Saturday, I returned with a few friends of mine.  I was excited to show them what the CBA was all about.  Although, when I tried to use the second and last Groupon I had purchased, I was unable to use it. I was told I could not use a Groupon on the weekend. Concerned, I looked at the terms and conditions of the Groupon and could not find wording which indicated the Groupon could not be used on the weekend, or wording that would allow the terms to be changed post-purchase.

I asked to speak to a manager and was told he was not in. I then asked to speak to the manager-on-duty; I was told there was not one and that every employee was a manager of the co-op.

My positive perception of the CBA quickly changed.  The customer behind me in line also came to use his Groupon.  He decided to leave; not paying for the food he had ordered.  Trying not to ruin my fiends experience I decided to stay and paid cash.

From what I can tell, your business does not like Groupon, as indicated by your staff, your terms changes, and your website indicating a post-Groupon party.  Holding a grudge against a company that your business agreed to do business with is quite off-putting.

Although business may have been financially painful during the Groupon period, the Groupon had the opportunity to built your customer base quite substantially.Whether or not the decision not to take the Groupon during the weekend had much, if any, negative impact, I do not know.  What I do know is that it will be hard to measure what positive impact the Groupon may have had when it is likely negative sentiment was created for an unknown quantity of customers.

My goal here is not to tell you how to run your business, but to tell you that trust is extremely important.  As I mentioned before I was a fan of the CBA before Saturday.  Today my feelings are much different.  Although the food and atmosphere of the CBA are highly desirable, at this point I do not know if I trust your business enough to ever return.  My friends, which also liked their food, feel the same way after they witnessed what happened.

Regards,
Ed Hayes

I started doing my tax return with H&R Block online last week.  Upon visiting the site, I clicked on the “Start Now” under the FREE edition.  As returning user, I entered my username and password and clicked log-in.  Suddenly, I was thrown into the Premium service, without warning.   Thirty minutes went by as I tried to search the FAQ, support, and rest of the internet for a way to switch back to the free edition.

Giving up, I called their support phone number.  The gentlemen I spoke to asked for my e-mail address and birth date to verify my account. He verified that I was in a  premium account, but was unable to tell me how I got to the premium section without paying or how to get back to a free account, making sure I did not have to pay later.  It sounded like he was a complete novice.  I must have spent 20 minutes on the phone with H&R Block cycling between representative confusion and hold music.

Frustrated, I asked for the gentleman’s supervisor.  He requested my Social Security Number in order to verify my account.  Why would I be asked for my Social Security Number when requesting a supervisor?  And why now, not before.   That made absolutely no sense to me.  I refused to divulge the information as it served no purpose, and I had already been verified.

I was about to be late to a Fit-Core class at my gym, so I thanked the gentlemen and hung up.

Now, a week later, I am trying once again to start working on my tax return.  I login, and see this message:

H&R Block Online 2010 Screen Capture

What am I supposed to do? Was this proof-read at all?

• The explanation makes no sense to me
• There appears to be internal-use-only jargon and/or industry acronyms within the explanation
• What is this newsletter they are describing?
• What are the implications, other than price, for switching?
• Will my tax data be deleted either way?
• There is a space before a period within the explanation

I think it’s time to file with TurboTax Free edition.

**UPDATE**

Upon publishing this post, an automated Tweet went out on twitter, and I quickly got a response from H&R Block. I responded with my phone number a and the best time to call which they acknowledged.  Promptly, at the time I specified, I got a call back from H&R Block!  Within ten minutes H&R Block had apologized and solved my problem!

I would have liked to thank H&R Block for their quick response, but it is hard to do that when I had to go through all of this just to solve a problem that shouldn’t have happened in the first place.  Furthermore:  their initial line of support should have been able to solve this just as quick!

For quite some time now, I have been a deal hunter.  I’m cheap.  I love deals.  And thus, Aldi, a value oriented grocery store, has become a staple in my life.  Aldi’s strategy is quite simple; offer a low variate of store brand products at a small no frills store.

If you want a cart, you have to deposit a quarter to borrow  it (you get the quarter back when you return the cart). Want a bag?  It will cost you $0.15.

With all this attention to cost cutting, you would think they would also skimp on customer service. That is not case. I recently communicated with Aldi about a change in their Bran Flakes recipe, and I have been amazed at the level of service I have received.

The Bran Flakes I used to buy from Aldi were outstanding. And at $1.59 a box, you couldn’t find a better deal, even if your life depended on it.  However, the manufacturer of the cereal recently changed the recipe they use to produce the product, and I was not impressed with the change.  I still eat the Bran Flakes, but I don’t enjoy them as much as I used to.

I thought I would express my dissatisfaction with the recipe change to Aldi via their website.

I quickly got response.  Aldi was extremely apologetic and wanted to follow up with the manufacturer about the change.  I was told to expect a followup from the manufacture.

Ralston Foods, the manufacturer of the Bran Flakes, responded just as hastily as Aldi did.  The requested that I send the “best by” date and manufacturing codes from the top of the box.  I did so, responding by E-mail when I got home.

Aldi, again followed up, sending me a letter in the mail apologizing for the change in quality.  They also explained that I can use the letter they sent at a store to get a refund and a replacement product.  Their Double Money Back guarantee is apparently taken very seriously.

I also got a letter in the mail from Ralston Foods asking for the top of the box.  I don’t know if they sent the piece of mail before or after I E-mailed them the code, but since they included a prepaid envelope, I will be sending them the box top as requested.

Finally, I got a third letter in the mail.  Again, this was from Ralston Foods.  But this piece of mail included something that I was not expecting. I received a check for $4.00!  Keep in mind Aldi already committed to refunding me and replacing my product.

It is astonishing how committed both Aldi and Ralston Foods are to the quality of their products and the satisfaction to their customers.  I have never received this level of response from any other company.  Aldi and Ralston foods put companies like Best Buy, Apple, and Compaq (now HP) to shame!

All this for a $1.59 box of cereal!

The other day I was at CostCo and realized they were scanning a barcode, that was affixed to the cash register, during each and every transaction.  I inquired into what the purpose was.  The cashier told me the barcode was scanned to verify they checked the bottom of the cart to make sure all products was scanned.

