NEW: Louis Coutts

Think of the value chain like a bicycle chain – one broken link, and the bike won’t go!

Have a nice day

Perhaps the most misunderstood concept in the lexicon of management is that of “customer satisfaction”.

Kids at the check-out counter of supermarkets are “trained” to offer a euphemism such as “How is your day?” Most of them recite if efficiently as they move into the more serious and mundane process of scanning the barcode of your groceries across the electronic reader.

If you do think to acknowledge their greeting, it is rare for them to engage with you, and indeed one suspects that they are discouraged from doing so. Management is convinced that such a cosmetic technique is demonstrative of their commitment to customer service and customer satisfaction.

The extent of customer satisfaction is determined by the effectiveness in which organisations manage their value chain. That is the chain of events in the process of bringing a product or service to a customer. 

It starts with the supplier, involves the internal organisation of the business and ends up in the hands of the customer. By way of example, if a business promises a delivery date to the customer but the supplier slips up, it is the customer who suffers and it is the customer who believes that the business has let them down.

If a receptionist forgets to give a sales person a message or if a sales person’s order gets caught up in an inefficient administrative process, or if a down-sizing decision is made to cut costs without measuring the effect it will have on customer service, links in the value chain don’t work and the customer gets the brush off.

As products increasingly become commoditised and margins are threatened, the extent to which the value chain works smoothly determines the extent of a business and its capacity to grow.

If we think of every step in the process of bringing a product or service to a customer as critical as a link in a bicycle chain, (one broken link and the bike won’t go) then we get a greater idea of the importance of ensuring that even the simplest process can influence success.

Get it wrong and a customer can be offended. Make the value chain work as effectively as possible in recognising the needs and expectations of the customer, and remarkable things can happen like increased sales and greater profits.

And yet we still see signs where this simple message is either not understood or ignored in comparison to outstanding examples of how it works effectively. The number of times that sales people can interrupt production to give priority to a customer without recognising the cost or the damage that is done to other customers who are kept waiting is alarming in this day and age. The value chain is deliberately broken.

The frequency with which bean counters ignore marketing acumen and insist on one-size-fits-all is another mysterious managerial technique in an age of diversity. “Don’t stock Turkish coffee because we sell so little”. That’s great for supermarkets in areas unpopulated by Turkish people, but if you live in a Turkish community and the supermarket doesn’t stock Turkish coffee, the customers leave in droves.

Take standard brands off the shelves and rename them with a generic name. It makes sense for the bean counters but not for the customer. Ultimately the bean counter discovers that the numbers aren’t good and so the blame goes to the guy in the shop.

Every decision in every business has to be driven by the knowledge that if the value chain is not working well, the business will lose customers and growth will become increasingly difficult.

It seems that one major reason for value chains breaking down is that management often does not realise the importance of getting every step in the chain right. Decisions are often made on numeric rather than marketing metrics. An opportunity to cut costs might well be an exercise in wrecking the value chain and losing customers.

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