Capacity and It's Impact on Customer Service | SMART Marketing ...

Hairried

My wife has a preferred local hair salon that she visits less frequently than she?d like, mostly due to exorbitant, premium costs. I know how the saying goes, ?You get what you pay for.? Heck, I?ve even heard myself echoing this over the years on occasion. This salon, on the surface, seems to be a good illustration of that saying with several talented employees decked out in New York black, a comfortable luxurious, leather-couched atmosphere including champagne while you wait, and a steady stream of seemingly, well-to-do clients. However, as of recently, a new reason for even less frequent visits from my wife has confusingly emerged?the hair salon either is not interested in her business or they are just ?too busy.? I?ll give them the benefit of the doubt by assuming the latter and try to prove that. Here?s goes?

• Example 1: The past two times my wife has tried to ?book? an appointment to give said-hair-salon her business, they responded saying they were booked solid through the next six (yes, six!) weeks. To make an appointment for a time that was convenient to my wife?s schedule would mean booking two-plus months out. The hair salon, however, was not empathetic yet happy to put her on the wait list for ?cancellations.? If she wanted a real appointment it?d have to wait until May. In layman?s terms that means ?after-season? when business is expectantly slower. Knowing how quickly hair grows and changes, and how important events call for hair-done-right, this seems extraordinary and not acceptable.

• Example 2: After actually making her last appointment which included my wife AND our daughter (side note: the visit would have amounted to over $250 in hair treatment!) which she also had to wait weeks to secure that appointment, the salon had the cahonas to call the day of the appointment and ask to reschedule, for reasons ?unknown.? Really? Wait several weeks to spend over $250 for about 1 hour?s time and then have to reschedule and wait another several weeks?

Both of these examples made it obvious to me that, not only is the salon supposedly ?too busy? but they are not interested in lower priority customers during their peak season. It has left my wife, a potential regular customer?during both peak and off-peak seasons, mind you?despondent and furious. She pays the suggested rate card, tips well, and is a relatively easy, younger head of hair to work on. I mean, how different is a high-priority head, or customer, different from hers?

This hair salon?s poor treatment of, and lack of capacity for, a potential higher-valued customer?

Take a pause to do the math quickly here folks:
+ frequency + retention ? cost to serve customer = + profitability + lifetime value

?led me to think through the concept of capacity and how its impact on customer service may be overlooked by this salon and others, perhaps in advertantly.

Capacity, Further Defined
Capacity, according to dictionary.com can be defined with relevance to our topic as:

1. The ability to receive or contain: This hotel has a large capacity.
2. The maximum amount or number that can be received or contained; cubic contents; volume: The inn is filled to capacity. The gasoline tank has a capacity of 20 gallons.

So, in a service business, capacity would mean the maximum number of person-hours that can be retained to perform specific service tasks and/or projects. This makes sense in the hair salon example mentioned earlier. There are only so many stylists that work for the hair salon, with so many available time slots for appointments within one given day. Once all of those slots are booked, it pushes available time slots further into the future. Premium time slots are more coveted and book easily whereas others, off-peak or off-season, are likely more available and accessible.

Capacity and Its Impact on Service
It?s interesting to note the impact of capacity on customer service. Take a restaurant with a host, five waiters, two chefs and a wine steward, for example. If you walk into that restaurant and as the dinner evening?s first and only customer, it?s likely you will get premium level service from several, if not all, of that staff. The table will be sharply made. Your order will be taken expeditiously. Food will be prepared quickly and served hot. And, it will be a comfortable, high-touch dining experience. Fill that restaurant to capacity and it is likely service levels will change. Now, take that same filled restaurant and subtract three of the wait staff, one chef and the wine steward, and service really starts to diminish. The business and customers suddenly become, at risk for loss (i.e customers leaving, poor referrals, etc.).

