Here's What's Wrong with Corporate America--and the U.S. Economy   (December 17, 2014)


Will we ever tire of navigating the multiple layers of intermediaries between the customer and the provider, while corporate profits soar to unprecedented heights?

If we had to summarize what's wrong with Corporate America and the entire U.S. economy, we can start with all the intermediaries between the provider and the customer. There are a number of examples we're all familiar with.

One is healthcare, where a veritable phalanx of intermediaries filters the interactions between doctors and patients so heavily that the traditional practice of medicine has been nullified.

By traditional I mean the arrangement that was conventional a few short decades ago: you went to the doctor of your choice (typically, the same doctor your family used), he/she treated you, and you paid the doctor's bill in cash. Only hospitalization was covered by the minimal (and minimally limiting) healthcare insurance plans of the time.

The second example is home appliances purchased at a Big Box retailer. Here's the list of interactions between Corporate America and the customer:

1. Customer enters Big Box Store and is sold a high-margin appliance, unless customer insists on the sale item. Either way, the appliance was assembled in China for a few hundred bucks and shipped to the U.S. for a few more bucks. The difference between the low cost and the price the customer pays is gross profit for Corporate America.

2. Customer and salesperson both know the reliability of the appliance, regardless of brand or price, is low, so an extended warranty is an easy sale. The manufacturer's warranty is typically one year, and the extended warranty tacks on a couple years to the minimal manufacturer's warranty.

(Recall that not too long ago in America, any major appliance was expected to last a few decades, not a few years.)

3. Customer shells out $1,000 for the appliance and another $300 for the extended warranty, and a few more bucks for delivery.

4. Corporate America to customer: we're done with you, bucko. The delivery is subcontracted to another company, the extended warranty is handled by another company, and should the appliance fail during the manufacturer's warranty, the customer has to contact the manufacturer directly.

The only interaction retail Corporate America has with the customer is the initial sale. Everything after that is handled by other companies. So Corporate America has no interest in customer satisfaction or happiness after the sales experience.

5. Calls made to Corporate America--the Big Box retailer or the manufacturer--will be directed to somebody else. The job of taking care of the customer has been shunted to intermediaries that the customer cannot contact directly.

Compare this with the traditional arrangement between the retailer and the customer: whatever the problem, the retailer took care of the customer. If the appliance broke down, the retailer's repair crew would go out and fix it. The retailer was accountable to the customer all the way down the line; if there was a warranty covering the repair, the retailer handled that bureaucratic layer as part of their service.

6. The appliance fails two days after the manufacturer's warranty expires, i.e. one year after purchase. (True story.)

7. Customer calls Corporate America retailer. Response: we're done with you, bucko. Call the manufacturer or the extended warranty company.

8. Customer calls Corporate America manufacturer (or the U.S. office of a global appliance manufacturer). Response: Since your appliance is off warranty, the service call will be (insert outrageous fee): $99.99 (that's our special price for good customers, pal.) Parts will also be marked up triple from what you could buy them for on the Internet, and our labor charges are so high that the repair, even if it is modest in scope, will cost a third to a half of the original price of the appliance.

If the repair is serious, the cost might exceed the original purchase price a year earlier.

Stripped of phony solicitude, the manufacturer's response: we're done with you, bucko. You bought our appliance, but we're under no obligation to make you happy beyond the 365-day warranty period--and well, to be honest, we don't really care if you're happy with our service under warranty, either. Our repair people will get to you when they get to you, and there are plenty of loopholes in the warranty.

Here's the view from Corporate America: we can get these appliances assembled in Robotic Factory #2 (yes, the appliance was stamped with this phrase) in China for an absurdly low cost for an order of thousands of units, and if 10% of those fail within a year due to defective parts, that's just the cost of doing business.

We can grind the customer down with lousy service to the point that many will give up and not even pursue repair or replacement under warranty.

Since Americans have been trained to buy the lowest price, a.k.a. The Tyranny of Price, or the currently fad (over-hyped, overpriced) model, we don't care if they're happy or not. They'll buy the lowest cost appliance or the over-hyped brand next time anyway.

9. Customer calls the extended warranty provider. The extended warranty provider is in a distant state and contracts with a local firm to handle the repair. The customer cannot contact the repair outfit or person directly; everything must be handled through the extended warranty provider.

10. Two weeks later, the repairperson shows up, takes apart the appliance and presents the customer with a bill for $900 which must be paid before he can order parts. But I'm under the extended warranty, the customer says, and the repairperson shrugs. "That's not what the paperwork says." (True story.)

11. Customer calls back extended warranty provider and gets the paperwork straightened out. Boxes of parts start arriving shortly thereafter.

12. A different repairperson comes back in two more weeks, takes a look at the disassembled appliance and the parts that had arrived, and declares the repair will cost more than a new replacement appliance, so the customer should contact the extended warranty provider for a voucher to buy a new appliance.

