THE MONEY BACK

GUARANTEE
OVERVIEW OF THE CASE
Prof Sylvia Cooper was to deliver a lecture to 30 senior managers at
Florida at 2.00 pm

She expected some material for the presentation from FedEx at 10:00
am

The parcel got mis-sorted and was lying at Savannah, Georgia which
was 3 hours from Florida
HU
B
city city
Amelia
islands
Savana
h,
georgia
Package source
Delivery 2
Delivery 3
Delivery 1
Pick up 3
Pick up 1
3 hours drive
Mis-sort
The case clearly states that FedEx failed in performing their task

Which they didnt deny and where ready to rectify their mistake

But there is a problem.. TIME URGENCY
Which brings us to two things

Firstly what could have FedEx done..

Secondly what do FedEx generally does..
FEDERAL EXPRESS AS A BRAND.
FedEx Corporation is an Import/Export company, incorporated
October 2, 1997
Well-known, well-respected FedEx brand, and telling your customers
they deserve the very best service.
Federal mean nation wide economics and where as Express is
speed.
broadening the concept of marketing
What would Federal
Express have done in
such a situation ?
In your view, what
should Federal
Expresss general policy
be for similar service
mishaps?
MONEY-BACK GUARANTEE


If FedEx fails to deliver package by 10:30 am they give the
money back to the customer.

If FedEx is not able to locate the exact location of any package
within 30 minutes of the request then the customer gets back the
money.

FEDERAL EXPRESSS GENERAL POLICY
FOR SIMILAR SERVICE MISHAPS MUST
INCLUDE
Two options:
Money back guarantee-
Only refund and no responsibility of delivering shipment to actual
address on specified time.
NO Refund:
Delivering the shipment without any extra charges on time.



BRINGING DOWN ERROR RATE
Guidelines to Customer service executives
Tie-ups with the Airlines, Local Transportation & Local Logistics
Provider
Yearly analysis of the amount spent on service failures
Incentives for Correction of Error
Continuously updating the customer
Separate department for Mis-sorted Parcels


WHAT DO YOU THINK ACTUALLY
HAPPENED ?
Mistake was on part of FedEx

Brand Image of FedEx

Ultimate aim of Marketing
FEDERAL EXPRESS HANDLES
ROUGHLY 875,000 PACKAGES
EACH DAY.
WHAT WOULD YOU GUESS ITS
ERROR RATE TO BE?
Since they provide money-back guarantee, they should try to avoid
errors.

Errors can affect there total revenue.

So the error percentage has to be kept as low as possible.

Number of
daily
shipments
Error rate (%) Number of
daily errors
Price of the
shipment ($)
Number of
days in an
year
Revenue lost
due to errors
($)
875,000 1 8,750 5 300 13,125,000
875,000

0.5 4,375 5 300 6,562,500
875,000 0.25 2,188 5 300 3,282,000
875,000 0.0625 547 5 300 820,500
875,000 0.03125 274 5 300 411,000
875,000 0.00781 69 5 300 102,506
875,000 0.00195 18 5 300 27,000
875,000

0.00097 9 5 300 13,500
875,000 0.00048 5 5 300 7,500
Error rate below 0.001 % is acceptable.

But keeping it to 0.0005% or lower than that would have less effect on
the total revenue.

We can afford to mis-sort 4 to 5 packages a day.