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Service-Profit Chain:

Customer Retention

Customer Service

Focusing on the Customer - and Doing Something About It

by Vadim Kotelnikov, Founder, 1000ventures.com

"Treat the customer as an appreciating asset."  - Tom Peters

 

Service-Profit Chain Customer Satisfaction

Five Dimensions to Quality Customer Care

(defined by your customers)

A survey of several thousand customers conducted by the Service Quality Institute at Texas A&M University revealed the following five dimensions to quality customer care:

  1. Reliability

  2. Responsiveness

  3. A Feeling of Being Valued

  4. Empathy

  5. Competency

All-time High Need for Improved Customer Service

  • Technology and e-business are turning marketplace upside down

  • Customers have increasingly more choices

  • Customers have lower levels of brand and product loyalty

Three 'R's of Customer Service2

  1. Reliability: fulfilling promises, creating realistic expectations, delivering quality products, being dependable

    • Organizational reliability

      Product / service quality; policies and procedures that consistently serve the customer; efficient dependable operational systems; accurate customer education and communication; realistic expectations.

    • Personal reliability

      Overall professionalism; product / service knowledge; integrity; timely follow-up on all matters.

  2. Responsiveness: timeliness; giving a higher priority to customers' needs than to company operational guidelines; willingness to incorporate flexibility in the decision-making.

    • Organizational responsiveness

      Moving decision-making process as close to the customer as possible; empowering employees with the authority to give customers what they want, within reasonable parameters.

    • Personal responsiveness

      Willingness and ability of sales people and other employees to work the system on behalf of the customer, take the responsibility for customers' problems and, if necessary, sell their solutions upstream.

  3. Relationship: building a positive, loyal, long-term business relationship.

    • Organizational relationship

      Leveraging service-profit chain; focusing on building long-term relationships rather than one-sales; researching the market and building customer partnership to determine what is important to your target markets; establishing guarantees and warranty policies.

    • Personal relationship

      Caring, courtesy, sincerity, recognition, empathy, establishing trust, building rapport, ethical selling, and communicating effectively.

Building Cross-functional Cooperation

  • Establish cross-functional teams and provides them with cross-functional training

  • Establish effective bilateral communication between management and frontline employees

  • Develop a cross-functional information system to identify any failure to provide adequate customer service, categorize these failures, and provide analyses of when and why they occur.

Related Chapters of the Business e-Coach:

Customer Satisfaction

Customer Retention

Customer Partnership

Service-Profit Chain

Customer's Perspective of Quality

The Recipe is Simple, the Implementation Is Not

Customer care is vital to survival and success of a company. Still, many organizations are not doing it well. The American Customer Satisfaction Index 2000 published by the University of Michigan reported that 27% of customers were not satisfied with product or service they received.

Cross-functional Cooperation and Training

"In many companies, the business units designed to serve the same customers rarely interact, and when they do, they seem at odds about how to handle problems or complaints."3 To remedy this lack of agreement you must improve your cross-functional communication and cooperation. This can be done, for instance, by assigning customer accounts to cross-functional teams of employees from various areas where contact with customers is paramount - for example, product/service design and development, marketing, sales, and accounts receivable.

"Eliminating the layers of bureaucracy between customers and those employees best equipped to solve their problems is a first step in the sub-process of building cross-functional cooperation. As world-class companies have discovered, the best way to streamline the customer service is to provide cross-functional training so that employees understand the entire customer cycle - from the first contact with a company to the follow up that accompanies a sale and order fulfillment."3

Next, to stay close to the customer, you need to establish bilateral communication between management and frontline employees. Some best-practice companies even require top managers to take the jobs of frontline employees for a day every month or assume a contributing role in a cross-functional team. This 'vertical' communication between managers and frontliners, however, should be truly bilateral. Make sure your frontline employees have a sense that management will listen seriously to any observation and suggestions they make.

Finally, you must develop a cross-functional information system to identify any failure to provide adequate customer service. You information system should collect those failures, categorize them, and provide analyses of when and why they occur. Remember however, that best practices in providing customer service ultimately come down to people behind the information system. Getting managers and frontline employees together and giving them a chance to work co-operatively is the essence of the process.

Love What You Do

"In almost every survey of factors that motivate employees in the workplace, job satisfaction is at or near the top of the list, far surpassing pay and benefits. Service Stars, however, are far more than satisfied with their job, they love what they do. If you have a front line service job, the plain fact of the matter is you'd better love serving customers because you will be doing it eight or more hours a day. And customers can see straight through you and tell whether you enjoy your work."1

Be Creative!

Creativity pays off both in terms of service and profitability. Success comes through people. If you understand what motivates people, you have at your command the most powerful tool for dealing with them to get them achieve extraordinary results. Creating a work environment that encourages rapid response to customers' needs and attentive follow-through is the key to leveraging the power of your service-profit chain.

Case in Point: Creative Customer Service in a Furniture Shop

The owners of a furniture shop in Boston love what they are doing and genuinely want to make furniture shopping fun. figured out that many customers bring small children with them and that adults would stay longer and shop more seriously if the kids felt happy in the shop. "So they constructed a large children's play area inside the store with every type of game imaginable. By the way, you have to walk all the way through the store to get to the playground, so mom and dad can see the furniture before settling down to serious shopping. The kids are happy, so the parents are happy. It's simple. And one more thing. When you leave the store, your car windows have been washed! It's no wonder that this store has the highest sales of any furniture outlet in the Boston area."1

 

 

Bibliography:

  1. "Exceptional Customer Service", Lisa Ford, David McNair, and Bill Perry, 2001

  2. "Companies Don't Succeed - People Do", Graham Roberts-Phelps, 2003

  3. "Best Practices: Building Your Business with Customer-Focused Solutions", Arthur Andersen, 1998

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