Many Happy Returns and the Zero-Sum Game

I call it the zero-sum game. The long held belief that there is a trade-off between providing good service and a corresponding increase in costs. The counter-intuitive truth is that costs go down when good service is provisioned.

A recent article in the Wall Street Journal – Retailers Loosen Up on Returns - provided an MIT study supporting the fact that those who have customer-friendly return policies have higher sales, profit and "word of mouth" marketing. The bean counters and financial analysts that watch costs for a living must be in septic shock.

How can this be?

When customers don’t get the service they want, need or expect, they complain. And nothing is more annoying than buying a gift for someone that can not be returned. The result is predictable and costly. The resulting outcome is failure demand (demand caused by a failure to do something or do something right for a customer). What is the cost of that, Mr. Bean Counter?

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Whilst managing visible costs, financial knuckleheads miss the real costs hidden away in the psyche of the customer and their ability or inability to get value in service.

The customer-retailer relationship has to be founded in trust, not suspicion. Unfortunately, too many retail policies take the attitude that all are guilty until proven innocent.

Predictably, a technology company (Retail Equation) has developed a software package that helps identify "cheaters." The software focuses on "return optimization" according to their website. Of course, this is, like the IVR, is where people are better at some things than technology.

Instead, we put workers in bad systems (structure, measures, thinking, work design, etc.) and pay through the nose for technology solutions that are better done by people.

Most customers are honest and setting up a system to avoid or find "cheaters" is costly to those that don’t cheat. Better to design work that puts the front-line worker in control of the transaction, rather than some manager five layers removed from the situation.

Management by edict and without knowledge of the situation is more costly than leaving the decision to the worker and customer. In fact, you wind up with an organization with fewer layers of management and more engaged workers.

There is no zero-sum game when it comes to good service. Good service always drives profit, revenue and "word of mouth" marketing. Having workers in control of the transaction will allow costs to fall and informed decisions to take center stage.

Like what Tripp has to say? Check out his column on 1-800 Flowers.