Cost benefit

There is actually an interesting underlying point to yesterday's post, which is that it's very hard to get customer service right. There's always a tradeoff between cost and service, and what you want is something that maximizes the return on your customer base. So companies periodically have an incentive to push the envelope, to see how badly they can treat you before you'll walk.

I know, I know, I'm a libertarian, I love the market? Why don't I love this? Well, I don't unlove it, exactly, because it's certainly not unique behavior to corporations. Spouses test how far they can push their spouses, friends do it to friends, employees to bosses, and so forth. No one knows the limits of the human heart; the only way we can find out what they are is to grope blindly for them.

That said, I'm pretty sure that the clerk at the hotel was not under the impression that I might be okay with her giving away my room.

What she did think is that I might not do anything about it. What Comfort Inn did to me usually has a low price; whoever bribed that night clerk essentially paid her to spend twenty minutes on the phone with me shouting at her, when she wasn't doing much anyway. Most people, tired and exhausted, will just forget it the next day, particularly those who are traveling on an expense account, as most airport travelers are. Even if they did have the will, most people certainly don't have the means to do what I did--to record their credit card company exposing the lie and then confront the hotel clerk with it. (Although the means I used can be acquired for well under $50, and include free, if occasionally wonky, phone calls anywhere in the United States.)

The reason I wrote that post--other than a fair amount of righteous anger that I needed to use up somewhere--is that I shouldn't be the only one who has that redress. All journalists know that we have an out, in really bad customer service situations: we can call the press office. We don't even need to threaten them; if our name is in their database, the press office will make it all better very, very fast. All the journalists I know are also cognizant of the fact that it's really kind of appalling that we have a special out, and use it very rarely. I've never done it myself, though I did once call the press office at Dell to let them respond to something I'd written about their customer service.

But it shouldn't be true that Comfort Inn has to make good and apologize to anyone who has the knowlege and means to force them to capitulate, and no one else; it shouldn't be the case that selling someone's room out from under them, which really is a loathesome practice (I wouldn't have gotten on that flight in the first place had I not thought I had a room at the other end) has such a low cost.

I have no taste for revenge at all; past wrongs just don't interest me. But I do think that the cost of doing things like this should be a lot higher. And the way they get higher is that when things like this happen--truly outrageous things that are in no way a matter of opinion about the correct level of customer service--is that everyone goes back to the company and forces them to spend time, energy, and money making it right to the best of their ability. Letting it go may be good for you, but it's bad for everyone else, especially the next poor bastard who has to sleep on the floor of the Jet Blue terminal because the hotel sold his room.

On a footnote--and here is where I once again revert to sounding like I'm 12 rather than 34--it had never occurred to me that when you bribe a hotel clerk for a room, this is what you are bribing them to do to someone. Thankfully, I've never bribed anyone--I lack the chutzpah--but I'd feel pretty awful if I had, and I'll never laugh at it when someone else tells such a story again.

Comments

It's interesting.

When I get screwed like that, I deal with competing feelings - make a stink, or go along to get along. My first impression is that former is selfish, while the latter is not. The truth is that it is just the opposite.

I think that the "screwers" can often get away with it because there is a line of people behind the "screwee". That further blurs the line between selfishness and altruism because those with whom you have common cause are being inconvenienced by your actions if you argue.

Posted by Njorl | October 26, 2007 10:11 AM

A CEO at Burroughs, back in the antediluvian times when they made computers (and still had a corporate identity, for that matter), once described the ideal customer as "surly but not rebellious."

Sometimes a little rebellion is a good idea.

Posted by TheRadicalModerate | October 26, 2007 10:33 AM

I've recently had to raise a stink with the local cable provider, Comcast. We've had severe problems with picture quality on the digital signal and slow performance on the cable modems, probably due to degraded lines and amplifiers in the area. The company customer service system is badly broken - there is no way for the phone reps to communicate to the local repair staff except via web forms and their local phone numbers are unlisted. The only way I have been able to get the attention of local repair service is to email the company CEO, the regional VP and the local manager detailing the problems of missed appointments, poor signal quality, lack of callbacks from local managers (despite promises to do so), etc. I've found that when the CEO's executive assistant calls the local operation, you get lots of help from the local staff. Alas, I've had to do this twice in the last 3 months, but they may have finally fixed the problem. It also helps that I have a degree in electrical engineering and can call BS when the CSRs try to explain away my complaint as "it is due to the position of the sun in the sky".

