Cost reduction may be the most overrated strategy in business.
Rory Sutherland, behavioural economist, made an observation that I haven’t been able to forget.
Eurostar wanted to improve passenger experience. The obvious answer: make the trains faster. Spend billions to shave 40 minutes off the journey.
His suggestion: hire top chefs. Put exceptional food on the train. Make the journey itself something people look forward to.
Same outcome.. happier passengers.. Fraction of the cost..!!
The problem was never the time. It was the feeling.
I think about this constantly when I sit in board meetings where cost reduction is the agenda.
A company cuts its customer service team to save Rs. 40 lakhs a year. Response times double. Complaints increase. Three key clients quietly move to a competitor. Revenue impact: Rs. 3 Cr.
A company removes the small welcome gift it used to send new clients.. “unnecessary expense.” Three months later, the sales team reports that the first conversation with new clients feels different. Colder… Less referred business is coming in..!
Efficiency is the enemy of magic.
The costs that feel unnecessary are often the ones doing invisible work.. building trust, signaling care, creating the feeling that makes a client stay, refer, and forgive.
Boards see line items. Customers feel experiences.
Before cutting any cost, ask one question: what is this cost actually buying?
Sometimes the answer is: more than you think.
Have you seen a cost cut that ended up costing far more than it saved.. in brand, trust, or customer experience?
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