Great Expectations

Expectations are powerful, and they affect our lives all day every day. High expectations are combinations of hope, optimism, and trust.

Negative expectations are based primarily on fears.

We set ourselves up for reality by expecting it to be either good or bad. When it happens and it’s better than our expectation, it’s a pleasant surprise.

Since the mid-’80s service companies have understood that customer satisfaction is tied directly to the customer’s expectation. If the service delivered meets or exceeds the customer’s expectation, then customer satisfaction has been achieved. The term ‘exceed expectations’ has become an idiom.

Negative expectations can also influence outcomes. Sociologist Robert K. Merton is credited with coining the term “self-fulfilling prophesy.”

In his book, Social Structure and Social Theory, Merton says, “The self-fulfilling prophecy is, in the beginning, a false definition of the situation evoking a new behaviour which makes the original false conception come ‘true’. This specious validity of the self-fulfilling prophecy perpetuates a reign of error. For the prophet will cite the actual course of events as proof that he was right from the very beginning.”

Examples of self-fulfilling prophesy happen many times in daily life. Every year it impacts grade school students, for example:

Little Johnny does ok in first grade, but he fidgets at his desk and talks a lot. At the end of the year, the first grade teacher notes these behaviors in Johnny’s record.

In August the second grade teacher is reviewing the students for the upcoming year, and Johnny’s behaviors in first grade are noted.

The second grade teacher decides to deal with Johnny right off the bat, and assigns him to the desk right in front of the teacher’s. His behavior is scrutinized by the teacher, more so than the other students’, and the first time Johnny fidgets or talks, the teacher comes down hard.

Pretty soon, Johnny starts forming his own expectations.

The Price is Right?

Pricing high-end technology services is a complex process, and it’s different from pricing a product.

When you price a program for services, all the costs have yet to be incurred.  With a product, the costs have been spent, and the margin can be more easily determined.

Sophisticated service organizations utilize complex algorithms and modeling to predict costs that will be incurred to deliver service.  There are lots of averages and metrics applied to the process:  The average time between failures, the average time to restore, the average cost of the labor component, the travel.  Unfortunately, some of these complex methodologies end up reducing the forest to the trees, and as a result services pricing is more art than science. We tend to me more inward-looking, and price according to our costs–rather than focusing on the market and what the customer will pay.

A true story from about 25 years ago illustrates this point, and a couple others:

The owner of a jewelry store in Santa Fe, NM, took a large inventory position in high-end turquoise and silver jewelry made by a leading local artisan.  Unlike the stuff sold on the roadside in the Southwest, this was very high-quality art jewelry.  She displayed it in one of the regular cases in her store, priced moderately.

For weeks the line did not move.  She moved it into the feature showcase in the center of the store, and featured some information about the artist.  The jewelry still didn’t move.

She was getting ready to go on a 3-week vacation, and she was reviewing the various items to be done around the store with her assistant.  Among the other items, she told the assistant to cut the price of the jewelry in half–she had decided to cut her losses and move out the inventory.

When she returned from her vacation, she noticed that virtually all the art jewelry had sold.  She mentioned to her assistant that it was a shame to have to lower the price to move it, but at least it was gone.

The assistant was surprised.  She informed the owner that she had misunderstood, and instead of cutting the price in half, she had doubled the price.

It is ingrained in each of us, “You get what you pay for.”

People expect to pay a reasonable price for quality services.

Nobody wants a “cheap” turquoise bracelet.



As we celebrate our national independence, it’s a good time to reflect on benefits of Independent Service.  Today we take for granted the freedom to choose our service provider for computers and medical equipment.  It wasn’t always so…

In late 1969 Control Data (CDC) launched a venture called “Comma.”  At the same time MAI launched “Sorbus.”  Until that point the company who manufactured and sold the product also provided the post-sale support.  Period.

This obviously limited customer options for migration and change.  Service served as an effective account control tactic.  The early Independent Service Organizations (ISOs) broke that control by offering service on primarily IBM equipment.

The ISOs (or 3rd-Party Maintenance Companies, as they were first known) flourished through the 70s, and into the late-80s.  In 1987 IBM declared “The Year of the Customer.”  Major customers were signed to NDAs and given 5-year contracts with drastic price reductions.  About $1B went off the IBM service revenue for the year.  (Of course ISOs immediately countered with, ‘If this is the year of the customer, what’s next year going to be…The Empire Strikes Back?’)

IBM went on to suffer some tough years in the early 90s, but then recovered, partly because IBM developed an effective, win/win, business model for co-existing with independent service companies.

By the 90s every major IT manufacturer was engaged in a “multivendor” service strategy, competing directly with the independents, but the existence of an alternative for support helped fuel the growth of open systems, and the cat was out of the bag.

Today, ISOs provide unique advantages over manufactuers’ services:

The infrastructure/cost structure of an ISO is totally and solely devoted to direct customer service productivity…Service is the ONLY business.  In OEMs the service organization absorbs costs from the manufacturing and product sales side of the house.

ISOs can be selective about what products they maintain.  OEM service organizations have to service EVERY product the company produces, in EVERY town and hamlet they sell the product.

ISOs are customer-, not product-, driven.

The existence of an alternative helps customers get better deals and service from their OEM service providers.

By their nature, Independent Service Organizations produce benefits for clients of high-end technology products…So happy 42nd birthday!