There's another factor companies should consider before pushing the envelope. If things go horribly bad, you end up in front of Congress and a hastily written law regulates your industry further. The overbooking policies of US Air, which have gotten quite a bit of press recently, what with the woman who was arrested for protesting being bumped too vehemently and the op-ed piece in the WaPo, are possibly going to result in Federal regulation of airline reservation policies. Is this the right thing to do to an industry that is already in trouble due to the TSA and fuel prices?

Posted by ech | October 26, 2007 10:34 AM

I recently had a bad experience with an upscale business hotel. The only amenity I needed was internet access in my room. And we were assured, when we booked, that that would be the case.

Turned out to be a lie. I checked in late, went to bed, and in the morning found there was no connectivity. When I asked about it I was told that there should be wireless access, but some rooms, because of the layout of the building, might not get it.

"So can you give me another room."

Sure, no problem. When I came back from my meetings in the evening I should check in at the desk and they would help me out.

In the evening, I found out that none of the rooms had wireless access, so moving my room would make no difference.

Classic buck passing. Customer service meant telling the customer a happy untruth, and letting someone on a later shift deal with the consequences.

The got away with it because the trip was expensed to a client. We could have wasted a day on the phone getting a refund from the deceptive cowards at the hotel.

But our client didn't care, so why bother?

And admittedly, this was just a minor inconvenience.

Posted by Henry | October 26, 2007 11:03 AM

I still think airline service would be improved by more chapter 7 liquidations, and fewer carriers operating while in bankruptcy.

Posted by Will Allen | October 26, 2007 11:37 AM

Contrawise, here are a couple examples of customer service done right, both involving Qwest:

1. My folks lost Internet at their house after a storm, and the (owned, not leased) DSL modem appeared to be non-responsive. Within two days Qwest had replaced it on-site without charge or obligation, and the technician explained that Qwest was blanket-replacing all instances of the failed older model after determining that it was designed with inadequate surge protection.

2. I signed up for basic land-line and DSL with Qwest when I moved into a new apartment:

a) The sign-up process was done online;

b) I received a customer-care call to my supplied cell phone number from a well-trained rep the day before start-of-service, which included a review of my account options and fees, and the ability to make changes;

c) the next evening the line in the apartment was still dead, and after I called Qwest, a wiring problem was remotely verified and a technician was scheduled for the next morning;

d) the next day around 11am, a Qwest rep called to state that the technician was running late but would be on-site around 1pm;

e) that evening, there was a tag on my door indicating that the technician had found and corrected a wiring problem in the exterior junction box;

f) nirvana.

Qwest nearly lost it with the whole Naccio and bankruptcy thing, but seems to have figured out a thing or two since then. Every company should be this good, especially considering the run-around people often get from the telecom and cable MSOs.

Posted by anony-mouse | October 26, 2007 1:26 PM

This is precisely why I'm glad I have a husband who has no compunction about chewing out customer service people if need be. I find that I'm way too willing to let things go, even when I shouldn't. But he's a pit bull, so I'm glad to free-ride on the improved service we get as a result.

Posted by Christina | October 26, 2007 1:32 PM

I'm not sure "bribe" is the only plausible explanation. Imagine this scenario:

Another traveller is transferring through JFK, and finds out at 11 PM that the tail end of his flight is being cancelled. He goes to the Comfort Inn, and introduces himself as a Platinum Member of whatever Choice calls their loyalty. The clerk looks his account number up, and confirms that this person averages five nights a month in Choice Hotels. He explains his predicament asks what they can do for him.

The clerk looks and sees that all the rooms are already filled, excecpt form one, which is booked to a Megan McArdle, who is not a member of the loyalty program, and was supposed to have arrived an hour ago.

What do you do?

I suspect that a hotel clerk at a hotel airport has some experience that on a stormy night, a fair number of those who book rooms end up not showing up. In front of her, she has a loyal customer, who could become not so if she does not accommodate him. So she gives him the room and hopes this Miss McArdle never shows up.

Now, that doesn't make it right, particularly the lying part (it might have been wise for her to "accidentally" attempt to authorize the card for a ridiculously high amount, but I don't want to give anybody ideas). But from Choice/Comfort Inn's perspective, it may be that she did the right thing, especially without the knowledge that Megan McArdle writes a well-read blog.

So, nobody's acting malevolently, but that doesn't change the fact that McArdle out of a room she thought she had. Sounds like a "market failure" to me.

Posted by JohnMcG | October 26, 2007 1:39 PM

Perhaps the potential that everyone is a blogger is suddicient to remedy this, perhaps not.

