Q&A with St.George Bank Limited - Customer Service Institute of ...

Independent studies reveal
that COBS is costing
companies millions of dollars
each year and its reduction
can transform marginally
successful companies into
profitable ones. Yet most
executives believe that their
company’s COBS is less than
5%, or just do not know what
it is.
“Today,” Bill explained, “our rule is to turn
around every application the day we get it. If it is
complete, it gets processed. If it is incomplete,
it gets sent back for more information. If we
are going to start queuing applications, then we
have to build a queue management system to
track the queue and make sure we don’t lose
stuff that gets held or hold some transactions
forever. But that’s a relatively small expense.
“The greater expense,” he continued, “is in
customer support calls. For every day that
we delay turning something around, a certain
percentage of people are going to call us to ask
where it is. So we get more calls. If we are
managing a queue, then we have to be able to
look in it to see where a particular transaction
is. We have to be able to predict when it’ll be
handled. We have to prepare for calls from
legislators who want this constituent or that one
given priority. No queue, no problem. When we
turn things around fast, we get very few calls.
When we do get a call, the status is either ‘we
didn’t get it yet’ or ‘it got mailed back to you on
such-and-such a date.’ No requests to jump
the queue because there’s no queue to jump.”
So he convinced me and I didn’t cut that part
of his budget. And notice he was only talking
about direct expense. He wasn’t even talking
about the happy customers who get things back
fast.’
To further underline the cost benefits of a
implementing a Customer Service management
system the following example is offered. A
manufacturing company had annual sales
of $250 million. Its finance department was
instructed to calculate the total cost of repair,
not getting information right first time, rework,
scrap, service calls, refunds, sales commission
paid on returned product, warranty claims and
complaints. This aggregated cost; called the
Cost of Bad Service (COBS) amounted to 20%
of their annual sales. A 20% COBS implied that
during one day of each five-day workweek, the
entire company spent its time and effort making
non-conforming or scrap products, which
represented a loss of approximately $100,000
per day.
Experts have estimated that Cost of Bad
Service (COBS) typically amounts to 5% to 30%
of gross sales for manufacturing and service
companies. Independent studies reveal that
COBS is costing companies millions of dollars
each year and its reduction can transform
marginally successful companies into profitable
ones. Yet most executives believe that their
company’s COBS is less than 5%, or just do
not know what it is. All levels of executives
recognise that a customer service management
system is an absolute necessity to survive and
succeed in today’s business environment.
CUSTOMER SERVICE EXECELLENCE
THE MONTHLY MAGAZINE OF THE CUSTOMER SERVICE INSTITUTE OF AUSTRALIA
5