Customer Service Reader

Strategic advantage in retail

Excerpts from Retailing Management, Chapter 19: Customer Service
Michael Levy & Barton A Weitz

• Good service keeps customers returning to a retailer, and generates positive word-of-mouth communication, which attracts new customers.
• Providing high-quality service is difficult for retailers. Automated manufacturing makes the quality of most merchandise consistent from item to item. But the quality of retail service can vary dramatically from store to store, and from salesperson to salesperson within a store.
• It’s hard for retailers to control the performance of employees who provide the service. A sales associate may provide good service to one customer and poor service to the next customer.
• 73% of consumers attribute their best customer service experience to store employees. Conversely, 81% of consumers attribute their worst customer service experience to employees.
• Most services provided by retailers are intangible - customers can’t see or touch them. Clothing can be held and examined, but the assistance provided by a sales associate or an electronic agent can’t. Intangibility makes it hard to provide and maintain high-quality service because retailers can’t count, measure, or check service before it’s delivered to customers.
• The challenges of providing consistent high-quality service provides an opportunity for a retailer to develop a sustainable competitive advantage.

War on customers

Excerpts from Stop The War on Customers
Fred Reichheld

Company leaders realize that profitable growth is impossible without loyalty — yet they have failed miserably in their efforts to earn loyalty from either their customers or their front-line employees. After pondering this paradox for several years I finally began to realize the answer.

The first step is to set aside all that rosy rhetoric about customer focus. Most companies today are waging a war they cannot win — the war against their customers. They cut corners on product and service quality. They impose hidden fees and charges. They force customers to endure aggressive sales tactics, endless airport lines, and virtual or voicemail hell. They don’t tell the truth in their advertising and marketing, nor do they own up to their mistakes.

Ironically, this is a war most of the generals do not want to fight. CEOs spend countless millions of dollars on customer-focus initiatives, improved service quality, and enhanced customer experiences. They extol customer loyalty as the ultimate strategic advantage. Satisfaction surveys rain down on homes and businesses with implicit messages of care, concern, and promises of a better future.

Yet this undeclared war is escalating. Cellular phone providers trap customers in long-term contracts, and then abuse them with outrageous overage charges. Car dealers mislead and manipulate consumers. Banks charge unconscionable nuisance fees. Electronics store clerks flog extended warranties more desperately than their flat-screen TVs. Printer manufacturers price-gouge on refill cartridges. Computer companies make sure that calling their customer help-line is more painful than a trip to the dentist.

Yes, what is really going on is an undeclared war that is destroying corporate reputations, alienating employees, and decimating economic prosperity. It is the reason that nearly 80% of the world’s major corporations failed to achieve a modest 5% real, sustainable rate of growth over the past decade. This war is the reason why society has concluded that business ethics and good profits are both oxymoronic.

The reason I wrote The Ultimate Question was to expose this war and its full range of guerrilla activities. I hoped that I could provide a manual of the tools and tactics required to stop this war for good—and clarify how corporate leaders are unwittingly motivating their troops to book bad profits that destroy loyalty and growth. My goal is to help leaders revitalize good profits and true growth by showing them a practical path for holding organization members accountable for building good relationships and for standards of behavior that are consistent with the Golden Rule and respectful of human dignity (of customers, employees, suppliers and investors alike). We must all blow the whistle on bad profits.

See also:
Reichheld on "The Ultimate Question"
Reichheld on Loyalty
A Survey of Surveys

"Variation is evil"

Taking care of a customer is easy. It’s taking care of all customers all of the time that’s tremendously hard. Most companies can't even take care of most of their customers most of the time. And this is why most companies fail to excel at customer service, and thus fail to use it to their competitive advantage.

In Winning, Jack Welch wrote that “variation is evil”. This Six Sigma mantra is as true of service processes, as it is of manufacturing processes.

The customer’s affection for a company can very quickly turn into enmity at the first encounter with inconsistency. Take just two common situations:

• You’re impressed by a salesperson’s knowledge and empathy. You try to buy what she sells, but fall in line for five minutes as a cashier argues with a customer.
• You had a great experience with Store A, at the branch close to your home. The product breaks and you try to get it exchanged at the branch closer to work, where they treat you like a beggar because "the receipt clearly states that you have 14 days to exchange a product, and you’re one week too late".

Very quickly, you swing from appreciation to disdain. And this is how variation kills us.

See also:
Strategic advantage in retail
Michael Porter's What is strategy?

Gallup's Human Sigma

Excerpts from Manage your Human Sigma
John H. Fleming, Curt Coffman, and James K. Harter, in Harvard Business Review

In sales and service organizations value is created when an employee interacts with a customer. To achieve meaningful operational and financial improvements, the employee-customer encounter must be managed with great care.

Quality improvement methodologies such as Six Sigma are extremely useful in manufacturing contexts, but they’re less useful when it comes to the employee-customer encounter, with its volatile human dimensions. To address this problem of fit, Gallup developed a quality improvement approach that we call Human Sigma. Like Six Sigma, Human Sigma focuses on reducing variability and improving performance. But while Six Sigma applies to processes, systems, and output quality, our approach looks at the quality of the employee-customer encounter, weaving together a consistent method for assessing it and a disciplined process for managing and improving it.

As we developed our thinking about Human Sigma, we arrived at several core principles for measuring and managing interactions between customers and employees:

• Emotions inform both sides’ judgments and behavior even more powerfully than rationality does.
• The employee-customer encounter must be measured and managed locally, because there are enormous variations in quality at the work-group and individual levels.
• It’s possible to arrive at a single measure of effectiveness for the employee-customer encounter; this measure has a high correlation with financial performance.
• To improve the quality of the employee-customer interaction, organizations must conduct both short-term, transactional interventions (such as coaching) and long-term, transformational ones (such as changing the processes for hiring and promotion).
• The company’s organizational structure often must be adjusted so that the employee-customer encounter can be managed holistically.

Human Sigma grew out of a multiyear, research-based initiative designed to map the terrain of the employee-customer encounter. This work was based on direct experience with hundreds of companies and millions of customers and employees. We then tested and cross-validated our findings in 1,979 business units—involved in financial services, professional services, retail, and sales—within ten companies. The results thus far have been extraordinary. The ten companies, all of which have applied the best-practice principles for managing the employee-customer encounter, together outperformed their five largest peers during 2003 by 26% in gross margins and by 85% in sales growth. We can’t guarantee readers comparable results, but we believe that closely monitoring the health of a firm’s employee-customer relationships will result in dramatic performance improvements.