Let's face it, there aren't many hotel rooms in the immediate vicinity of JFK airport. Faced with a similar predicament, I would probably still go there, my distaste for their practice here notwithstanding.

Just like we all keep using the airlines, in spite of one horror story after another.

Posted by JohnMcG | October 26, 2007 1:41 PM

"There's always a tradeoff between cost and service..."

I was thinking about this last night, as my girlfriend and I were waiting in a McDonald's drive through line and saw two cars bail on the line and drive away because the wait was so long. This wasn't a result of bad service, just slow service. Those two cars represented $20+ of revenue -- enough to pay everyone on the crew a dollar extra per hour, easily. Would a dollar higher salary attract more efficient workers and make the lines go quicker, thus leading to less lost revenue?

Shouldn't there be some overpaid MBA consultant keeping an eye on this?

Posted by Fred | October 26, 2007 1:52 PM

Good customer service can occur in some unlikely places. I had to go to a New York State DMV office yesterday to renew my car registration, having missed the deadline for an online renewal. Knowing what DMV's are like, as well as New York State bureaucracies in general, I was prepared for an agonizing, hours-long ordeal.

As I parked my car near the office, ready for unspeakable horrors, I took a glance at the dashboard clock. It read 8:31. When I got back to my car, having renewed the registration, the clock read 8:38. Yes, that is correct, seven minutes in and out.

Posted by Peter | October 26, 2007 2:11 PM

Decades ago I was advised to use an American Express card when booking hotel rooms. Supposedly, American Express was more likely to punish hotels that mistreated AmEx customers, so hotel clerks would give away the rooms of people using other cards (or none, in those days) first. Since American Express has expanded its business so much and reduced customer service in proportion, I can't say whether it makes any difference which card you use.

I wish there were some card issuer or reservation service which could and would sanction hotels and car-rental agencies for mistreating cardholders (I don't think anyone can do anything about airlines). Suppose American Express threatened to raise its discount fee 1 percent for three months to any hotel chain that screwed over more than one AmEx customer per month? (AmEx would have to do it once or twice to prove they were serious.) That would have a really fine effect. Indeed, I would be willing to pay extra on my end for that... say, an American Express Tungsten-Carbide Card with a $300 annual fee and a credible promise to protect cardholders?

On another theme, Megan has hopes that someone in Comfort Inn's management will question the night clerk about her misbehaviour.

(Pause for uncontrollable laughter, followed by gasping, hugging aching sides, and wiping tears from spectacles.)

So at this point, class, we pause to consider a problem in business ethics:

What should a Comfort Inn manager do when he finds out a clerk took a bribe to give away a guest's room?

(a) Fire the clerk. She violated a trust and damaged the hotel's reputation.

(b) Do nothing. The incident won't affect demand for rooms anyway.

(c) Demand a two-thirds share of the bribe. There are plenty of applicants for every clerk's job...

Posted by Mark Seecof | October 26, 2007 2:15 PM

Wow.

You mean people expend their own resources creating public goods without government coercion?

Amazing.

Posted by Gil | October 26, 2007 2:19 PM

Actually, what you did by using yor blog to publicize the situation is a perfect example of the market at work. But its using modern communications techniques to create better information, and information that, in a previous era (as in not that long ago) would have never gotten out.

This motel chain, like many other businesses, assume that jilted customers will do nothing because their own alternative is a law suit that will be too much of a hassle for most to undertake. They are also less concerned about bad publicity because getting any standard print publication, even a small town newspaper, let alone television or radio news to cover an event like this is almost impossible these days.

By blogging, you had the ability to get information about the situation out to people who otherwise woudl have never heard about it...and you were able to do it in real time. It might have been venting for you but for the rest of us it was instructive.

This has to have some impact on customer service, and company psyches. If you don't have your own blog you can simply go to any of the hundred others that deal with travel and get the word out. You can repeated callout the offending company by name, and you will almost certainly convionce at least one potential customer that they should stay somewhere else.

Think about I Tunes. One of its best features is the ability of ordinary users (as opposed to a professional critics who likely would never listen to the cut you are thinking about buying) to post a review of a CD or song. That has saved me countless times when a great description written by a marketing department was trumped by something written by a purchaser.

You can have a real and negative impact on Comfort Inn if you continue to write about your experience. That's much closer to the perfect information free market people are always looking for than the one-sided company propaganda we've usually heard before.

