Topic: Outsourcing

Why cutting costs is the most expensive way to grow your business

You can save money but money can't save you

Automating and reducing waste by adopting more efficient processes is good business, right? For the last 50 years this school of thought has been the driving force behind some of the world’s most successful companies. Outsource everything, continually refine your processes, cut costs and then squeeze out the juice to the bottom line. A recipe for success, right?

Wrong. In this new service economy we live in, being “efficient” is actually wasteful. By cutting costs, you’re also cutting the relationship with your customers. Instead of standing out with remarkable service, you’re now just another company with an unfriendly yet efficient approach that “keeps costs down.” You see this mantra everywhere: email instead of phone calls; self-service instead of full; ATMs instead of tellers. Rejoice! It’s working. The world is more efficient than ever before!

But efficiency does not translate to the bottom line.

Efficiency is expensive

Building this kind of efficiency into your business is usually not worth the money saved. Furthermore, most cost-saving schemes are being adopted by your competitors, too. So, far from being unique, you become just another me-too business:

  • Everyone has automated phone menus with voice recognition. Saving a small percentage of your expenses on labor is not worth frustrating the hell out of your customers.
  • Everyone prefers email to phone calls. But making a strong lasting connection over email is almost impossible.
  • Every B2B company is getting rid of its field sales reps in favor of tele-sales teams. But bonding with senior decision-makers over the phone is hard.

You can’t cut your way to happiness

For the customer, day-to-day interaction with these so-called efficient companies is indistinguishable and anonymous. It doesn’t matter whether I call AT&T, Sprint, Verizon or T-Mobile: before I even pick up the phone I know I’ll be talking to a robot. It doesn’t matter whether AT&T’s phone system is friendlier than Verizon’s: they both still suck compared to a real person. No matter how much optimizing and cost-cutting these companies do with their customer service, I won’t like them for it.

But what if a cell phone company were to answer its 1-800 number on the first ring… and with real people? I bet the word-of-mouth buzz and brand awareness generated would easily cover the cost of the extra reps. Why? Because phone companies all have the same mediocre customer service. Answering the phone on the first ring would be a differentiator. It would get more attention than a Super Bowl ad.

The top three phone companies in the US alone spend $8.2 billion per year on advertising. So it must be an efficient method of customer acquisition, right? Wrong again. These companies are in a bidding war for consumer attention. Yet all of their ads look the same. And consumers aren’t even paying as much attention to mass media as they used to.

Instead of trying to one-up the competition with another me-too ad campaign, what if a company put 25% of its advertising budget into its call center and did something remarkable like answering all phone calls on the first ring. While everyone else would continue zigging with ads, it would be zagging with outstanding service. Instant differentiation, free PR, a million thank-yous from happy customers, a ton of word-of-mouth buzz—all resulting in many more customers than it could have acquired with traditional advertising.

The case for waste

Think of the times you’ve received extraordinary customer service. How many people did you tell about your experience? How loyal are you now to the company? How much more money have you spent on the company over time?

Next time you think of cutting costs, don’t. Fooling yourself into thinking that you’re improving the bottom line is easy. But when the by-products of efficiency are irate customers and damaged relationships, you’re not saving money at all. Being inefficient might just be the cheapest way to stand out and get the attention of millions.

Why we got rid of our office, sent everyone home, and started working remote

Cubicle FarmCould your startup shut down your office and go virtual—by next Friday? Sounds scary, doesn’t it? Even though you’d save lots of money on rent, never waste away in another rush hour traffic jam, and be able to hire the best talent regardless of location, you’re probably still thinking to yourself—that’s impossible. My situation is different. We made up excuses too—for six years! But now we’re about to find out what it’s really like to be free from the shackles of office life.

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