It turns out CostCo has a major problem; items in the bottom of the cart are frequently not scanned before  customers leave the store. The cashier told me that they repeatedly discuss this problem in team meetings.  I would agree that this problem could be very costly, and that it would be a significantly larger problem at CostCo compared to most other stores since there are so many large heavy items for sale at CostCo.

I was rather puzzled.  I didn’t whiteness any obvious attempt by the cashier to verify the bottom of the cart was empty.  I admit they could have just been checking while they scanned other products, but I was still confused.I thought to my self as I was being rung up, this solution was half baked.  I was impressed the company realized the gravity of this problem, and that they decided to put a solution in place to make sure the cashier was verifying the cart was completely empty before finalizing the transaction.  But, there was one glaring problem to me; the process didn’t actually solve the problem.

Scanning a barcode next the scanner didn’t really accomplish the goal.  Yes, the cashier was required to scan the barcode during every transaction.  But that process didn’t actually make the cashier look at the bottom of the cart.  If this scan was done on every transaction, I would assume it would be come second nature to scan the barcode.  Scanning would be the habit, not looking at the bottom of the cart.

CostCo made a good attempt, but one small change would make the solution perfect.  Barcode labels are incredibly cheap, why not affix the barcode to the bottom of every cart instead of just the cash registers? Affixing the barcode to every cart would require the cashier to actively look at the bottom of each cart, verifying it was empty, guaranteeing no products were left un-scanned.  The cost to implement this solution would be negligible, and the benefits would be astronomical.

When implementing your own business process, make sure it makes sense.  What was the goal of the process?  Is your new process accomplishing that goal?

Last Saturday I was trying to print a simple postage label for a package I wanted to ship.  All I wanted was a shipping label.  I thought it would take me five minutes at USPS.com, but it turns out a pot-roast cooks in less time that it takes to print a shipping label!  After using their sites, I have come to the conclusion that the United States Postal Service (USPS) and United Parcel Service (UPS) go through very little, if any, user acceptance testing.  FedEx isn’t much better; I did get a label in 10 minutes, but their rates are significantly higher than I was willing to pay.  Here are the pains I felt while navigating though the websites of the three major United States shippers.

United States Postal Service

The trouble at USPS.com started when I was signing up for an account.  The United States Postal Service’s website requires a “strong” password, which MUST include:

• A minimum of 8 characters
• At least 1 uppercase letter
• At least 1 lowercase letter
• At least 1 number

Special characters are not accepted.  The passwords “Sprite$%2” or “uisk28s5x” would not be accepted, but “Password1” would.  Which do you believe is more secure?  After signing up, I navigated to the shipping label creation page.

The “from” address, “to” address, and package information was all on the same page.  This made it impossible for a form filler to work correctly, which really pushes my buttons! For those of you who are unfamiliar with form fillers, they are tools that allow you to fill in web forms with the click of a button.  For example, I can say “fill the form with Ed Hayes data” and it will fill in my name, address, and most other personal information a form asks for.  I can also have it fill in my credit card data if I wanted.

I could not get past the screen of where I was supposed to enter the “to” and “from” shipping addresses!  The only error I received was “the address is not valid.”  I have no idea why; it gave no details on why the address was invalid. I ended up closing the window and opening it again. That seemed to solve the problem.  Go figure.

Continuing, I added my payment method with my form filler and got to the point where I was supposed to be able to print the shipping label.  I clicked the print button, and nothing happened.

I clicked the link that said “it didn’t print correctly” and was brought back to my shipping label cart.  I tried to go back do it again.  Although most of my data was saved, I was asked to type in my credit card CID code again.  It got quite annoying typing in this code repeatedly as I was troubleshooting. I tried three or four times to print the label, but was not able to do so, and I never got an error.  Furthermore, I didn’t see anything saying my browser or operating system was invalid or that I have to disable pop-up blockers.

I gave up and headed to UPS.com.

UPS

As luck would have it, my UPS account had expired.  For some unknown reason, UPS accounts expire after a few months of non-use. That is ridiculous. I had to start from scratch.

I got to the point where I typed my package information.  Like the USPS, they wanted me to fill out all the package information on one page. Once again, I couldn’t use my form filler.  I got pretty sick of typing in all the data over and over again.

Every time I did something with a drop down box, it would reload the page. I hate when sties have pages reload only to present the user with an updated set of options.  Every time the page reloads, the page position gets changed and it really aggravates me. A few lines of AJAX code would solve that problem and update data dynamically without page refreshes.

I went to choose the payment information, and couldn’t find a credit card choice.  For a second I was under the impression they didn’t accept credit cards as forms of payment.  I thought I would see what “Use  Payment Card” was, assuming it could be the credit card option, and I was right.  Why doesn’t UPS use the industry standard phrase “Credit Card?”  I pushed my “fill form with Chase Freedom” button.  And the data appeared to be entered correctly. I clicked next.

The page came back with errors.  It said my payment method expiration date was invalid. Looks like my form filler failed me! I corrected the dates and clicked submit again. This time my CID was missing!  UPS cleared the field each page load; very aggravating!  They should keep the data if the user is expected to fix an error. I corrected the errors, filled in the CID, and continued.

When I got to the package dimensions page, somehow I ended up with 10 packages to edit.  How did that happen? I never said I had 10 packages. I started to delete each package, which required a confirmations and page reloads.

I got so aggravated at the entire UPS process, I went to FedEx.com.

It turns out my form filler filled the package quantity with a 10 assuming that was the expiration date field.  Who do I blame for that problem?

Federal Express

The FedEx experience was significantly better, but still rather frustrating.  Just like USPS and UPS, they had the “to” and “from” address forms on one page.  Again, my form filler wouldn’t work, I had to type it all in by hand.

Another part of the form asked when I wanted my package picked up.  It was filled with the current date; a Saturday.  After filling in the credit card data by hand, and submitting the form, the page returned an error.  Saturday was not a valid date for ground shipments.  A bit annoying; why would they default to an invalid date?

When I went to change it, I found the text box didn’t allow manual typing!  I had to use their stupid calendar! What is the deal with all this crap?? I fixed the date error and pushed submit.

The page came back with another error!  My CID field was blanked out!  You can imagine how thrilled I was about that. Although the experience was painful, I got to the point where I saw my shipping label relatively quickly compared to what I went through at USPS.com and UPS.com!  Come to think of it, I never got to that point on the prior sites.

