Kanika Datta: The 'cartel' approach to service

SWOT

In the early nineties, when India's new open skies policy attracted a flock of private competitors, travellers will recall how "service" suddenly emerged as the standard by which airlines began to be judged.

Many of the facilities that were introduced then""tele check-in for Business class passengers, even hot/cold towels for less favoured Economy passengers, frequent flier programmes and so on""were considered novelties at the time.

Today, the domestic airline that does not offer these services would be considered sub-standard. A consumer now incorporates all of this as a given; her choice of airline will be based on a much more complex set of factors, price only being the latest among them.

Certainly, there is nothing like competition to make companies start thinking of the customer.

Recall how, in the first flush of liberalisation, prospective car-owners revelled in the fact that they could buy cars almost off the shelf""a great leap forward from the days of interminable waiting lists and hefty early-bird premiums.

Within years, with availability no longer an issue, other practical issues as fuel efficiency and after-sales service became differentiators. But these too have become standard requirements.

Today, the number of models being offered at the upper price bands may well suggest that more car-buyers are ready to incorporate design and ergonomics in their purchase decisions as well.

Imagine the surprise, then, when a J D Power survey of new car- owners last fortnight reported more problems with their cars, compared to a year ago""especially those related to fuel consumption.

This was largely ascribed to rising fuel prices over the past year. So even as design, looks, service, and price now stay factored into the Indian car buyer's decision, a crucial global development has realigned expectations all over again""and car manufacturers need to adjust to it quickly.

For marketers in India, the key take-away from this survey is that service is neither a static concept nor does it progress in a linear manner.

As Scandinavian turnaround expert Jan Carlzon, the man credited with putting SAS back in the black in the early eighties, told me earlier this month, "What is good service today might become a given tomorrow and might even become bad service the day after."

Carlzon's novel focus on services for the premium-paying business traveller all those years ago soon became the standard for Europe. Now, the global airline business needs to look for the next breakthrough idea, and it can only come in terms of service.

Coming back to India, the growing crowds in the Indian consumer markets have certainly taught most companies that service is now an integral part of a product.

But as yet, the overall approach appears to be me-too rather than out-of-the-box. Longer warranties for cars, time-barred cheap tickets by airlines, membership reward points by credit card companies are all Big Ideas that were thought up by one company and rapidly emulated by the others.

As a result, as any Indian consumer will testify, it is difficult to tell one mobile phone company from another, ditto for credit card companies or home loan offers.

This tends to create a lowest common denominator in which consumers accept service standards at a particular level on the assumption that all companies are as bad or as good (the former rather more often than the latter).

Right now for most companies, establishing service as a significant differentiator doesn't matter a great deal since consumer demand for goods and services outpaces supply by several lengths. Success still lies substantially in the aggression and efficiency of the selling function.

But the crunch will come when markets grow satiated""this will soon be the case with mobile phones in urban areas, for instance, where the telecom regulator has allowed the number of service providers to multiply.

Domestic airlines will soon be headed that way too as the apex-fare price game""introduced by Air Sahara and then rapidly copied by everyone else""plays itself out on the back of rising fuel prices.

In short, Indian companies may well be taking the easy way out by virtually cartelising the service function.

Certainly, achieving and sustaining superior service is a tougher proposition that involves efficient HR policies and sound supplier relationships as much as clever advertising and canny marketing strategies. But companies that start addressing those issues now will be the ones that will prove the stayers.

Dell is the finest example of a company that chose to think differently and structured the organisation around a concept that has been hard for the competition to emulate (even HP struggles to copy it).

As markets in the West are demonstrating, technology is narrowing the scope for companies to use product features to significant advantage. Companies operating in India have a chance to learn that lesson early.