5 ms·

Customer service is not cost of sales. It's a marketing expense.

14 points by paraschopra 15y ago

wccrawford 15y ago
I hate to burst his bubble, but management feels the same about paying for marketing as they do for paying for sales. It's practically the same thing, when it comes down to it. I'm all about good customer service, but relabeling it on the expense sheets is not going to change anything.
- paraschopra 15y ago
  It changes how you look at the expenses. An extra dollar to more marketing isn't always necessarily frowned upon. But an extra dollar to a cost is always considered avoidable.
  - anigbrowl 15y ago
    Not as much as losing a liability lawsuit. Good customer service is partly a marketing exercise - in the sense of spending some resources on avoiding negative publicity. But shuffling it around from one cost center to another is essentially a form of defining the problem away, and it's not a good foundation to build on. 'Sure, you feel unhappy with our product now, but try thinking of yourself as being happy instead.' If you define it as marketing then you're just going to get a customer service experience featuring relentlessly happy people who refuse to admit the product could have any shortcomings. Search on 'sirius cybernetics corporation'.
    - commandar 15y ago
      >If you define it as marketing then you're just going to get a customer service experience featuring relentlessly happy people who refuse to admit the product could have any shortcomings Other than the happy part, this varies from most customer service departments how?
vetinari 15y ago
To paraphrase, "this is so bad, it is not even wrong". Firstly, both cost of sales (COGS) and sales, general and administrative (SG&A, where marketing belongs) are profit and loss statement (P&L) items. They really have nothing in common with balance sheet. Secondly, it is in COGS, because support is directly attributable to specific product and directly impacts given product's gross margin. You can specifically tell, which product is well or badly designed, due to support it requires. In specific cases (one-off products - projects), support is financed from reserves created for specific projects. These reserves impact the margin of the project (and the project manager's bonus is usually based on the project margin). Thirdly, it is not "management" who decides, what goes where. It is CFO and his minions, who base it on "accounting standars" (US GAAP or IAS, depending where you are), so the revenues and cost structure is comparable among companies. Benchmarking is not used only in tech field. Fourthly, where comes this belief, that management does not slash SG&A costs, but does COGS? They do both, but COGS, if it leads to acceptable gross margin is left alone; SG&A is being cut at any possible chance.

14 points by paraschopra 15y ago

I hate to burst his bubble, but management feels the same about paying for marketing as they do for paying for sales. It's practically the same thing, when it comes down to it. I'm all about good customer service, but relabeling it on the expense sheets is not going to change anything.

paraschopra 15y ago
It changes how you look at the expenses. An extra dollar to more marketing isn't always necessarily frowned upon. But an extra dollar to a cost is always considered avoidable.
- anigbrowl 15y ago
  Not as much as losing a liability lawsuit. Good customer service is partly a marketing exercise - in the sense of spending some resources on avoiding negative publicity. But shuffling it around from one cost center to another is essentially a form of defining the problem away, and it's not a good foundation to build on. 'Sure, you feel unhappy with our product now, but try thinking of yourself as being happy instead.' If you define it as marketing then you're just going to get a customer service experience featuring relentlessly happy people who refuse to admit the product could have any shortcomings. Search on 'sirius cybernetics corporation'.
  - commandar 15y ago
    >If you define it as marketing then you're just going to get a customer service experience featuring relentlessly happy people who refuse to admit the product could have any shortcomings Other than the happy part, this varies from most customer service departments how?

vetinari 15y ago

To paraphrase, "this is so bad, it is not even wrong". Firstly, both cost of sales (COGS) and sales, general and administrative (SG&A, where marketing belongs) are profit and loss statement (P&L) items. They really have nothing in common with balance sheet. Secondly, it is in COGS, because support is directly attributable to specific product and directly impacts given product's gross margin. You can specifically tell, which product is well or badly designed, due to support it requires. In specific cases (one-off products - projects), support is financed from reserves created for specific projects. These reserves impact the margin of the project (and the project manager's bonus is usually based on the project margin). Thirdly, it is not "management" who decides, what goes where. It is CFO and his minions, who base it on "accounting standars" (US GAAP or IAS, depending where you are), so the revenues and cost structure is comparable among companies. Benchmarking is not used only in tech field. Fourthly, where comes this belief, that management does not slash SG&A costs, but does COGS? They do both, but COGS, if it leads to acceptable gross margin is left alone; SG&A is being cut at any possible chance.