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PRICING

The ABCs of Internal Guarantees

Internal guarantees allow companies to offer customers service guarantees
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A service guarantee promising "satisfaction or your money back" can be a powerful marketing tool -- if you have the systems in place to make good on your word. Before going public with its written guarantee, Creative Professional Services (CPS), a $10.5-million provider of direct-marketing services in Woburn, Mass., began a yearlong dress rehearsal by creating service guarantees within the 135-employee company.

The idea of identifying internal "customers" and "providers" is catching on among service companies striving to adopt total quality management. Internal guarantees are easy to latch onto, since they resemble consumer guarantees and are enforced by the employees. "It's taking the idea of a customer guarantee and turning it inward," explains Mike Epelman, an associate at the Boston consulting firm TQM Group.

At CPS, "many mistakes happen because procedures aren't defined," says Jim Hackett, vice-president of sales. The relationship between CPS's 25 salespeople and the company's production department was a prime example. Salespeople discuss ideas for direct-mail pieces with prospective clients and scribble down the details, which they give to account managers for production. CPS couldn't pinpoint how many little mistakes originated in that information handoff between sales and production, until the company launched a service guarantee between the two groups. The components of the internal guarantee CPS created with the help of the TQM Group can be used as guidelines for any internal guarantee.

The promise. It can be specific ("I will deliver x service by x date") or sweeping (the CPS salespeople pledged to give account managers "all the information you need to do your job").

The payout. If I fail to deliver, I will give you x. Here's where the internal guarantee differs from the classic consumer guarantee: money isn't usually appropriate in an internal guarantee, and the payout is designed not to punish offenders so much as to reward employees for invoking the guarantee. If a CPS salesperson delivers inaccurate or incomplete specifications, the account managers choose the payment: treat me to lunch, do the data-entry work on the job yourself, or sing a song of my choice at the next sales meeting. The account managers suggested the choices, with help from CPS's guarantee steering committee.

The invocation procedure. Activating the internal guarantee must be easy. CPS employees deliver a simple invocation form to the person who's erred. "At first the salespeople had to convince production that they wanted errors pointed out," says TQM's Epelman. If employees think they're going to get teammates in hot water, they won't invoke the guarantee.

Among the payoffs of the internal guarantee: a standard one-page "job-launch form" was created for salespeople to use to record crucial details, helping to reduce small but potentially costly mistakes. Before, almost half the order entries had some sort of error. "Now we're pulling about 10% a month, and the errors are real minutiae," says Hackett, who's betting that as a result of such improvements, fewer customers will ever need to invoke the consumer guarantee.

-- Susan Greco

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Last updated: Mar 1, 1993




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