I was so happy! But, I realized I never saw how much it I was going to be paying.  Before I confirmed the transaction, I clicked on the “view receipt” and was in shock!  My little 6x3x3 package at 1 pound would cost $10 to ship.  Not acceptable. FedEx almost got my money, their site actually worked decent enough to get a label out!  But their price was too high.

I gave up on FedEx and said “maybe I have to install Adobe Acrobat Reader on my computer for USPS.com to work.”  I gave that a shot.

Back to USPS

I installed Adobe Acrobat Reader.  Still, USPS could not show me a label. I tried printing the label on my PC.  To my amazement, it worked! I found out, after chatting with a USPS representative, I had to correct some settings in FireFox:

• Open Firefox
• Click on Firefox next to the Apple logo in the upper left hand corner of your computer screen
• Click on preferences in the drop down menu
• Click on the Applications tab on the right hand side of the screen
• Click on Portable Document Format or “PDF” for short on the drop down menu
• Click on the drop down menu on the right hand side of Portable Document Format or “PDF”
• Click on “Other” in the drop down menu
• Click on and select “Adobe Reader”
• The drop down menu should now read open with Adobe Reader
• Completely close Firefox
• Reopen Firefox and print out the label

None of this was displayed on their website.  Why not just allow the user to download a simple PDF instead of going through that process?  I would be willing to bet that most users couldn’t even follow that process to completion.

The web was built on standards, why not use them?  Why complicate the process?  It may make things easier for some users, but on the flipside, it makes the process impossible to complete for other users.  USPS doesn’t work with Apple Safari; there goes that entire client base. Why does it not work on Safari?  Because USPS most likely wanted to eliminate one step, and since most users use Internet Explorer, they designed their solution around that.

How it should have gone

All of these sites have many things going on that should have been weeded out with some simple user acceptance testing. If I was operating a shipping company, I would make sure the label printing potion of my company’s site had the following requirements:

Passwords should not be restricted

If a user is restricted to a complicated password, they will write the password down on a piece of paper or in an unprotected document on their computer.  This would completely negate any security the site was attempting to create.  Usually users have a few passwords they tend to use, which are easy for them to remember, and fit the majority of password complication requirements.  Let them use those.

The excuse that the server does not accept special characters is not an acceptable excuse either.  For one, the database should allow any number and type of characters in that tables field.  Furthermore, the site should be hashing passwords, not storing them in plain text where the database variable type may not accommodate special characters.

Data entering

Each section of the process should have its own page. This idea accomplishes many goals; it simplifies page development, it simplifies database insert statements, it conforms to browser navigation standards, it makes the process simpler for the user, and it allows the user to use form fillers.

All of these sections should have their own pages including a unique page for:

• Account creation (username, password, email) or Login
• From Address
• To Address
• Package Information and Service Type
• Shopping Cart, with option to loop prior 4 pages for additional packages
• Payment information
• Order Verification
• Printing the label

After the order is complete, and ready to be printed, the user should be given options to select print with PDF or via HTML.  If printed through PDF, the user should be able to click a link that directly links to the server-generated PDF file.  If utilizing the HTML version, the user would be able to print via the browsers printing function.  Each label should be presented as a separate image.  Modern browsers will make sure images stay intact, and not be split between pages. Any browser/operating system configuration could handle either label printing process.

The moral of the story

Make it simple, and use standards.  All other things being equal, if your process is the simplest, fastest, and easiest for each and every customer to complete, your company will be the preferred choice for all consumers.

Example 1: The Grocery Game

The Grocery Game is a service that informs their customers on how to combine coupons and promotions, at a variety of grocery stores, in order to get the best deal possible.  They distribute updates on a weekly basis to paying customers.  Here is a screen shot from an E-mail they recently sent me encouraging me to sign up.

Since when does $2 divided by 3 equal $0.55?  I would think their E-mail marketing would go through a more vigorous editorial review then their product.  If their marketing is inaccurate, how accurate is their service I would pay for? Or if this is a screen shot of the actual service, I now know that I would be paying for something that was not correct.  After seeing this, I could never trust the company.

Example 2: JBoss

I recently received an E-mail newsletter from a local consulting firm that my friend works for. They mentioned “JBoss” in the newsletter many times, so I thought I would do some research into what JBoss was.  I was browsing RedHat’s website and found this example comparing the cost savings JBoss provides compared to IBM WebSphere and Oracle SOA Suite.  I thought I would play around with the tool a bit. Check out these calculations:

I don’t see how 20% of  $212,800 is $212,800.  Am I missing something?

It appears as though they were going to add up the column and have a Total License Cost like they had in the first column.  But, in year two and three, they all add up to $0.

Both of these errors impact the savings calculation shown on the bottom of the tool.  If RedHat’s savings tool doesn’t work, why would I trust the service they are selling with my company’s data?

Grocery retailers frequently use promotional sales to lure customers into stores.  Retailers hope customers will purchase higher margin products while they shop for the promoted items.  Chicago grocers Jewel-Osco, subsidiary of SUPERVALU, and Dominick’s, subsidiary of Safeway, both follow use this marketing strategy, changing promotions twice a week.  The promotional sales may increase customer traffic, but they may also lead to the demise of the store.  I suspect, retailers that use promotional sales, on every day products sold year round, increase the cost of doing business and decrease supply chain efficiency.

Used by many grocers, promotional sales are the activities, materials, devices, and techniques used in the advertising and marketing of products.  I separated their cost into two different categories; direct costs and indirect costs.  I see the money spent on the processes and material to implement the promotional sale as direct costs, and the money lost due of the effects of the promotional sales are considered indirect costs.  From my point of view, both of these costs are significantly high, high enough to possibly outweigh any benefit of the promotional sales.  If I were managing a retail grocery operation, these are the items I would consider when deciding whether or not to continue utilizing promotional sales.

Direct Costs

Promotional sales have many components, each having a cost associated with it. Planning, marketing, inventory builds, and store preparations all take time to complete and consume valuable company resources.

Planning

Planning a promotional sale must be time consuming and costly.  Stores need to decide what products to put on sale, when to put them on sale, and at which price to sell them during the sale.  They must also decide how they will market the promotion, design the promotion, and distribute the promotion. It takes time for the retailer to manage, and it takes time for suppliers to manage.  That being said, it is possible that retailers who promote frequently can manage this process relatively efficiently.  However, managing a promotional sales still requires resources; resources that do nothing other than manage and execute promotions. The planning process is only the beginning.

Marketing

Promotions need to be communicated to the public, using any number of methods, all of which cost money.  From my experience, grocers seem to prefer some form of print media, like news papers or local ad circulars. Designing, printing, and delivering these advertisements must add significantly to a retailers cost. Some grocers even compliment the print media with radio and TV commercials, all of which take additional resources to produce and distribute.

Inventory Builds

Before the promotional sale starts, retailers must increase inventory of the items being promoted. Vendors, transporters, distribution centers, and storefronts all need to take special measures to guarantee extra inventory is delivered, on time.  Not only on time, but just in time; fresh produce spoils quickly and it’s vital the delivery process be planned and executed without error.  Early or late delivery can lead to costly spoiled inventory. In addition to any spoiled inventory losses; inventory builds take significant amounts of working capital.

Store Preparations

At the start of the promotional sale, costly store preparations must occur.  I have witnessed employees rearranging store shelving to accommodate shifts in inventory in anticipation of an increase in demand for some products, and decrease in demand for others.  Price tags throughout the store need to be updated, reprinted, and reapplied.  Finally, if displays are being used, they must be built and placed.

Each activity and consumable is temporary.  As promotions end and new ones begin, I expect these four processes repeat endlessly, adding cost during each cycle.

Indirect Costs

Along with any direct costs mentioned above, I predict promotional sales also have indirect costs aswell. Indirect costs caused by poor forecast accuracy, inadequate supply chain communication, and large inventory swings.

Forecast Accuracy

As part the planning and execution phases, I suspect most vendors and retailers use Enterprise Resource Planning systems, or ERP systems, to manage the supply chain.  ERP systems use a multitude of variables, including, but not limited to forecasts, past orders, current orders, and current inventory levels, to track, plan, and manage inventory.  Recommendations to create purchase orders or manufacturing requirements are created on a regular basis. Recommendations may be edited manually and released by planners, or  they may be released automatically as purchase orders to suppliers.

Because forecasts are the foundation of ERP system demand calculations, I know the data must be clean and accurate for the systems to operate efficiently.  But, from my point of view, promotional sales cause forecast data to be dirty or inaccurate for two reasons: lack of predictability, and manual data entry.

I assume it is nearly impossible to precisely predict how inventory will move during and after a promotional sale.  The incredibly high quantity of variables makes it close to impossible to accurately forecast purchasing. Even the most nimble and elaborate forecasting software will likely have difficulty analyzing uneven sales data, not knowing what impact each dip or spike had, or if the dip or spike will happen again. During a promotion, inventory could be wiped out completely or may not be sold at all.  After the promotion, purchasing may likely decrease but it may, instead, increase.  The dip or spike in demand will last an unknown period of time.  I suspect competitors may possibly have a promotion on the same or competing products.  The promotion price may or may not impact purchasing.  Finally, it is also likely a naturally occurring or unpredicted event may also affect demand.

Even if all the variables are correct and accounted for, and the company has perfect knowledge of consumers’ thoughts and competitors’ marketing, forecasts may still be entered or edited incorrectly.  The manual data entry processes is far from six-sigma levels of accuracy and, from my experience in analyzing forecast data, will most likely have errors.  Incorrectly entered or edited data points could flow automatically from the retailer’s ERP system to the vendor’s ERP system without notice.  It is likely systems would be in place to detect erroneous data, but because the data nature of highly volatile forecasts, I would expect the detection systems would miss many errors.

Supply Chain Communications

The ramifications of incorrectly generated and/or entered forecasts could be huge and expensive.  Data often trickles down from retailers to distributors and from distributors to suppliers; Most likely traveling automatically by way of automatic releases of ERP generated purchase order recommendations.  An invalid forecast could be transfered from the retailer to distributor to vendor without anyone knowing its inaccuracy.

Correct, but changed forecasts, could also cause problems.  I expect promotion plans change all the time.  They may get canceled, dates may move, or anticipated purchasing may change.   Regardless of the change, corrections or non-standard changes could get lost, miss communicated, or miss translated when being sent from retailers to vendors.  In some cases, they may not be communicated at all.

The farther away in the supply chain a company is from the retailer, the more difficult planning and communication becomes.  At the front of the chain, retailers have direct knowledge of a promotion, and have the ability to add or edit the details in their ERP system.  As promotions are developed, retailers communicate information to suppliers.  But, as mentioned before, if a promotion changes, it may not be fully communicated to all suppliers.  To add to the confusion, suppliers have suppliers, and those suppliers also have suppliers.  The farther down the chain, the less promotion visibility is seen.

The entire chain is only as good as the weakest link.  If not handled quickly and efficiently, at all levels of the supply chain, one invalid or missed forecast entry, or forecast change, has the ability to trigger massive product spoilage.

Inventory Swings

From my experience at a manufacturing company, huge swings in inventory are nightmares for suppliers.  Inventory builds require increased production, which may require overtime pay and/or auxiliary temporary warehouse space; both impacting the supplier’s profitability.  On the other hand, purchasing reductions that occur after a promotion ends may lead to vast amounts of unused warehouse space, non-moving inventory, or unutilized resources or personnel.  These swings are not only problems for suppliers, they are disruptive to transporters as well.

Trucking is the predominant type of food transportation in the United States.  Trucking is a tough business; just like empty planes, empty or unused trucks are not profitable. To be profitable, trucking companies need to haul loads to and from sources and destinations.  And inventory swings spurred by promotion sales create irregular shipments and increase the possibility of empty trailers for flatbed trucks.  Fortunately, third party logistics companies have become a popular way to mitigate the cost of empty trucks, but I still don’t believe they are still not a perfect solution, nor do they provide free services.

The least tangible costs of inventory swings are their affect on data mining and forecast generation.  As previously discussed, forecast accuracy is crucial.  From my experience as a Supply Planner, large swings in inventory make it very difficult to produce an accurate forecast. Standard deviations for products that regularly go on sale are extremely high, and systematically generated forecasts can be incredibly inaccurate.

Any losses or costs incurred at any point in the supply chain will be passed on to the retailer by way of higher wholesale prices, regardless who is at fault.  The retailer will then pass that cost increase to the consumer via higher retail prices throughout the store, not necessarily on the product being promoted.   Keep in mind, all of these additional costs are being incurred to sell an item at a reduced price, likely a price below wholesale cost.

I believe retailers that use promotional sales as part of their marketing strategy are pregnant with cost saving opportunities.  It only requires retailers to realize how many costs are likely associated with their promotional sales in order for them to analyze their promotional sales strategy.  In a retail world ruled by everyday low prices, the analysis will hopefully come soon.  If not, retailers selling everyday products will likely fail because their promotional sales have a high probability of increasing their cost of doing business and decreasing their supply chain efficiency.

One of my client’s computers recently got infected by several viruses.  She attempted to solve the problem by installing Norton Antivirus 2010.  After the instillation, her computer would not allow her to logon, so she gave me a call.  After doing some research, being unable to solve the problem, which was likely caused by the instillation of Norton Antivirus, I called Norton to receive the “Free Support” that came with the software.   The phone support reminded me of my recent post on foreign call centers; Norton’s support was unbelievable and unacceptable.  Explaining my interactions with Norton’s support team will illustrate how Norton’s “low cost” foreign call centers destroy consumer trust, damage Norton’s brand, and ultimately reduced the company’s profitability.

Before I elaborate on Norton’s phone support, I want to point you to how I solved the problem.  You can see the solution on how to fix a logon logoff loop on a previous post of mine.

I would also like to give a brief history of Norton Antivirus. Historically, Norton Antivirus has received extremely poor reviews because of its intense PC resource consumption, and inability to be completely removed from a user’s computer system.  Recently, Norton has been making great strides in reducing the products resource requirements and marketing it as such.  It has been quite some time since I have personally used Symantec’s Norton software; before the following fiasco, I perceived the Norton and Symantec brands as mostly neutral.  Let’s see how Norton’s call center impacted my perception of Norton’s brand.

When I arrived at my client’s location, she was completely beside herself.  My client was about to go on vacation, and her POS (Point of Sale) system was out of commission.  I tried for about an hour to solve the problem on my own to no avail. The box the antivirus software came in mentioned that it came with “Free 24/7 chat, E-Mail, and phone support”, so I figured I would give that a shot.

When I called, I was first connected to a Norton call center in the Philippines.  Before getting to the actual support, I had to give the Norton agent some personal information so she could create a customer profile for me.  I usually find it quite easy to tell someone my name and phone number.  This was not the case with Norton; I was barely able to communicate with the Norton representative I was on the phone with.  I spent five minutes spelling my name and giving her my phone number.  I am not an exaggerating.  If it was difficult to give my phone number, I could only imagine the quality of support I was about to receive.

After describing the problem, and going through some basic trouble shooting steps, the representative said she was unable to solve the problem.  I asked for their second level of support, the support based in the United States. As she began her response, I came to realize they were attempting to up-sell me.

I was embarrassed for the Norton representative as she began her sales pitch; I could tell she was reading from a script.  She told me that the second tier of support was based in the United States and normally cost $170.  But since I was a “valued customer,” they would give me a $30 discount.  So much for the “Free” support claims on their packaging.  I agreed to pay the $140, as I knew this was the only way I could reach someone that understood English.  I also knew that could get a refund, or if not, dispute the charge with the credit card issuer.

Prior to connecting with the second level of support I was asked to go to “Norton.com/link” in my browser.  Early in the support call, I told the agent I was using a second computer that had access to the internet, and it was not the computer I needed the support on.  With that understood, I figured this page would be used for some purpose other than remotely controlling my computer.

I spent another five minutes communicating my E-Mail address.  I was laughing in my head the whole time.  I assumed Norton’s support would be poor, not painful.  Norton’s support was painful.

The Norton representative then spent more time then necessary explaining how I would be entering my credit card information into an automated phone system.  When she finally transferred me to the automated system, I looked at my phone, and realized I had spent 30 minutes talking to her; 10 minutes of which was communicating my name, phone number, and E-Mail address.   I entered the requested information into the automated system with relative ease and was transferred to tier two support.

I got to the second level of support after a brief time on hold.  As the conversation started, I noticed the second representative had a stronger accent than the initial agent I spoke with. I inquired about her location, and she said she was in India.  I distinctly remember being told I would be talking to the second level of support, in the United States.

As I was talking to the second female agent, I was asked to confirm the information in my customer profile.  It turns out my E-mail address was incorrect.  I guess the five minutes I spent giving it to the first agent was not enough.  I had to go through the process once more; add five more minutes to the phone call for simple data entry.

After verifying my information, I was asked to go to the “Norton.com/link” page I had open in my browser.  The Norton representative said she was going to remotely control my computer.  I expressed, again, this was not the computer with the problem.

We discussed the problem once again. She reviewed a few pages of her resources with me; all of which I had already tried with no success.  Once her resources were exhausted, she said she was unable to assist any further and that she would refund what I had paid for the support.

After the interactions with Norton, I did some more research on the internet.  And, as I mentioned in the beginning, I did finally fix the Windows XP Logon Logoff loop.  Not only is it likely Norton Antivirus caused the problem in the first place, their support provided zero assistance solving the problem.  What Norton did do, however, was impact their brand quite negatively.  Norton’s “low cost” foreign call centers damaged the trust I had in Norton, damaged Norton’s brand, and ultimately cost the company money.  Let me elaborate a bit on each of these claims

Trust

My trust in Norton’s brand has now been damaged.  Norton’s packaging says “Free Phone Support” and I did not get that.  Instead, Norton required I purchase their advanced support to get any relevant help.   If one portion of the packaging was untrue, were other parts untrue?  Is Norton Antivirus actually effective at preventing infections? It is hard to trust one claim on a package if a second claim is proven false.

Second, I was told I would reach American based technical support if I paid their advanced support fee.  When I was transferred to that second level of support, I reached someone in India.

Impact on Brand

Besides losing consumer’s trust, Norton also proved they can’t effectively communicate. Either Norton’s foreign call centers are staffed with employees that can’t understand English well, or the call centers are built using poor quality telephony equipment. Why would anyone do business with a company that can’t spell “Ed” or understand a 10 digit number?  Statistically, from my interactions with two of Norton’s employees, in two different countries, 100% of Norton’s employees can’t communicate.  I realize that that is quite a poor population size, but it is all I have to go by; it is the only point of contact I have with Norton.

