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

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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
The diagram below provides a framework for calculating COBS as a percentage of sales. Cost of Bad Service (COBS) as a % of Sales Unnecessary Capacity Rework Compensation/ Refunds Warranty Costs Lost Sales • Planned overcapacity to anticipate problems • Increased FTE to manage Customer Service Issues • Handoffs between silos • Reliance on cascade information dilutes effectiveness of communication and training • Rework Costs and Restocking costs • Non-material rework costs (sorting, handling, downtime and expedited shipping) • Cost of credit notes • Product performance not as specified • Damage, Inspection Data, On time accurate delivery • Warranty costs include customer credits. • SLA Penalties • Cost of complaints handling, Ombudsman/ Ministerial issues and compensation • Complaint management • Lost Revenue • Customer Churn Costs • Excess Inventory carrying costs due to fewer sales • Inaccurate tracking of customers • Poor Customer Satisfaction as surveyed • 360 degree view of the customer and all products and interactions • Cost of Repair system • Not getting it right the first time • Cost Per Sale/Customer Acquisition. • Cost of Commission on sale that is later reversed • Some back-end processes may not kept pace with promises made at point of sale, resulting in the customer needing to contact the organisation to correct errors, clarify information or to arrange delivery of what was promised. • Cost of incorrect invoicing The Cost of Bad Service for an average company is estimated at about 30% of sales. When reviewing Australian industry, this can range from: • under 3% for companies who have achieved Customer Service Excellence • approximately 15%-25% for companies who have spent one year on their customer service excellence journey • approximately 25% to 40% of revenue for companies who have not implemented any customer service management system. The savings for non-manufacturing service companies are potentially larger and less understood than manufacturing organisations which have long examined ‘quality processes’ and are better able to currently account for the Cost of Bad Service. A large Fortune 500 communications company calculated its Cost of Bad Service at 8.6% of sales in 2005 and has set a goal of 5.4% for 2007, which will result in a savings of a little less than $1 Billion per year! Most service projects require its champions to build a business case to justify the capital spend. CUSTOMER SERVICE EXECELLENCE THE MONTHLY MAGAZINE OF THE CUSTOMER SERVICE INSTITUTE OF AUSTRALIA 6
Page 1 and 2: customer service excellence The Off
Page 3 and 4: St.George Bank Limited Antoine Casg
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Page 7 and 8: Service Manager Service M anager St
Page 9 and 10: New 100% Government Funding for CSI
Page 11 and 12: u Develop and assess the success of
Page 13 and 14: *Terms and Conditions based on the
Page 15 and 16: Certied Customer Service Manager Co
Page 17 and 18: Winning back lost custom and reputa
Page 19: A little considered factor in justi
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Page 25 and 26: A Key Tool in CSIA’s Methodology
Page 27 and 28: Many times projects actually report
Page 29: I just wanted to drive home that po

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