You have to do some cost-cutting. Fine. It’s part of the responsible stewardship of your business. But if you think across-the-board cuts are best simply because it distributes the pain and keeps interdepartmental whining to a minimum—you’d better think again.
Jan Carlzon took over the reins of Scandinavian Air and turned an $8 million loss into a $71 million profit in one year. He did so NOT by slashing costs across the board, but by identifying every moment, a customer had the opportunity to form an impression of the business. He called these Moments of Truth and knew that at each of those Moments, a customer would either feel better or worse about Scandinavian Airlines. He knew that if he managed every one of those Moments meticulously, he could create consistent positive impressions and earn customer loyalty.
His Moments of Truth included the cleanliness of the waiting area, the announcements of the pilot, the check-in process, and even the cleanliness of the plane. If a customer saw a coffee stain on a tray when it was pulled down from the seat back, Carlzon knew that the person’s first thought would be, “Uh oh, I wonder if they remembered to service the engines.”
But that’s unreasonable, you say. Darn right, it is. But customers WILL make unreasonable assumptions about whether small things are predictors of something more serious. So it’s essential to manage the perceptions.
Not all cuts are the same. The companies that fare best in tough times are those who figure out how to cut costs in ways that register least with the people who matter most—the customers.