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Discussion: Long term vs. short term
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FabienneB |
Long term vs. short term
Sep 13 2008, 4:09 PM EDT
I found the following statement quite interesting: "A business owner’s decision to show more care for consumers is a decision to accept lower levels of profits.”In a short term cause the business owner is making less profit because he has to put a lot of money into customer care programs. But on the long term cause it will be possible for him to higher the prices of his products because the buyers are willing to pay for the additional service. Or the business owner can sell more products at the same price. So he will make more profit. The conclusion is that decisions can show different impacts over time. 0 out of 1 found this valuable. Do you?
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DominicMcNamee |
1. RE: Long term vs. short term
Nov 18 2008, 2:54 PM EST
I'd agree with this idea. For example a small car company like Pagani make only a handful of cars each year for a very high price. Whereas a company like Ferrari or Lamborghini make many times more cars of similar quality and performance for a lower price. The reason why Pagani stays in bussiness is because they offer much better service to the customer. Ferrari and Lamborghini both offer a set number paint and interior options. Pagani, on the other hand will build their cars in any colour that is requested with the interior upholstered in any workable material. One customer even went as far as to get ostrich skin seats. When taking a Ferrari or Lamborghini to get serviced a customer deals with who ever is managing the dealership. With Pagani the owner and founder of the company will personally greet you and test drive the car afterward to make sure everything is working perfectly. They will so send a mechanic to anywhere in the world within 24 hours if a customers car breaks down.
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SimonStrong |
2. RE: Long term vs. short term
Nov 25 2008, 1:38 PM EST
In regards to Dom's idea of Pagani being able to charge a significantly greater amount of money for their cars against the likes of Ferrari and Lamborghini because they are more consumer oriented is, I believe, not entirely true. Pagani do yes sure take more time to appear more consumer oriented but the fact is that due to Pagani literally making only tens of cars they HAVE to appear more consumer oriented. From the way Pagani see it, if you are buying one of their cars it means you have money, money no object kind of thinking. They may yes agree to consumers have "ostrich skin seats" but they are not going to turn away a customer who is willing, and will have to, pay for his/her accessory. The point is that Pagani are supreme luxuries, by making themselves in such short supply the shift the price up exponentially. Ferrari and Lamborghini are too luxury cars, but they do not cost $1.2million retail. So whereas yes they are selling in short supply, and can fit to order many features such as the ostrich skin seats they are making their revenues from the ridiculously high prices. And here's a thought - If Pagani started making as many cars as Ferrari or Lamborghini or Aston Martin would they be able to take such care and time in each consumer. My guess is no.
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MikeSchenck |
3. RE: Long term vs. short term
Nov 25 2008, 2:34 PM EST
I agree to some extent with you. I'm not sure if what Dom is talking about is considered costumer service, isn't that just more options on a purchase? When I think of costumer service it's more of a "My computer isn't working how can I fix it?", and the person calls the company or goes to their store, to get their computer fixed. If the repairs are covered by the warranty the costumer pays nothing, and if they aren't they, well, have to pay. A good costumer service can lure costumers to come to use your service to help them deal with their problem, or fix their goods. So I don't always think it's a decision to accept lower profits, especially if done well. For example, if you have an iPod and it breaks, you take it to the apple store, and they fix it for you if it's covered under the warranty. However, you would still go to the store if your iPod is no longer under the warrenty, and maybe pay for the repairs. Meaning, apple can still benefit for having a good costumer service. Or, when someone makes the decision to buy an iPhone which is expensive for an average person, they want to know that if it breaks they will be able to get it fixed, and in this case, having a good costumer service can make the difference to whether or not that person is going to purchase the iPhone. Also doesn't costumer service also cover how employees interact with cosumers? If a good costumer service allows for easy communication and buying options for the consumer, it would most likely help the company selling the good or service. So a costumer service could decrease profits if it cost more than the additional money earned through better service to the costumer, but it could also increase it. It just depends on the situation.
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robschenck416 |
4. RE: Long term vs. short term
Nov 25 2008, 4:51 PM EST
Let’s look at this concept in terms of branding. McDonalds, as we all know, is one of the, if not the most famous brand on earth. Everyone knows what McDonalds is, and knows what to expect when they go to McDonalds. They know that all the burgers will taste the same; they know that they are cheap; they know that there will be restrooms, and so forth. This ties in with a consumer’s knowledge of products. When we have more information about a product, and that information is “good” information, consumers will generally choose that product over a product they know little about as they know exactly what to expect. If you’re driving in a foreign country and are extremely hungry and tired, and you have a choice of either a local restaurant or a McDonalds, it’s likely you’re going to choose the McDonalds. You know you’ll be able to get something that tastes ok, you know the environment will be comfortable- you know exactly what to expect.Branding essentially supplies consumers with knowledge about the market they wouldn’t otherwise have, thus creating an incentive for that consumer to go with that product over another. Do I buy an iPod that I know will work, that I know I will have support for if it breaks, and that I know the software for that product works well, or do I buy an obscure Chinese PMP (portable media player) that may be that I know nothing of? Most consumers are going to choose that iPod, even if the Chinese alternative is cheaper. (Post continued below) Do you find this valuable? |
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robschenck416 |
5. RE: Long term vs. short term
Nov 25 2008, 4:51 PM EST
Good customer care programs build reputation and branding. It’s common knowledge that both Best Buy and Circuit City have abysmal customer service whereas Amazon or Newegg’s (both online retailers) have generally very good customer service. If you’re buying an expensive product, you may choose to purchase it from Amazon or Newegg because you know that if it breaks, or is broken, you have a much better chance of getting a refund, and will have a better experience dealing with the problem. As a result, although Amazon and Newegg will have to invest more money in their customer service, especially considering the fact they will often replace purchases with no questions asks, it also generates more business for them which, hopefully, covers their cost. For Best Buy and Circuit City it could be that they generate more money by not investing anything into customer service, which could easily be a possibility, especially considering the fact that most of the people who purchase electronic products from them have no idea how that product functions and know little about it, so they are unable to predict potential problems with it. As with Amazon and Newegg especially, consumers will generally know more about the products they’re purchasing, and will refuse to purchase it from that specific site if they know that site has a reputation of poor customer service.Companies spend millions upon millions of dollars to create a brand for themselves- to differentiate themselves from other producers that supply essentially the same service/products. Do you find this valuable? |
mikewilkes |
6. RE: Long term vs. short term
Dec 4 2008, 4:11 PM EST
I dont think anybody touched on this but customer care is a form of advertising. Firms obviously want people buying their product so they can maximize their profit and they do this by advertising, if a company losses some profits in the short term it may apear they are a friendly company who does what ever they can for the customer. But in reality they are thinking in the long term of more sales and increased profit. ;]
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