As Dan Schaeffer stared at the small font on a mind-numbingly large spreadsheet he decided that Tuesday would be a lot like Monday.  Half way across the country, Steve Penderman looked at the top message in his inbox and reached a different conclusion – Tuesday was going to stink.

Earlier in the month Dan’s software company sent his customer Steve an invoice for annual maintenance fees.  Like other software companies around the world, Dan’s sent hundreds of invoices each day which charged fees to provide ongoing support.

Steve’s team depends on the software each day.  If it breaks or is configured incorrectly, his company loses millions in lost productivity.  The note Steve saw when he gazed into his inbox was an invoice from Schaeffer.

On most days the arrival of an invoice would start a pre-determined set of processes.  Steve’s team would analyze expenses, perform a competitive analysis, and make a business decision to see if they could satisfy the needs more cost effectively elsewhere.

Today however, the invoice presented a problem because their budget, finalized weeks ago, had not included the fees.  So Steve picked up the phone.

As Steve’s name popped onto the caller ID screen Dan groaned and thought “ugh, this guy works us over for concessions all year long and then nickels and dimes us each time we send an invoice.  Looks like today won’t be like yesterday after all.”

After complaining about the high price for a few minutes, Penderman finally came to the point.  “Your product doesn’t work and is basically useless,” said Steve.  “So you need to waive the annual fees as compensation.”

Dan replied “Steve, we can’t just waive fees, we use those to support you by hiring and training the people who answer inquiries, repair defects (bugs) and make product innovations.”

Unmoved, Steve indicated that the product was so bad that they hadn’t even budgeted the fees.  “Look Schaeffer,” said Steve, “the money just isn’t there.  Unless you waive the fees we’ll be forced to look to your competition for a replacement.”

How would you handle Steve’s predicament?  What about Dan’s?

(For the past few years, I’ve tried to come up with clever posts on April Fool’s day.  On occasion the posts have been convincing enough to vex those who care deeply about customer service.  This post has many elements of an April Fool’s day post, contains a deliberately facetious title and uses fictional characters to protect the innocent and the guilty.  Unfortunately, it is also true.)

What’s the pivot point?  Are you kidding me?  Any kid who has ever operated a lemonade stand can figure this one out.  If costs exceed revenues you may quench your thirst by making lemonade from lemons, but you’re bound to go hungry.  If you try this same model in business enough times you can expect to become acquainted with the term Chapter 7.  The pivot point is that free support is no solution.  While it may help Steve in the short term, Dan’s company will suffer and as it does, the support Steve receives “for free” will get worse and worse.

For fans of irony I include these points:

  • To create an environment where decisions are based on facts and free from the appearance (real or imagined) of quid pro quo Steve’s employee ethics guidelines prevent him from accepting anything (even something as trivial as a cup of coffee) from vendors.  Steve sees no conflict in asking for free support.
  • Steve’s company is, by all accounts, very successful and profitable.  They insist that their customers pay them.
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