The Numbers

A few months ago my interactions with RCN inspired me to write an essay on how low cost call centers are inherently expensive.  My experiences with Norton prove my theory once again.  I spent roughly an hour and a half on the phone with Norton Support.  The call accomplished no positive outcome.  However, many resources were used during the conversation.

• Norton authorized a $140 credit card purchase, which likely cost Norton $3.
• I talked to two different support agents, at $10 an hour, that cost Norton $15.
• Norton consumed 90 toll-free minutes.

The call, which cost Norton nearly $20 financially speaking, was not the only cost to Norton.  The damage to Norton’s brand, caused by the poor quality foreign support and false advertising, carries an even larger cost, although it’s tough to say exactly what that cost is.

Even with the sale of the software, it would be tough to conclude Norton made any profit.  Norton only received a fraction of the revenue generated from the purchase of the software, which retailed for $40.  And it is likely that the software will be returned.

Here is the kicker: The foreign call centers may actually impact Best Buy more than Norton.  Best Buy does not allow opened software to be returned; it is against their return policy. It is unfortunate for Best Buy that Norton’s packaging included false advertising.  The customer, my client, did not receive what she had paid for; free phone support.  Therefore, it is safe to assume any credit card disputes would end in favor of my client.

I believe a credit card charge-back, or “dispute”, would cost an estimated $25, regardless if the dispute ends in the retailers favor or not.  Furthermore, credit card charge-backs are an administrative nightmare for any company.

At minimum, if Best Buy accepted the return, Best Buy would incur the cost of processing the initial sale, the refund, and the cost of employing someone to process both transactions. Total minimum cost would be roughly $3.30.  However, if they won’t allow the product to be returned, Best Buy would incur a charge-back fee from the credit card processor, regardless if they were found accountable or not, which would add $25 plus any administrative labor cost.  The total cost would be well over $30 after all is said and done.  That is well above the margin from the initial sale.  Furthermore, if the dispute ended in the customer’s favor, Best Buy would be out the $40 as well; totaling $70.

Norton’s “low cost” call centers have impacted both Norton and Best Buy quite negatively.  Norton has lost consumer trust.  Norton has badly damaged its brand.  And both Norton and Best Buy have incurred, or will incur, significant financial losses.  When will multinational corporations begin to see the damage caused by poor quality and low cost call centers?  It astonishes me that this trend continues.  Even as I was writing this essay, a friend of mine was complaining about HP’s foreign support as he tried to get his printer installed.  Ironically, he recently consulted on a project to outsource a portion of a company’s workforce to the Philippines.

A recent trip to Best Buy encouraged me to Tweet about a slow line and unhappy employee.  After my Tweet, a concerned Best Buy employee responded and asked me to elaborate on the problems I was having.  I decided to write him an e-mail.

Below is a copy of my e-mail and his response.

John,

As I mentioned, I thought it would be best to elaborate on my situation today.  Today’s situation is quite irritating on its own, however, there are other circumstances related to today that should concern your company more. I will bring those to your attention after I describe the day’s events and review some background information.

Today’s events
I came to the store to apply a gift card ($5) and RewardsZone certificate ($5) to a $140 purchase I had made a few weeks prior.  The transaction could be completed in two minutes, if done correctly.  When I got in line, there were three people in front of me.   While waiting, for somewhere near 30 minutes, I was able to watch the actions of many Best Buy employees quite closely.  Leah was the only person working customer service at the time I arrived.  She had an incredibly dreary and unhappy  look on her face for the entire 30 minutes.  I don’t think she smiled once the entire time I was in line.  She talked very quietly with little joy or excitement in her voice. While completing transactions, she had no sense of urgency and not once acknowledged the customers waiting in line.

Although Leah was the only Customer Service representative that was helping customers at the time, I saw many other Best Buy employees walking back and forth behind the counter.  None of the other employees came to help Leah or acknowledge the customers waiting in line.

Bored in line, I turned around several times and witnessed many concerning things.

1. A Best Buy employee in the digital imaging department was not helping any customers, and was standing, literally, right behind the customer service line.  He must have been aware of the slow moving line with several people in it.
2. Several Best Buy employees were standing and talking to one-another in the computer department.
3. One of the store managers, a tall man, was talking to another Best Buy employee at a nearby POS system.

Combined, there must have been at least six Best Buy employees, that I could see with my own eyes, whom were not helping any other customers.  And most, if not were aware, should have been aware of the situation.  Although it was hard to hear Leah speaking, I do not believe she ever spoke into her in-store communications device asking for assistance at customer service.  I did hear her, however, ask for a Digital Imaging employee to assister her.  The digital imaging employee I mentioned earlier came over to briefly discuss something with a customer and left.

It was at this point I formulated my Twitter message.  Before I could send the message, a second store manager came over and started to help me with my transaction.  By that time, there were four people behind me in line, and two other people that had come and left the line.  I was shocked that a store manager was helping me with my transaction. To his credit , he apologized for the wait.  however he did not offer anything for compensation when I agreed waiting in line for 30 minutes was concerning.

After the transaction, I was able to send my Twitter Message.  As I returned home, I was pleasantly surprised that one of the “twelpforce” agents called her, and many responded to my tweet.

Some background information
Nearly two months ago, I was aware the store was accepting applications for seasonal help.  I filled out an application online for a customer service representative or cashier position.  I was called in for an interview the same day I submitted the application.  I came in, a week later, for an interview with Elisa on September 7th.

I believe I was exactly what Best Buy was looking for.  I had worked for Best Buy for three years during high school and college; working during two different holiday seasons.  I was recently laid off from my previous full time job and was fully available. I would need nearly zero training, could start immediately, and to top it off, I am one of the most cheerful and upbeat people I know.  And to add to that; I am passionate about process efficiency and would have been very good at quickly helping customers.

During my interview, it was stated on many occasions that cheerfulness and happiness was important.  It was also stated that bending the rules on occasion was acceptable to make a customer happy, and encourage repeat business.

