See the case scenario illustrated below:
Not long ago, it appeared that refuse giant Waste Management was headed for the recycle bin. Accounting troubles forced the company to pay shareholders $220 million in 1998 because of overstated earnings. In 1999, shareholders sued after learning executives sold shares prior to an earnings shortfall, and former President and COO Rodney Proto was subsequently fired. To top it off, the Securities and Exchange Commission is suing six former execs for accounting fraud from 1992 to 1997.
But times have changed. Since becoming CEO in November 1999, Maury Myers has made the business of waste beautiful again. And he's proven it to stockholders. Waste Management's share price has held steady despite the recent downturn, moving up almost 15 percent to $25 since Myers took over. Myers engineered the turnaround by focusing on the company's core competency, solid waste, and by selling its international businesses.
Myers also focused on strengthening the heart of Waste Management's business model: operational efficiency. By switching to a centralized purchasing and billing system, Waste Management saved $20 million in 2001, and expects $70 million in additional cost reductions this year.
Another important move was to promote accountability to customers. With 27 million solid-waste customers, taking the time to respond to individual customers' needs may sound anywhere from a bit unorthodox to downright wacky. After all, how can picking up household trash possibly be one to one? And how can it translate into revenue for the $11.3 billion publicly-held company?
Most people don't give weekly trash pickup a second thought unless the bags are still on the curb after 10 a.m. But two years ago, a Waste Management survey revealed that missed pickups were a major cause of customer angst. "Don't miss my pickups; that was the number one issue," recalls VP of customer service Paul Marshall. The failure to meet this fundamental need led to a sour 12 percent churn rate.
In an ambitious customer-facing program, Waste Management launched the "Service Machine" initiative to provide communication between the driver on the street and the customer. If a scheduled pickup can't be made for any reason, the driver immediately calls the office and reports the problem. The office then calls the customer for immediate resolution, and all problems are resolved within 24 hours, explains Marshall. The results have been substantial. "In many of our districts, in-bound call volumes have been halved," he says. Customer churn dropped from 12 percent annually in early 2001 to 10 percent as of June 2002.
A culture of accountability and customer service has helped Waste Management meet its goals. "We track how many drivers call in and how many customers call, of which we want to have zero," explains Marshall. Though backed by "a lot of compensation plans," peer pressure among drivers has been another contributing success factor. "No one wants to be at the bottom of the list," says Marshall.
The idea, of course, is to engender loyalty among customers in order to lock in long-term return. "We're trying to get a view of the customer throughout their life cycle," says Marshall.
To maintain momentum, Waste Management has formed a focus card program to gauge customer sentiment. In addition to follow-up cards to gauge complaint resolution, different types of cards are sent to new customers as well as long-standing ones, Marshall says.
It's all part of an ongoing customer-focused effort at Waste Management. More efficient pickups, rapid response to customer needs, and a culture of accountability have all contributed to the firm's recent recovery; and under Myers' leadership, Waste Management hopes to continue to enjoy the sweet smell of success.
What do weekly trash pickups have to do with customer relationships - why is it important?
Do you have weekly trash pick up from an outside company like Waste Management? Do you talk to neighbors about the service (word of mouth)? If so, what are they doing RIGHT or WRONG that you think Waste Management could learn from?
How does a 2 percent reduction in churn among 27 million customers sound? Why is this important? Be specific. Provide revenue figures based on $40 per month refuse charges. (Churn rate = For any given period of time, the number of participants who discontinue their use of a service divided by the average number of total participants. Churn rate provides insight into the growth or decline of the subscriber base as well as the average length of participation in the service).
Should they be keeping a database on your refuse needs? Should they track customer history?
What other ONE-TO-ONE initiatives could a company like WASTE MANAGEMENT try? Be innovative!