by Terry Smythe
Chief Administrator
Motor Transport Board

September 1990

This document is to assist in implementation of the Taxicab Board decision respecting a superior class of taxi service in Winnipeg. It expands upon the basic concept and highlights the nature and focus of excellence of service as already in practice in a number of major centers throughout North America.

1. To enhance the image and status of the taxi industry in Winnipeg.

2. To improve the quality of taxi service in the city.

3. To fulfill unmet demand for taxi service.

4. To provide greater consumer choice.

5. To make Winnipeg a city where it will be fashionable to take a taxi.

"Everybody talks about service, but not too many people are happy with it. Yet quality service is becoming more and more important in business today. Service is a critical for survival, it is the competitive edge in many organizations."

Stanley Brown

"Creating the Service Culture" ¹

Regrettably, some taxicab companies are finding themselves in the uncomfortable situation where their user base is shrinking to minimum "users of necessity". The process is gradual and tending not to be noticed in the day-to-day operation of the business.

The reasons for this process tend to focus on a number of perceived "intruders" such as a second family car, subsidized public transit, stretch van "buses" behaving as taxicabs, U-Drives, corporate fleet vehicles, hotel vans, etc. There is no question that in many cases these intruders have contributed to the erosion of the customer base. However, in many instances, they are simply a competitive response to perceived opportunities.

Taxicab management has looked with justifiable alarm at this erosion of their previously safe array of customers, and in seeking out solutions have tended to focus on response time as a means to improve service levels. Unfortunately, response time is not the true measure of "service", which also embraces vehicle quality, cleanliness, comfort and features; driver appearance, conduct, grooming, knowledge, honesty, and attitude; corporate image, status, and services; dispatch efficiency, responsiveness, and responsibility; a host of relevant factors.

Perhaps a problem has not been perceived or detected because of a lack of complaints. However, according to Stanley Brown,

"One should never rejoice that his or her arm rarely receives any complaints, because the average company never even hears from 96% of its dissatisfied customers! For every complaint that is actually recorded, 26 other customers had problems with the firm, and 6 of those were considered "serious".

Of those customers who do complain, between 1/2 and 2/3 will continue to do business with that arm, if their complaint is satisfactorily resolved. That number leaps to 96% if that complaint is resolved quickly!

According to TARP (Technical Assistance Research Programs, Washington, DC), only 17% of customers who were dissatisfied with a recent customer service experience intended to continue doing business with the offending company! Again, only 17%, less than 1 in 6, of customers who were displeased with the customer service they received would buy other products or services from that company. Loyalty increased to 50% when customer service was acceptable, and zoomed to 80% among those who were completely satisfied.

In other words, excellent customer service is clearly a powerful marketing tool."

The world is full of entrepreneurs constantly seeking out opportunities to provide a better service or a better product, so as to improve their competitive position and enlarge their share of a particular market segment. Such is the way of democracy and competition. The taxicab industry, even though regulated, is no different in its vulnerability to natural competitive forces.

It is precisely because it is regulated that the taxi industry has no option but to be vigilant in sustaining and continuously enhancing their service levels. For if they fail to do so, they will surely suffer from these external competitive forces.

Regulation of the taxicab industry is not intended to guarantee its success and survival. It only guarantees that the public interest will be protected. The industry has a responsibility to take its service levels seriously, and they would be well advised to heed Stanley Brown’s advice.

According to Brown, the consequences of service neglect can be devastating, causing a 20% drop in profits, a 10% decline in sales, and an annual 2% loss of market share. The nourishment of a "service culture" is generally poorly handled, as less than 60% of the firms surveyed allocated a budget for training in service excellence.

Brown believes their are 5 key "pillars" that must be in place to nourish a service culture:

· Research into employee needs and beliefs, customer needs and competitive positioning.

· Management must accept responsibility for developing a service strategy.

· Service standards must be established that meet or exceed expectations of customers.

· The service concept must be communicated to employees and customers.

· Quality service must be encouraged and rewarded.

According to Albrecht & Zemke in their book, "Service America", service is not a competitive edge, it is the competitive edge. People don’t just buy things, they also buy expectations. Those expectations emerge with each "moment of truth".

Donald Porter, Director of Customer Service Quality Assurance for British Airways, points out:

"If you’re in a service industry, and you get it wrong at your point in the customer’s chain of experience, you are very likely erasing from the customer’s mind all memories of the good treatment he or she may have had up until meeting with you. But if you get it right, you have a chance to undo all the wrongs that may happened before the customer got to you. You are the moment of truth.'

Carl Witten, Publisher of the Boston Carriage News, serving the Boston and New England taxi industry, observes that, "10,000 cab drivers talk to a hundred thousand passengers/". That is 100,000 moments of truth! From this, Albrecht & Zemke have concluded:

'When the moments of truth go unmanaged, the quality of service regresses to mediocrity"

To better understand what is service so as to better manage these moments of truth, Albrecht & Zemke have determined that a service product - i.e., any incident of doing something for others for a fee - can be defined as having the following service characteristics:

· A service is produced at the instant of delivery; it cannot be created in advance, nor held in readiness.