I was told I would receive a call back from Elisa once they made a decision.  I never did.  I called back twice to talk to Elisa the following two weeks, and left messages for her on both occasions.  When I visited the store to make the original purchase I mentioned earlier, I talked with Elisa and ask why I was not hired.  She said I had experience with customer service and not being a cashier;  they were hiring cashiers. Maybe she didn’t remember that I had mentioned I was both a customer service representative and cashier.

Why this should concern your company
I realize this email is getting quite long, so I will try to be brief.  It appears to me that Best Buy is trying to create happy customers.  I have perceived this through commercials your company is developing, the fact that I received multiple responses to my Twitter comment, and the information I was given during my interview.  But these all are merely one-way, or distant two-way communications.

As a customer, former employee, and non-hired seasonal employee of Best Buy, I have a significantly different perception of your company than most people.  My goal in writing you is to make you aware of both today’s situation, and the situation a few weeks ago when I was not hired.  Individually, both of these scenarios are of little consequence.  Combined, however, a different picture is painted.  It seems to me that Best Buy is spending incredibly amounts of money to improve their brand image by bettering their customer interactions.  However, Best Buy is failing when it comes to the actual face-to-face customer interaction.  Today, all of the good will built by Best Buy’s advertising and promotions was eliminated by one single transaction that took over 30 minutes to complete.

It astonishes me that your company is not only hiring people that do not compliment this new “happy company” image,  it is actively seeking not to hire them.

I could write a whole other two page email about an HP representative I interacted with a few months ago and my attempts to improve that situation.  I could also write up a lengthy critique of a list of computer “optimizations” your company sells which was given to me by your employee.  Furthermore, I could assess a poorly designed Windows 7 upgrade flyer I picked up today.  But, I will not.  It is at this point I believe the free advice has run out.  But your company need’s to get with the program.

We can discuss any of this over the phone if you would like.  My  phone number is listed below.

Regards,

Ed Hayes
Information Technology Integration Analyst

I got this from John in response:

Ed

That was actually me who had called the store because I was concerned about your experience when I saw your tweet.

I agree that the below items are concerning, and I need some time to figure out an approach to rectify the situation. It may be that store process dictates employee behavior, but it seems we could have done much better here. I’ll be getting this information to the store manager asap.

With regard to the hiring situation, I realize I’m hearing only one side of the story, but it seems a bit confusing at best. Stores are empowered to make their own decisions, so I’m afraid there’s not much I can do.

Thank you for taking the time to tell us where we can be better. Info like this will help us get better.

Thanks,
John <last name truncated>

It appears Best Buy is genuinely concerned about the situation I had.  I am hopeful that my letter will encouraged better hiring practices, or at minimum, better employee training.

© H3C Technologies Co., Limited

Last month, I spent a significant amount of time talking with representatives at two different RCN call centers; one in the Philippines, and one in the United States.  I was trying to get their new invalid URL request hijacking service, also known as PoxFire, removed from my account.  The situation spurred me to analyze why call centers are located in foreign countries.  I also wanted to review the factors that should be considered when making the decision to export a domestic call center.  After coming up with a structure that can be used to determine if a call center could successfully be exported, I applied my theory to RCN’s business model.  Finally, I determined if my interactions with RCN supported my theory.

Call Centers

Moving call centers to foreign countries has been a tremendously popular trend during the past decade, predominantly as a way to reduce costs.  The trend and momentum of their migration reminds me much of the dot-com internet bubble.  An initial few companies’ relative success spurred businesses in other industries to attempt the same.  Many of the latter businesses’ endeavors were, and are, destine to fail.  I believe call centers, in foreign countries, frequently foster higher overall costs of doing business because of the low wage employees, culture, and complex incoming calls.

Low Cost Labor

Before discussing foreign call center’s unique problems, I need to discuss an inherent problem of low cost labor that is nearly impossible to overcome; turnover.  The low end of the labor force is more apt to move from company to company, if given a better opportunity, because employers are not looking for specific skills or knowledge from their employees. Every time a seasoned employee leaves, and a new employee takes their place, the new employee must go through a training period in which they learn the industry and review policies.  Once they are allowed to act independently, they must also go through a “learning curve” where their work is less productive and less accurate than a more experienced employee.

Both the training and learning curve periods have a cost associated with them; a cost that is incurred each and every time an employee is replaced.  Therefore,  higher turnover, means higher costs.  Unfortunately for the business, it has little impact on how frequent turnover is, other than compensation.  And in this case, the goal is to reduce compensation, so it is unlikely that that a company will raise compensation in order to reduce turnover.

Foreign Countries

External factors have more influence than internal factors when determining turnover rates.  The two most significant external factors, that are pertinent to my argument, are the country in which the labor is located, and one business’s proximity to other similar business.

The culture of the workforce, determined by the country in which it resides, is extremely important; it plays a tremendous roll on how likely workers are to move from one job to another.  As seen from my personal experiences, in some countries, employees are a lot less likely to change employers because of the importance of relationships.  This causes a distinct commitment to their employer.  In other countries, the population would not think twice about changing employers; their personal status and wealth is their only motive, and relationships are broken all the time.  Coincidentally, the countries in which most call centers are located are the countries in which I have come to expect people are likely to switch jobs on a frequent basis.

The concentration of similar businesses, in the same geographic area, is the second most important external factor in determining employee turnover.  Thanks in large part to global trade; generally, many countries specialize in specific industries.  Furthermore, the more recent a country’s industrial revolution was, the more geographically concentrated similar businesses tend to be. When similar businesses are located close to one another, it eliminates one of the barriers of switching employers.  A laborer is much less likely to switch from working on a cotton plantation to an Internet Service Provider’s, or ISP’s, call center, than they would be switching from a bank’s call center to an ISP’s call center.

A mass migration of call centers has occurred over the last decade, a migration to countries with recent industrial revolutions, like India and the Philippians.  This migration has created business parks full of call centers; call centers that are located in close proximity to one another. Many of these countries are also the same countries where there is a cultural tendency to move from one opportunity to another. The combination of these two factors creates the perfect conditions for employees to move between different call centers, with relative ease, and low switching costs.

So, in addition to the inherently high turnover frequency of unskilled labor, foreign call centers, especially in the South Asian region, have many other possible cost disadvantages.  The already high turnover frequency is increased by both cultural tendencies and the close proximity of many call centers.

