Note from Ron: This is a guest post from James Lawther. Enjoy!
Here’s an interesting link for you. It shows the prices of some domestic appliances in the 1950’s. Sixty years ago you could buy:
- A Sylvania 17 inch black and white TV for $179.95
- An Admiral fridge freezer for $399.95
- A Roll Round vacuum cleaner for $49.00
I had a quick look on Amazon, today I can buy:
- A Phillips 22 inch colour TV for $179.99
- A Sanyo fridge freezer for $329.99
- A Dirt Devil vacuum cleaner for $54.99
Over half a century later I can still buy the same item for the same price, except it isn’t the same item, nothing like the same. Do you fancy staying in and watching a night’s entertainment on a 17 inch Sylvania?
Why do we pay more for services?
Here is another interesting site for you. It calculates inflation statistics. Since 1951 inflation in the US has been 761%. Or to put it another way the $50 you spent in that restaurant last weekend would have cost you $6.57 in 1951.
Now this begs a question. Why is it that we are paying 7 times as much for services now than we were 60 years ago, but we can buy a bigger, better, more reliable TV for the same price? You don’t have to be Einstein to see that something strange is going on.
What is it? Is it that labour costs are lower? Is it raw material costs? Is it energy costs? Is it technology? What is so much cheaper in the manufacturing industry than the service industry? None of those reasons really cut it, to a greater or lesser extent they apply to the service industries as much as they do manufacturing.
My guess is that it all comes down to process improvement. Over the past six decades manufacturing industries have had wave after wave of productivity improvements, from Deming and Juran, through TQM, 6 Sigma and Lean there has been a remorseless effort to cut costs and improve quality. Once one company started the others just had to follow suit or they would have been out of business, it is what Charles Darwin called survival of the fittest.
The service industries are just starting to get to grips with process improvement. Once they do it will lead to a similar onslaught of productivity improvements. So, if you work for a bank, or a restaurant or a body shop, maybe now is the time to learn a little more. It has been a while since you could buy a Roll Round cleaner.
About the Author
James Lawther gets upset by business operations that don’t work and apoplectic about poor customer service. Visit his web site “The Squawk Point” to find out more about service improvement.
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