13. The repairperson leaves the disassembled appliance and the parts. The customer has to call the extended warranty provider again to demand the broken appliance and the new parts be hauled off. Three weeks later, somebody shows up to haul off the useless appliance and the new parts.

14. Customer reads that corporate profits for the Big Box retailer and manufacturer just hit record highs, and has a seizure. Corporate America doesn't make money making the customer happy, beyond the few moments needed to collect $1,300 from him/her. That's how you reap record profits: make the sale and you're done with the customer.

Nobody is tasked with making the customer happy--that's some other intermediary's job. The customer is denied contact with the actual person who ends up with the job of making the customer happy--all communications must go through multiple corporate intermediaries, guaranteeing frustration and wasted time and money.

Will we ever tire of navigating the multiple layers of intermediaries between the customer and the provider, while corporate profits soar to unprecedented heights? The two dynamics are intimately linked: once we book the sale, we're done with customers.







Get a Job, Build a Real Career and Defy a Bewildering Economy (Kindle, $9.95)(print, $20)
go to Kindle edition
Are you like me?
Ever since my first summer job decades ago, I've been chasing financial security. Not win-the-lottery, Bill Gates riches (although it would be nice!), but simply a feeling of financial control. I want my financial worries to if not disappear at least be manageable and comprehensible.

And like most of you, the way I've moved toward my goal has always hinged not just on having a job but a career.

You don't have to be a financial blogger to know that "having a job" and "having a career" do not mean the same thing today as they did when I first started swinging a hammer for a paycheck.

Even the basic concept "getting a job" has changed so radically that jobs--getting and keeping them, and the perceived lack of them--is the number one financial topic among friends, family and for that matter, complete strangers.

So I sat down and wrote this book: Get a Job, Build a Real Career and Defy a Bewildering Economy.

It details everything I've verified about employment and the economy, and lays out an action plan to get you employed.

I am proud of this book. It is the culmination of both my practical work experiences and my financial analysis, and it is a useful, practical, and clarifying read.

Test drive the first section and see for yourself.     Kindle, $9.95     print, $20

"I want to thank you for creating your book Get a Job, Build a Real Career and Defy a Bewildering Economy. It is rare to find a person with a mind like yours, who can take a holistic systems view of things without being captured by specific perspectives or agendas. Your contribution to humanity is much appreciated."
Laura Y.

Gordon Long and I discuss The New Nature of Work: Jobs, Occupations & Careers (25 minutes, YouTube)



NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

  Thank you, Patrick M. ($5/month), for your astoundingly generous subscription to this site-- I am greatly honored by your steadfast support and readership.  


"This guy is THE leading visionary on reality. He routinely discusses things which no one else has talked about, yet, turn out to be quite relevant months later."
--Walt Howard, commenting about CHS on another blog.

"You shine a bright and piercing light out into an ever-darkening world."
Jeremy Beck


Contributors and subscribers enable Of Two Minds to post 275+ free essays annually. It is for this reason they are Heroes and Heroines of New Media. Without your financial support, the free content would disappear for the simple reason that I cannot keep body and soul together on my meager book sales alone.

Or send coins, stamps or quatloos via mail--please request P.O. Box address.

Subscribers ($5/mo) and those who have contributed $50 or more annually (or made multiple contributions totalling $50 or more) receive weekly exclusive Musings Reports via email ($50/year is about 96 cents a week).

Each weekly Musings Report offers six features:
1. Exclusive essay on a diverse range of topics
2. Summary of the blog this week
3. Best thing that happened to me this week
4. Market Musings--commentary on the economy & global markets
5. Cultcha/Culture: selected links to the arts, performances, music, etc.
6. From Left Field (a limited selection of interesting links)

At readers' request, there is also a $10/month option.

What subscribers are saying about the Musings (Musings samples here):

The "unsubscribe" link is for when you find the usual drivel here insufferable.

 
 
Dwolla members can subscribe to the Musings Reports with a one-time $50 payment; please email me if you use Dwolla, as Dwolla does not provide me with your email.



The Heroes & Heroines of New Media:
oftwominds.com contributors and subscribers



All content, HTML coding, format design, design elements and images copyright © 2014 Charles Hugh Smith, All global rights reserved in all media, unless otherwise credited or noted.

I am honored if you link to this essay, or print a copy for your own use.

Terms of Service:
All content on this blog is provided by Trewe LLC for informational purposes only. The owner of this blog makes no representations as to the accuracy or completeness of any information on this site or found by following any link on this site. The owner will not be liable for any errors or omissions in this information nor for the availability of this information. The owner will not be liable for any losses, injuries, or damages from the display or use of this information. These terms and conditions of use are subject to change at anytime and without notice.


                                                                         
blog     My Books     Archives     Books/Films     home


 

Add oftwominds.com
to your reader:



Making your Amazon purchases through this Search Box helps support oftwominds.com at no cost to you:



search my site: