Tuesday, May 19, 2009

Time for Perceptions to Change

When companies experience a downturn in quality or customer service, it can take a very long time to recover. The problem is that perceptions are "sticky" - i.e., even when quality and/or service improves, it may take a long time for customers to alter their perceptions. Customers may cling to the old belief that quality and/or service are inadequate long after a firm has corrected the problem.

Home Depot may be a firm experiencing this situation today. The company reported earnings this week. While the firm is making progress financially, it appears to be largely due to expense control, rather than sales gains. Home Depot sales continue to suffer due to the poor economy, as well as the consequences of a damaged customer service reputation. Interestingly, the firm reports that customer service has improved after dismal performance in that area during the later stages of Bob Nardelli's tenure as CEO. It may take time, however, for the general consumer to recognize and believe that service has indeed bounced back from that period of very poor performance.

Companies need to think very carefully about how they can communicate improvements in quality and/or service. They have to be transparent, and show consumers key data that will help convince them of the enhancements. They also must use social media to help drive word of mouth, as traditional advertising may not the best way to change perceptions. What they cannot do is over-reach about their accomplishments, because consumers may become more upset if they perceive that the firm is proclaiming improvements that do not seem real and substantial to the consumer.