Posted by PolicyWonk | October 26, 2007 2:48 PM

Fred, that's something I wonder about a lot. I see a lot of e.g. McDonald's franchises that get frequent, *predictable*, periodic peaks, and reckon that if I could get a team of ~10 motivated people, and thereby be able to predictably handle these rushes, it would be like a license to mint money because people could rely on being able to get through at busy times.

This is exactly what the "Urban Commune Project" was going to try to do (not necessarily with a McDonald's): save a lot of money by living together and minimizing expenses for a year or two, and then buy a franchise, run it as a partnership (so as to ensure maximum employee motivation since each extra dollar earned goes partly into each one's salary), maximize efficiency, and get rich. Plus, you'd have a lot of community goodwill by advertising that it's "employee owned".

Of course, the UCP never got through phase 1, and I don't know if their site's still up or if they'll try again.

Posted by Person | October 26, 2007 3:11 PM

My general experience of McDonald's is that they do get this right at peak times; it's "off-peak" times when the second tier employees are there and there's an unexpected spurt of business that you might get a bad experience.

But going to a McDonald's at noon on a weekday usually results in a swift trip through a long line.

Posted by JohnMcG | October 26, 2007 3:20 PM

"Those two cars represented $20+ of revenue -- enough to pay everyone on the crew a dollar extra per hour, easily. Would a dollar higher salary attract more efficient workers and make the lines go quicker, thus leading to less lost revenue?"

In Southern California this is what In-n-out burger does. They are higher paid than McDonalds workers so they are friendlier and work harder.

Posted by JordanT | October 26, 2007 5:22 PM

Person,

I'd never heard of the Urban Commune Project, but I like the idea. If memory serves, there's a high-end restaurant in Manhattan that was started by folks that lived in a sort of commune -- (WD-50).

JordanT,

I've been to In-and-Out burger in California (actually, one in Northern Cal) and the burger's are great. I'm not surprised to hear that they pay their folks well -- it's sort of a quirky company that has resisted expansion east. But I don't remember the place being exactly fast, since the made burgers fresh.

Posted by Fred | October 26, 2007 5:40 PM

I was thinking about this last night, as my girlfriend and I were waiting in a McDonald's drive through line and saw two cars bail on the line and drive away because the wait was so long. This wasn't a result of bad service, just slow service. Those two cars represented $20+ of revenue -- enough to pay everyone on the crew a dollar extra per hour, easily. Would a dollar higher salary attract more efficient workers and make the lines go quicker, thus leading to less lost revenue?

$20 in revenue is not $20 in profit, therefore $20 in revenue cannot be converted 1:1 into employee salaries. McDonalds makes money in two ways: (1) volume, i.e. thin margins gradually add up over a large number of customers; and (2) soft drinks, which have something like a 75% markup over the materials costs.

If both of those cars were planning to buy ice cream and shakes, McDonalds' profit on $20 in revenue may have been much less than $1. For typical meal purchases, less than $4.That doesn't mean any particular restaurant will survive if it gets a reputation for being unable to handle customers promptly, but it does mean that McDonalds' capabilities and incentives are not stacked in quite the way you propose.

Posted by anony-mouse | October 26, 2007 6:05 PM

As I recall, from my days long ago (1990) as a McDonalds worker on the night shift, we were primarily hired as being cheap, not reliable.

Of course two stories stick with me. The one is, (quite believable) that the manager slept her way through Burger U, the management training course. She was on record screaming at the grill group for horseing around (they were, for high school kids, long term and very competant. The food came out hot, right, and on time but they were cracking jokes and an extremely observant customer might notice that...) They left her manning grill *(all grills)* as a bus pulled in and they quit, to a man. The second story is mine; I made employee of the month, for two months in a row. Under the same manager. These were, to be precise, the fourth and fifth months of my three month employment. Even by my current standards, that is impressive.

Mickey D is neither efficient nor intelligent; he merely out performs the federal government.

This is no great feat. But it makes an excellent illustration of the point, for those who care.

Posted by Dr_Mike | October 26, 2007 7:57 PM

Comcast is notorious for bad service and incompetent technicians. I won't bore you with our long list of problems (it would take more space than Megan's hotel story).

After reporting Comcast to the gov't cable regulators we got a call from someone high up in Comcast's customer service department. We now have his direct number. Their terrible service continues, but issues get resolved quickly now after we call our new friend.

Posted by MarkT | October 26, 2007 10:12 PM

I had some problems with cable service a while back.

The next time they called me up to suggest that I get their VOIP phone and internet packages (I get internet from a phone company) I explained to the guy in detail why I would not buy it from them.

