Address the problem well, be rewarded with loyalty

Forty four per cent of respondents said they usually complain if they are unhappy with
the product, slightly less said they usually complain about service, but only 10 per cent
say that they never complain. Customers are not only complaining more, but are also
becoming more aggressive and angrier when they complain.

Word of mouth advertising - good and bad - is alive and well

When customers complain and their complaint is handled well, only five per cent were
likely not to repurchase. Most people were likely to use the organisation again and over
90 per cent said they were likely to tell others about their positive experience.
However, get it wrong and customers will vote with their feet and again nearly 90 per
cent will tell others.

Customers want complaining to be quick and easy

The two top reasons for not complaining are `Lack of time' and `Too much trouble'.
The next two were `Why bother, the organisation won't do anything' or `I'll just get
sent on a wild goose chase'. Both indicate cynicism and apathy towards organisations,
which might be justified - within organisations less than 30 per cent of respondents said
they tell customers if their complaint has resulted in improvements to products or
services.

Customers prefer to complain either in person or over the phone and want quick answers

Around 10 per cent of consumers prefer to complain via Internet and e-mail. Nearly 75
per cent of respondents want to complain to another person, either in person or over
the phone. Of these, 48 per cent expect the problem to be solved in the same day. This
could prove to be a real challenge for organisations where the frontline staff are not
empowered to deal with complaints, which also arises as a significant issue in the
survey.

Within organisations, training was the lowest rated factor

Yet, people want more training because of rising customer expectations and the
increase of anger and aggression.

Only 24 per cent of employees indicated that they received adequate training to handle
complaints and in the worst performing organisations, this dropped to seven per cent.

Organisations don't have customer-friendly complaint systems

Compiled by PS Kar, for RIMS Rourkela

Though 79 per cent of the organisations believed that satisfied customers are an
organisation's future, only 43 per cent of respondents felt that complaining customers
should be thanked for providing feedback, and only 38 per cent felt their systems made
it easy to be a customer.

(Source: International Complaints Culture Survey, 2001, TMI 200 organisations and
20,272 people from 14 countries, including India, participated)

(The author is a Chennai-based consultant. Feedback can be sent to

bleditor@thehindu.co.in.)

www.thehindubusinessline.com/catalyst/2002/08/29/stories/2002082900170400.htm

Effective service recovery is vital to maintaining customer and employee satisfaction and loyalty, which
contribute significantly to a company's revenues and profitability. Yet most customers are dissatisfied with
the way companies resolve their complaints, and most companies do not take advantage of the learning
opportunities afforded by service failures. The authors provide a research-based approach for helping
managers develop a comprehensive service recovery system.

To encourage dissatisfied customers to complain, leading firms set performance standards, often through
the use of guarantees; communicate the importance of recovery to employees; train customers in how to
complain; and use technological support offered through customer call centers and the Internet. In resolving
problems, companies need to focus on providing fair outcomes, procedures, and interactions. Successful
companies develop hiring criteria and training programs that take into account employees' service-recovery
role, develop guidelines for service recovery, are easily accessible to customers, and use the information in
customer databases to solve problems.

Firms promote organizational learning by documenting and classifying complaints; useful methods include
creating internal complaint forms, accessing complaints made to front-line employees, and categorizing
customers who complain. Finally, companies need to generate additional information on service quality,
disseminate it to those responsible for implementing improvements, and identify those process
improvements that will have the greatest impact on profitability.

Customer conflicts are inevitable. A powerful service-recovery strategy can turn these conflicts into
opportunities to improve performance and raise profitability.

Stephen S. Tax is associate professor of marketing at the University of Victoria, British Columbia. Stephen
W. Brown is professor of marketing at Arizona State University and holds the Edward M. Carson Chair of
Services Marketing. He is also director of the Center for Services Marketing and Management.

sloanreview.mit.edu/smr/issue/1998/fall/6/