Customer Service – Penny Wise, Pound Foolish

Will Lukang, MBA, PMP, MASCL, CSM

In this economic situation companies have a tendency to focus on cutting back and reducing expenses to make their business profitable.   But there is a saying “penny wise, pound foolish”.  While it looks like you’re making progress by seeing incremental expense reduction, you could be missing the big picture, which is what your company’s value proposition is – what  your company is all about.

 

This week I witnessed this first hand while a friend of mine dropped off his car for service.  The customer representative at the counter for loaner cars asked him which insurance company he has.  Upon hearing the name of the insurance company, the customer representative says, “I’m afraid that I cannot provide you with our loaner car, but we can provide you a Budget rental car and you have to pay for the insurance.” I was surprised by what just transpired because the purpose of the loaner car is to let your customer experience driving the newer cars, thereby eliciting interest to possibly make a future purchase.   The representative explained that they had an issue with the insurance company that led to their decision. The insurance is $36 per day.  From my perspective, for such an amount, they decided to sacrifice the client experience and took away the opportunity for the client to drive one of their vehicles.

 

As I returned to work, I pondered on what just transpired that led to that outcome. My friend was not happy with what happened; he felt that loaner service is one of the conveniences that people expect.   For $36, how many customers had a bad customer experience?  Once a customer has a bad experience, there is chance that they will not make any future purchases.    Therefore, is the $36 cost worth losing your customer?   In my opinion the company was being penny wise but pound foolish.   In fact, they’re missing the big picture as to why they are in business. They describe themselves as a luxury line of product, but they don’t provide the level of service commensurate to the image they’re presenting.

 

From a customer-service standpoint, it is important that we make the most of every opportunity we have when dealing with our customers.  We need to ensure that the customer comes away feeling good about how they are treated.   If they are treated well, it increases the chance of repeat business.  

 

That experience taught me one thing.   We need to deliver what we promised.  Each touch-point with our customer is an opportunity to impress upon them that we are here for them.   It is essential to do our best to make sure their needs are addressed and they come away satisfied.  


 

 

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4 thoughts on “Customer Service – Penny Wise, Pound Foolish

  1. Will ~ I enjoyed your post! Your caution regarding “Penny-wise, Pound-foolish” for customer service is equally applicable for us leaders in regard to our teams. We should ask ourselves whether our “Penny-wise” decisions are really serving our employees. Sometimes, spending just a bit more (and yes, I know it’s hard to do in these times of tight budgets!) can immensely increase ease of work, which in turn can increase morale and productivity.

    • Jackie ~ I agree that this also apply to leadership. Sometimes when we make decisions we need to look past the current economic benefits. I’ve seen this many times in the current corporate environment whereby a companies make the wrong decisions just because it make a good sense for this year bottom line, but in the long run it hurt the company. At the end of the day, decisions should be validated against company’s core values to ensure it align.

  2. I had a similar experience at a Honda dealer. Two days after purchasing a brand new mini-van we had a problem and the car had to be returned to the dealer and I was told they did not supply loaners. Suffice it to say I never went back to that dealer, even though they were conveniently located. Another dealer nearby was quite happy to supply a loaner and became my place for service for the 5 years we owned the vehicle.

    Penny wise and pound foolish indeed…

    • I’m not sure what is the motivation behind those pound foolish decisions, because it does take a rocket scientist to figure it out. Akin to common sense it is not too common. For companies to succeed, they need to differentiate themselves from their competitors. I supposed doing the wrong create the same outcome.

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