Customer Satisfaction

The most important effect of turnover is poor customer satisfaction. A new worker is generally slower, less accurate, and less likely to find a solution to a problem than a seasoned worker.  All three of these reduce customer satisfaction, especially in a call center.  Even though customer satisfaction does not directly impact the cost of a call center, it has a direct cost to a business’s overall operating costs.

Reduced customer satisfaction is actually one of the highest costs to any business.  Because call centers are frequently the one and only connection a customer has with a business where a discussion between the customer and business takes place, they play a very important roll in customer satisfaction.  For arguments sake, if a foreign call center’s costs were able to stay below a domestic call center’s costs, poor customer satisfaction has the ability to indirectly erode any potential cost savings by dramatically increasing the cost of marketing.  If a customer’s discussion with a call center occurs with negative results, the customer is likely to bring their business elsewhere.  And, as most business owners know, obtaining a new customer costs many times more than retaining a current one.  When customers start to leave, a business has two monumental problems; revenue plummets, and marketing costs skyrocket.  Ask the executives at Sprint, Motorola’s handset division, or Chrysler; they are all well aware of these problems.

Call Complexity

Call complexity can refer to either the depth or breadth of knowledge required to complete the call. Previously, in regards to turnover, we discussed the frequency of training and learning curves.  Call complexity has a different effect; it impacts the length of the training.  The cost associate with training is directly related to the length of the training.  Less complex calls would have a short less costly training period, and highly complex calls would have a long costly training period.  Complex calls also mean longer learning curves; increasing call length and decreasing the quality of and quantity of call solutions during that period.  These all directly impact a call center’s cost.

The indirect impact these call centers have on marketing costs, due to different levels of customer services is also important.  If call complexity was high, the length of calls would most likely be longer, and have more frequent unresolved or poorly resolved calls.  All of which would likely cause a loss of customers, increasing the costs of marketing.

Call Center Decision Making Framework

• Turnover
  • Culture will directly affect turnover
  • Competing call centers will directly affect turnover
• Complexity of Expected Calls
  • Highly technical problems and/or solutions will increase complexity
  • High variety of problems and/or solutions will increase complexity
• Training and Learning curves
  • Increases in turnover will increase the frequency of training and learning curves
  • Increases in complexity will increase length of training and learning curves
• Call Lengths
  • Increases in sophistication will increase call length
  • Increases in learning curves will increase call lengths
• Customer Satisfaction
  • Increased call length will decrease customer satisfaction
  • Increases in unsolved or incorrectly solved calls will decrease customer satisfaction
• Cost Savings
  • Increased Call length will increase direct costs
  • Turnover will increase direct costs
  • Decrease in customer satisfaction will increase indirect cost

Solving the Problem

Potentially, a foreign call center could be successful.  It is possible, if done right, to create a lower cost call center abroad.  It has been done before! If calls were extremely simple and very short, training time for new employees would be short and cheap; the high frequency of low-cost turnover may not be an issue. However, if the call center is expecting complex calls, training time would increase, and the highly frequent low-cost turnover would cascade into highly frequent high-cost turnover.

As logical and elementary as these principles are, it is astonishing companies continue to promote the exportation of call centers. Why do so many companies invest so heavily in foreign call centers, when, on nearly all fronts, they are likely to fail?  Especially if these call centers are expecting complex issue resolution. It is apparent that executives make the strategic decisions to export call centers based solely on the hourly cost of labor.  Many companies, like the ones previously listed, operate primarily in business silos, where each major business operating unit is connected only at the executive level.

To judge the overall success of any cost reduction project, including call center exportation, I believe it is vital that both the cost reduction projects and marketing cost impact be combined.  Business silos must communicate and think of the bigger picture.  Regardless of who is at fault, or for what reason, low wage labor and frequently complex incoming calls many foreign call centers receive, inevitably cause them to fail on both their cost savings and customer satisfaction metrics.

ISP Specific Call Centers

Hypothetically, with the formerly given framework, and the fact ISPs receive many highly complex calls, it is likely an exported ISP call center, where all types of calls were routed abroad, would incur high costs and low customer satisfaction ratings. If I were responsible for making the decision on whether or not to export an entire ISP’s call center, I would make the decision that it is undesirable to export the call center.  The combination of high turnover, location, and extremely complex calls would damage the profitability of the business.

RCN

With hypothetical analysis out of the way, I would like to analyze the direct cost, and impact, my situation had on RCN.  If my interaction with RCN is any indication, the customer satisfaction ratings of calls directed to the Filipino call center are extremely low.  And, from my experience, it is apparent that turnover is quite high as my interactions with each representative gave me the feeling that each was in the midst of their learning curves.  None of the employees I talked with were able to answer simple questions without putting me on hold for several minutes, or even the majority of an hour.

In terms of cost, I spent over three hours on the phone with RCN’s Filipino call center, which accomplished no positive outcome.  In fact, there were numerous times where the representative had to call me back after researching the problem.  I would estimate my inquiries consumed 5 Filipino people hours.  The cost of the connection to the Philippines is likely negligible, and, although the cost for the 800 number could add up to something substantial with three hours of talk time, I would consider that negligible as well.  Irregardless of what costs were incurred, my problem was never resolved during the 5 hours of Filipino support.

The United States based technician was able to resolve my problem in 15 minutes.  It took 1/20th of the time to solve my problem using the US call center/technician as opposed to the Filipino call center.

Now, let’s assume the the Filipino service was 1/5th the cost of the US service on a per hour rate.  The Filipino based support cost at minimum 4x as much as the US based support.  Keep in mind my problem was never even solved with the Filipino support, so in this particular case, the entire cost of Filipino service was a complete loss.

The impact of my call on RCN customer relations is another matter that must be considered.  My frustration with RCN’s lack of competent support reached a point at which I was frustrated enough to blog about my problems AND tweet my frustration to all of my followers on Twitter, which is number in the hundreds.  The public relations impact I had on RCN is hard to valuate, but it most definitely had a negative impact on RCN’s business.

Prior to calling RCN’s Filipino support center, my opinion on whether or not an ISP should locate a call center in a foreign country would have been no.  Experiencing it first hand only serves to reinforce that opinion.  Locating a call center in a foreign low wage country is not always successful. In this case RCN’s decision to outsource their call center has not only cost them money, it has detrimentally impacted how at least one customer perceives their brand.