· A service cannot be centrally produced, inspected, stockpiled, or warehoused. It is usually delivered wherever the customer is, by people who are beyond the immediate influence of management.

· The product cannot be demonstrated, nor can a sample be sent for customer approval in advance of the service; the provider can show various examples, but the customer’s own haircut, for example, does not yet exist, and cannot be shown.

· The person receiving the service has nothing tangible; the value of the service depends on his or her personal experience.

· The experience cannot be sold or passed on to a third party.

· If improperly performed, a service cannot be "recalled". If it cannot be repeated, then reparations or apologies are the only means of recourse for customer satisfaction.

· Quality assurance must happen before production, rather than after, as would be the case in a manufacturing situation.

· Delivery of the service usually requires human interaction to some degree; buyer and seller come into contact in some relatively personal way to create the service.

· The receiver’s expectations of the service are integral to his or her satisfaction with the outcome. Quality of Service is largely a subjective matter.

· The more people the customer must encounter during the delivery of the service, the less likely it is that he or she will be satisfied with the service.

Not every service can or should possess all of these characteristics, or even that these are the only characteristics a service can have. Nevertheless, these characteristics do paint a picture of a very special kind of transaction between buyer and seller: a transaction called "service".

It has been argued that Winnipeg’s taxi industry cannot absorb additional vehicles, as there is insufficient business for the fleet at its current quota. This fear was addressed in the Board’s March Report when it observed (p. 48):

"The market for taxi services is heterogeneous. There is a clear dividing line between those members of the public who of necessity use taxis because they are not able to drive themselves, whether due to poverty or disability, and those for whom the taxi is a convenience. Price and service elasticity of demand are clearly substantially different for the two groups.

When taxi fares go up, the "users of necessity" are more adversely affected than the "users of convenience". When service quality goes down, the "users of convenience" find more suitable alternatives.

The "convenience" group generally values their own waiting time higher than would the "necessity" group. The "convenience" group could therefore be charged more in order to attract the capacity necessary to provide the lesser waiting time for which they are prepared to pay.

It would appear from the general views of Winnipeg businessmen that the current regulatory structure fails to allow the provision of service at a level that will attract their business, and that should service be offered at such a level, total demand for taxi services in the City would increase substantially."

Throughout the public hearings, and subsequently to the present, the industry has consistently drawn attention to long wait times between dispatch calls as their evidence of insufficient business to support the present fleet size. It is probable the industry is correct in this perception as it tends to focus on "users of necessity".

It is important that the industry attempt to see itself through the eyes of lost customers, and to reach out, attract, and "capture" potential customers who do not now use taxi services the elusive "users of convenience".

Experience in other major cities where "users of convenience" have been the focus of attention have clearly shown that this market segment will start to use taxi services when those services become sufficiently attractive as to inspire a change in their attitude. Whatever company chooses to be the best to provide the superior class of service will become the first that this market segment will telephone for service as an alternative to their present practice.

A market survey of 687 Winnipeg residents, conducted in March 1990 by the independent Prairie Research Associates Inc., determined that almost one third of Winnipegers would use taxi services more if a superior class was available, and one half would be prepared to pay more for such a service.

Detailed analysis of the survey indicated overall taxi ridership would increase by 20% with the presence of the superior class of service at a 20% higher fare. This would facilitate a quota expansion of up to 80 licences without adversely affecting existing licence holders.

As the survey was conducted with 687 Winnipeg residents only, it was impossible to verify the expected demand for this service by tourists and non-resident business travelers. Such a service will likely be appealing to these types of users, who would add considerably to the demand. As result, the estimate of increased usage of the superior class is likely much lower than reality, a very favourable consideration.

While perhaps new to Winnipeg, the superior class service concepts outlined herein are not unique. High quality taxicab service companies are already in place in numerous major centres throughout North America, and all appear to be thriving.

What is significant about all of them is that they are marketing oriented companies aggressively seeking out a wide variety of clients not previously using taxicab services.

All have developed a total service concept so good that their company is the first to be called. Their drivers are true professionals and are rarely idle. Because of high quality and frequent rides, financial success for owners and drivers is highly probable.

It is likely that innovative taxicab companies like those illustrated in the attached documents can be identified in most major centres. The few illustrated here exemplify the essential characteristics that make such companies successful.

¹Sponsored by five major Canadian firms and by the Faculty of Management of the University of Toronto, Brown recently surveyed 1000 companies and wrote a book, "Creating the Service Culture: Strategies for Canadian Business", available from Prentice-Hall. Copies of the research report itself can be obtained from L&H for $25 by faxing them at (416) 977-3538. The report is called "I.D.EA.: The Status of Innovation and Service Excellence in Canada."

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