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Ten
Ways To Make The Economics of Time Work For You
(1)
Pay attention to time. Be as
efficient at controlling time costs as you try to be at controlling cash
costs. Seek out and eliminate unnecessary inefficiencies
wherever possible. While this objective
certainly sounds obvious, many firms find that nothing gets done unless
it is made a priority. Consider
the fast food industry. Despite
the label, fast food is often anything but fast.
When the industry started paying attention, it realized that faster
service directly increases revenues. One
1999 study showed that sales at a typical Burger King restaurant grow
$15,000 a year for every second it shaves off drive-through time. Once the fast food industry recognized the importance
of service times, they were able to find numerous ways (including training,
incentives, process changes, and technology) of speeding up customer service.
These opportunities were all available previously, but nothing
was done until service time became an explicit priority.
(2)
Focus on the big picture. Many
companies have undertaken re-engineering projects or similar efforts in
order to save their own time. Fewer
have recognized the opportunity to save time for their customers.
Every minute you save for the customer is equivalent to reducing
the customer's cost of buying your product or service. A technique may
make you more efficient, but if it causes the
customer to wait then you've effectively increased the total cost of your
product. And don't forget employees,
suppliers, and other business partners.
Wasting their time can be just as damaging as wasting customer
time.
(3)
Use queuing theory and agent-based modeling to measure and manage the
tradeoffs between cost and customer service times.
Queuing theory provides a set of proven models for analysis of
customer service processes. Agent-based
modeling, not as simple to use but potentially offering even richer insights,
draws upon complexity theory to describe emergent patterns in customer
service systems.
(4)
Make queuing time more productive.
If you can't (or won't) change your system to
reduce customer waiting time, help your customers make more efficient
use of that time. Consider the
example of Disney theme parks. Waiting
in line is one pervasive downside of the theme park experience. (Any park with sufficient capacity to eliminate
lines would likely be prohibitively expensive to operate.) Disney's strategy has been to make queuing time
more enjoyable, by offering entertainments, games, and other diversions
to waiting guests. It's hard to
imagine a park that customers would visit just to stand in line, but a
park that makes lines more enjoyable can generate significantly higher
revenues by accommodating larger crowds of happy customers.
(5)
Define metrics to monitor how you and your competitors use customer time. Most
companies today rigorously measure the cost of providing products and
services, and continuously monitor their costs against competitor costs. The time it takes a customer to use your service
is another type of cost, and is just as important to monitor. Just as a more expensive product creates openings
for competition, a company that extracts a higher time cost for its products
also makes itself vulnerable to competition. Boeing's new Sonic Cruiser jet is designed to
save more time for travelers. Not
only does the plane's faster speed make for shorter flight times, but
the plane is tailored for point-to-point itineraries (rather than funneling
huge number of passengers through congested central hubs), thereby shortening
total travel times even further.
(6)
Offer alternatives to segment the market.
While it's economically inefficient to use queues solely to
regulate demand, they can be a useful tool to segment the market.
IBM pioneered the time-based segmentation concept by artificially
slowing down computer chips so that it could maintain high prices for
customers able to pay for top performance.
They were then able to capture additional revenue (while protecting
their big-ticket accounts) by providing the slower machines to customers
who would have otherwise gone elsewhere.
Priceline follows an analogous segmentation strategy -- liquidating
excess capacity at low prices to customers who assign relatively low values
to their time, thereby protecting the higher-margin time-sensitive customer
base. Some amusement parks have
started using time-based market segmentation in the opposite direction,
holding prices relatively steady for the majority of their price-sensitive
customers, but capturing incremental revenues by providing special services
to VIP customers willing to pay extra to bypass queues.
(7)
Use technology to speed up customer service, but be wary of potential
downsides for customers. Many forms of technology offer the potential
to improve customer service, response time, and overall efficiency. Just remember that if these involve a significant
customer learning curve, if they don't work as promised, or if they slow
down your customers, then your great leap forward will be perceived as
a big step backward. Automated
telephone menus and voice mail are generally thought to represent progress,
but how many customers yearn for a simple human voice? ("Good morning. Acme Corporation. How may I direct your call?")
(8)
Provide information. Most consumers would avoid buying a product
with no posted price, yet many companies expect customers to make a time
commitment with little or no information of the time involved. Providing information (how long a wait to expect,
how long it takes to assemble the product) allows consumers to make economic
decisions regarding their time. Some
decisions may well result in lost sales but many will result in a more
economic use of available resources, such as consumers calling back when
they have more time or when demand for service is lower.
(9)
Provide accurate information. Customers
don't know whether you've quoted them the wrong "time price"
until they've paid it, so low-balling the wait may allow you to salvage
some sales. Doing so also undermines your credibility for
all future interactions.
(10)
Know when to speed up, and when not to. The
overall theme of this article is that queues are bad and saving time is
good, yet speed isn't always appropriate.
Nobel-Prize-winning economist Gary Becker has suggested that fine
restaurants will sometimes want to encourage queues. An orderly reservation process that efficiently
deposits arriving diners right to their tables may be efficient from an
economic perspective, but a long line at the front door and a crowd waiting at the bar convey to the world that this establishment
is a hot destination and an experience worth waiting for. On a more mundane level, fast service may not
always be worth the cost of providing it.
Assign appropriate costs to customer waiting time, factor in your
own costs, and optimize appropriately.
Conclusion
Time is indeed a scarce commodity. Customer time requirements are just as much
a part of product cost as the price quoted on the price tag. Many companies act as though they aren't concerned
with consuming customer time, which opens a new dimension of competition
for firm's which are attuned to the issue. Enhance your value proposition by providing
customers more time-efficient ways to do business with you. It's about time.
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