Tuesday, September 27, 2011

Determing the Cost of Solving a Problem

About 6 months ago, I purchased a new BlackBerry phone. As I used it, I noticed there was an inordinate number of double-typing – in typing “how are you?” it would spell out, “hhhhooww arrre youuu?”
I just assumed it was my poor typing.
Finally I decided to do a quick Google search to see if anyone else had reported the same issue. It turns out that there is a problem with that model phone manufactured during a certain time period that was causing the issue. I then called my carrier, and sure enough, they will exchange the phone (for a slight fee as it is out of warranty).
What lesson we can draw from this situation?
You sell a product that turns out to have a problem. Do you try and contact all the purchasers and tell them to return the product for another? Or do you wait until those who report it contact you, before exchanging it? Most small businesses won’t have an issue the scale of a cell phone manufacturer, but there will be cases where you need to determine the right strategy.
Here is a set of criteria for making this decision:
  • Contact: Can you contact the customer?
  • Scope: How widespread is the issue?
  • Danger: Does using the defective product harm the consumer?
  • Cost: What is the cost of the solution (or continuing use without solving)?
  • Reputation: Will not acting harm your reputation?  What is your reputation with consumers?
Let’s apply the criteria to some cases.
A restaurant serves something that can make the customer sick.
  • Contact: will you be able to contact the customers who may have eaten the bad food? Not easily.
  • Scope: do you know how many meals were served? Yes, of the x number of meals served, you should have a pretty good sense of how many included the bad food.
  • Danger: how dangerous is the food? If it is just rotten, then of those who eat it, some may get sick, some may not. If it is extremely dangerous – then you have a greater cause to act on.
  • Cost: usually if someone is sick the restaurant will pay doctor visit, or at the least a free meal.
  • Reputation: if some people get sick, will it affect your restaurant?
Often, a restaurant will just wait and see who comes in a day or two later – most food pathogens take 24 hours to germinate, and if the customer complains they were sick, do something to recompense them.  But if you were a small local restaurant with a very supportive and regular clientele, you may decide to call those people you remember ate the bad food and let them know.
Apple’s iPhone has an antenna issue. You may remember back when their latest phone seemed to have a problem where holding the phone in a certain way meant calls were dropped or not completed.
  • Contact: Could reach all the users, since they are phones.
  • Scope:  All new versions of the phone had this issue.
  • Danger: No danger to any of the users
  • Cost: If they’d had to replace all the phones – high, especially in roll out with new phone.
  • Reputation: People generally have a high opinion of Apple. If Steve Jobs felt it not a big issue, then the users might give him the benefit.
In this case Apple gave away free cases for a while, management came out strongly on the issue, and generally the issue petered out.
So in my cell phone example -
  • Contact: Can you contact the customer? While in some cases it may be difficult to contact the customer, in the case of mobile phones it is quite easy.
  • Scope: How many phones are we talking about? If it is 10,000, that is very different than 500 in terms of cost to replace.
  • Danger: Does using the defective product harm the consumer? Will the user be harmed by using the product? In the case of my phone, it was annoying, but not dangerous.
  • Cost: Unknown, but I would imagine the cost would be pretty easy to calculate (# phones x cost of replacement body + shipping).
  • Reputation: Will not acting harm your reputation?  What is your reputation with consumers? I think we can all agree that cell phones are rather balky devices and we have low expectations regarding their operation.
From the above, the cell phone manufacturer determined they would let the customer call, and when they do, then replace the phone.  
I happen to believe this was a mistake, mostly on the grounds of reputation. BlackBerry owners generally are business users, not consumers. As such, they are already disposed to the strengths of the BlackBerry – reliable, email, voice mail. Since typing on the physical keyboard is why I use a BlackBerry, a typing input problem is a real issue.  Also, I bet that they could know which business users are most important – those that use the Enterprise server edition. Why not replace those phones? Since my company allows Apple iPhones to be used for business email, I stick with the BlackBerry for its keyboard.
What would you do?

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