Very satisfying.

Posted by Glaivester | October 27, 2007 12:18 AM

Mickey D is neither efficient nor intelligent; he merely out performs the federal government.

Outperforms the federal government at doing what? Grilling flash-frozen quarter-pounders with cheese and extra pickles?

Posted by Immoralist | October 27, 2007 12:48 AM

I had a similar experience with AIMCO (apartments) via their local subsidiary, Sun River.

The place had a whole string of problems; They didn't provide heating or AC for 8 months. They refused to accept my lease termination. (I notified them twice via email, attached to service requests.) And when it was all over, they tried to collect an extra month's rent claiming I didn't notify them of lease termination. In the course of the argument, they deleted one of their service requests and the corresponding notification to make it seem like they fixed the heat and AC in two months. They wouldn't fix the problem even when I went into the office and showed them where the other notification was in their database, and noted that they'd changed their story about five times, as I proved each wrong in succession ("This happened when going in to pay rent? That's interesting. Because my checkbook says I paid my rent to the end of the lease four months in advance...") Finally, after 100 hours on the phone, trying to get them on the phone, working through the BBB and trying to find a lawyer I could afford and threatening to sue them for defamation of credit (since they sent the account to collections) they agreed to 'zero the balance.' They kept my deposit, but agreed to clean my credit report. It was obvious that they weren't getting anything anyways. And this was after getting the CEO of the company to review the situation! I wanted to keep fighting, but it just wasn't worth the time. At least I heard the company has changed it's policy of refusing early notification of lease termination. (*cue very small victory salute*)

Posted by Ryan W. | October 27, 2007 1:44 AM

There's another factor companies should consider before pushing the envelope. If things go horribly bad, you end up in front of Congress and a hastily written law regulates your industry further

True, but you've got a collective action problem.

Posted by Tret | October 27, 2007 11:06 AM

Immoraist wrote: Outperforms the federal government at doing what?

Serving large numbers of people a mediocre-but-convenient product, in a reasonably efficient manner using mostly low-skilled labor, while maintaining a basic level of good fiscal practice.

Posted by anony-mouse | October 28, 2007 1:57 AM

Harkening back to yesterday's post, I do think the situation was handled poorly once you got to the hotel, but I also think it is possible that the clerk was lying as an expedient to ending the confrontation as painlessly as possible and just as likely to be covering up a glitch in the system, a regrettable piece of incompetence, or even an actual tacit hotel policy.

And was it completely unreasonable to assume that you might not show up at all, when you failed to show up by 2 am? What of the other traveler who likely had a rough day as well, and showed at at 1:45 am? Should she be turned away on the 30% chance you are still showing up? I realize you paid and can make a justifiable case that the room is yours, whether or not you were going to arrive and sleep in it, but what of this other traveler who may have had a horrible experience averted (or passed on to you)?

I would be furious too, were I in your spot. But the hotel and one other person did benefit. I think most objective free-marketeers would argue the outcome was acceptable.

Posted by Different Jeff | October 28, 2007 10:36 AM

anony-mouse wrote:

Serving large numbers of people a mediocre-but-convenient product, in a reasonably efficient manner using mostly low-skilled labor, while maintaining a basic level of good fiscal practice.

Why not boil it down even further and claim that Mickey D does it "faster, cheaper, better" than the federal government? It's more punchy, less verbose. But it still doesn't answer the question of "does what better," even though you think it does. You can't reduce the vast differences in quality and type between what the federal government produces and what McDonalds produces simply by applying blanket-level abstractions like "mediocre-but-convenient product" and "basic level of good fiscal practice." Unless the federal government is in the burger-producing business, you can't point to Mickey D's grill-and-deliver procedures and proclaim that they're more efficent than what the DMV does (to use a popular example of purported government inefficiency). You're literally comparing the procedures used to produce burgers and licenses as though some meaningful standard of measurement existed for assessing their efficiency. No such standard exists.

Posted by Immoralist | October 29, 2007 12:00 AM

As the spokesman for a mid-sized corporation, I can tell you that the special break for journalists is available to anyone with a little moxie.

If you get through to my direct line (listed on the "pressroom" page of our website) tell me you have a problem and sound plausible claiming that you are going to go to the local tv station with it, I'll be on the phone to the priority customer service desk three seconds after I hang up with you.

Obviously, this is dependent on the amount of money it would cost to fix the problem. But if I can make a potential bad news story go away for a few hundred bucks, I'd be stupid not to do so.

Posted by Flack | October 30, 2007 2:51 PM