At or beyond capacity does not have to necessarily equate to poor customer service. Remember, customers who have an affinity for your brand, product or service also have a threshold for their expectations. Seinfeld?s Soup Nazi was a great example of this. Customers would wait in excessive lines and be treated inconsiderately to experience an extraordinary bowl of soup, taken to go, nonetheless. It created fear and anxiety among many customers. Truth be told, it was the Soup Nazi?s exceptional product, not the wait or poor treatment, that customers desired the most. Had he improved the waiting experience by providing new soup samples, wi-fi for the busy professional, and/or compliments to each customer, it is possible demand and loyalty would have excelled. He might have even been able to charge a higher premium for his soup and generate higher profitability with the same level of personnel and infrastructure; capacity.

The Soup Nazi?s capacity and impact on customer service placed his business at risk. This was further illustrated when Elaine got a hold of his recipes. Had she opened up a soup kitchen down the street promoting the same Soup Nazi product, yet with no wait, kinder service and at better prices, she might have very well stolen some or all of the Soup Nazi?s business. It?s important to constantly remind yourself that:

• Customers have choices.
• Competition is formidable.
• And, most businesses depend on how defendable a product or service you have, for the customer threshold on service, pricing and other factors.

Capacity-Service Tips
Here are a few tips to keep your capacity and its impact on service in check to optimize your business:

1. Prioritize Your Customers Yet Treat Them All As VIPs: know the average revenue and/or profitability of each customer and their lifetime value (including referral value), yet treat them all as important VIPs. Low revenue generating customers can become high revenue generating customers and/or the best referrals. Don?t take any customer, and their potential for business, for granted. Take time to recognize customers and their value for your business (without customers there is no business). Be polite and thank them profusely for choosing your business.
2. Be Honest and Forthright. Make an Effort by Giving Alternatives to Satisfy Their Buying Need: If you?re at/beyond capacity, be sure to tell your customers, but not at the expense of making them feel unimportant. Something like this, goes a long way, ?Mrs. Customer, I?m sorry to inform that we?re currently at capacity and cannot accept your reservation during the time that you want. Your business is extremely important to us. Here are a few alternatives that may satisfy you.? Offer a discount or other incentive for the inconvenience so not to lose their business. Make the effort to retain your customers as this could be your last chance to do so. And, it costs more, generally, to acquire a customer than it does to retain an existing one.
3. Manage Demand, Service Capacity and Resulting Profitability, Carefully and Regularly: If your problem is high demand beyond capacity and you are not interested in increasing capacity (via technology, more employees, etc.) for whatever reason, you may consider raising your rates or not taking on new clients to prevent your business from becoming at risk. Don?t be afraid to drive demand to accommodate capacity with price, service and other functions. Rental properties have peak rates, for example, when demand is most high. This might take some testing but could be well worth it.

To reiterate, your customers have choices. Competition is formidable. And, unless your product or service is 100% defendable, decreasing service because of capacity could put your business at risk. Manage your business? capacity and service levels to help acquire, retain and grow the most profitable customer relationships and, ultimately, achieve business success.

About the Author

Angelo Biasi is General Manager of SMART Marketing Solutions, LLC, a leading full-service integrated marketing company in Florida and New York since 2001. He has helped create and execute marketing plans and integrated marketing solutions for companies such as Playtex, Bic, Rogaine, Tauck, and over 35 colleges and universities, to name a few. Angelo has an MBA in Marketing from the University of Connecticut and teaches Marketing at New York University where he has for over six years. He has been quoted and/or featured in USA Today, Mobile Marketer magazine, Mobile Commerce Daily, Luxury Marketing magazine, BNET TV and Business Currents magazine, to name a few. For more information or to learn more, email him at abiasismartmarketingllccom??(abiasismartmarketingllccom)??, visit www.smartmarketingllc.com, call him at 239.963.9396 and follow him on Twitter @angbiasi.

Source: http://www.smartmarketingllc.com/2012/02/27/capacity-and-its-impact-on-customer-service/

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