How I managed a crisis that hit 1,000 of my customers

The solar hot water industry has boomed over the past few years, and New South Wales-based Apricus has been taking advantage of the trend. Chief executive Chris Taylor has grown the business from turnover of $4 million during 2007-08 to $20.4 million in 2009-10, with thousands of units installed.

But the company had a near-death experience when a component in the company’s system failed, causing 1,000 tanks to leak. Taylor had to spend hundreds of thousands of dollars fixing the problem and getting customers back on side.

Taylor says SMEs should make sure when crises happen that a plan is put into action and customers are immediately contacted, or you risk a backlash that could bring your company down.

How has the business been travelling this year?

The first six months of this year were fantastic, and we were recording quite strong growth. There was a lot of energy in the market, and then around July, when the Government called the election, it was almost like someone put the brakes on.

It hasn’t been just our business, either. A lot of the people who I’ve spoken with have said everything just stopped. You would expect that activity would pick up, but it didn’t. There are a couple of reasons for that, but things have stalled… however, we expect things to pick up.

What happened with this issue when your components started failing?

The company that was supplying us, which was a locally manufacturing, independent business, worked really well with us. They had a big focus on quality, and we had a really good long-term relationship with them.

Unfortunately for us, their business was sold. They were actually bought by a competitor, and they switched how those components were made. And one of those components, which sit in the tanks, failed.

What actually happened to them?

They leaked. The seals gave way and the tanks started to leak. We had already put up about 1,000 units, and 80% of those started to fail. We were basically drowned with customers complaining about their units. It was a major issue, these things would degrade very quickly.

What was the reaction inside the business?

There was an initial panic. And once we got over that, we thought about what we had to do. We have a very big focus in our business on what we call the “good bloke” factor. We want people to deal with us and think we’re a reasonable company.

And the thing is, people don’t say, “Oh, this component stopped working”. They say, “My Apricus unit stopped working”. So for us it was a huge branding issue, it surrounded everything about our integrity and brand quality.

When did you first start realising the units were failing?

A pattern started to emerge. The units would start going down when it was really cold. So you might have a really cold night somewhere, and everywhere in that region, the units would fail. If we came home and it was a cold night, we knew some units would fail.

The biggest issue was that we simply had no control over what these units were doing. There wasn’t even a consistent pattern in how they were failing, it simply happened at different times. In New England, for instance, if there was a cold night, then all of the New England units would fail, and that’s several hours away.

And so what was the reaction plan?

We quickly developed a team of service agents, about 20-30, who would go out and fix the seals immediately. We increased our warranty department four-fold, and started servicing all those calls that were coming in.

We had one person in our company who went out on the road fixing the problem, and was gone for 46 days straight. He changed components over himself, and replaced 164 out of 1,000. It was incredible, and we think that’s a result of our culture as well. He had a young family at the time, as well.

Hopefully he wasn’t the only person out on the road. Were those service agents the other part of that team?

Yes, we outsourced that. It ended up costing me between $150,000-$200,000, and this all happened within a six-week period. But another big problem was that a lot of our sellers lost confidence in us and said that unless the components were changed, they would walk away from us and stop selling our products.

And what was your response to that?

We had to supply to other resellers, and if we lost one, we would lose the 40 or 50 clients, or however many that they sold to. To lose those guys would have been a tragedy. So we had to start working on new configurations and new components straight away.

But working in hot water is a stringent process. If you’re dealing with cylinders and components, you have to spend about $75,000 testing a new tank to ensure it can run. You have to run it through all sorts of testing to make sure they don’t blow up, and that’s about a three-four month window in which to get everything squared away.

How did you manage to service the rest of those customers?

We had plenty of consumers who couldn’t get serviced, which is why the service agents went out. They had to get a profile of every customer in each area, but that was also hard because some of the databases weren’t updated.

Then we went through the process of changing the tanks, and moving to our own product. It took about two months for them to regain confidence, and once people started realising they were working fine, people started to come around. We regained their confidence and we are still performing strong.

For other businesses suffering from a problem such as your own, what would you recommend they do?

When everything goes pear-shaped, you’re only as good as the people you have around you. The first lesson is that you should really focus on your hiring because if you have the right people, they will treat your business as their business and work hard to get it back on track. You need to have a plan to fix your crises, because if you don’t respond immediately then you can’t fix the problem. A plan is a necessity.

You also need to have a very clear understanding about what the proposition is. It’s very easy to slip into a mindset of, “Well, this isn’t our responsibility or obligation”. But no, it is, because your customers are everything. You need to tell customers what exactly happened, and what you’re going to do about it. You can’t ignore the problem, and once you explain to them what’s happening you can start working on the problem.