Customer Service (Encyclopedia of Business and Finance)
A growing number of organizations are giving increased attention to customer service. Financial institutions, hospitals, public utilities, airlines, retail stores, restaurants, manufacturers, and wholesalers face the problem of gaining and retaining the patronage of customers. Building long-term relationships with customers has been given a high priority by the majority of America's most successful enterprises. These companies realize that customer satisfaction is an important key to success. Customer service can be defined as those activities that enhance or facilitate the purchase and use of the product. Today's emphasis on customer satisfaction can be traced to a managerial philosophy that has been described as the marketing concept.
EVOLUTION OF THE MARKETING CONCEPT
What is the "marketing concept"? When a business firm moves from a product orientation to a customer orientation, we say it has adopted the marketing concept. This concept springs from the belief that the firm should dedicate all its policies, planning, and operation to the satisfaction of the customer.
The marketing era in the United States began in the 1950s. J. B. McKitterick, a General Electric executive, is credited with making one of the earliest formal statements indicating corporate interest in the marketing concept. In a paper written in 1957 he observed that the principal marketing function of a company is to determine what the customer wants and then develop the appropriate product or service. This view contrasted with the prevailing practice of that period, which was to develop products and then build customer interest in those products.
The foundation for the marketing concept is a business philosophy that leaves no doubt in the mind of every employee that customer satisfaction is of primary importance. All energies are directed toward satisfying the consumer. L. L. Bean, the Freeport, Maine, mail-order firm, provides a good example of a company that has embraced the marketing concept. This well-known supplier of outdoor products offers the customer an unconditional guarantee of satisfaction that has been in place since the company was founded in 1912. If you are unhappy with an L. L. Bean product, simply request replacement or a refund (Comarow, 1999).
We have entered the age of boundless competition, triggered in large part by an expanding global economy. Multinational competition has increased dramatically in recent years, and this means a one-world market exists for products ranging from cars to computers. To compete successfully in markets where products are the same or very similar, and prices are basically the same, service is often the only competitive advantage available.
WINNING CUSTOMER SERVICE STRATEGIES
According to the marketing concept, an organization must determine what customers want and use this information to create satisfying products and services (Pride and Ferrell, 1997). Federal Express redefined mail service by providing over-night, door-to-door delivery of packages and letters. The company discovered a need for speed, reliability, and courteous service by well-trained employees. The marketing concept is a management philosophy guiding all the organizational activities, including production, personnel, finance, distribution, and marketing.
Excellent customer service is achieved by a three-dimensional process (see Figure 1) that includes a well-conceived service strategy, customer-driven systems, and customer-friendly
people (Albrecht and Zemke, 1985). Each dimension must reflect the important needs and wants of the customer. The "service triangle" can be developed for any type of business. Each piece of the triangle is explained in the following sections.
A well-conceived service strategy includes three important elements: market research to discover the customers' needs and wants; a clear vision of the firm's "reason for being"; and clearly stated beliefs and values that guide the enterprise (Albrecht and Zemke, 1985).
Many organizations are creating a written vision or mission statement that directs the energies of the company and inspires employees to achieve greater heights. Ortho Biotech, based in Raritan, New Jersey, begins its vision statement with a bold prediction: "We will be the best in our business by providing customers with innovative solutions to significant medical problems through biotechnology and related science" (quoted in Lee, 1993, p. 27). Senior managers must serve as "cheerleaders" to unify employees behind the vision.
The creation of a sound set of beliefs and values can give stability to an organization. Customer service priorities also become clearer. Ben Edwards, chairman of A.G. Edwards and Sons, Inc., the seventh-largest securities firm in the nation, says following the Golden Rule is still the best way to achieve success in business (Kegley, 1990). This attitude has had a positive influence on the company's 7400 employees.
Service systems are made up of all the various practices and procedures that personnel can use to meet customer needs. When you check into the Hyatt Regency Crown Center in Kansas City, Missouri, you are given a card that says, "Call 50 for a response to any concern within five minutes" (Manning and Reece, 1998). MBNA, a Wilmington, Delaware, financial services company wants every phone call answered within two rings. Employees achieve this goal nearly 100 percent of the time (Reece and Brandt, 1999). If you have a problem with your Dell computer, you can check the detailed troubleshooting guide provided by the company or get help from a member of the technical support staff. These examples are typical of the steps being taken by companies that want to meet, and in some cases exceed, the expectations of their customers.
Customer-friendly systems are designed to make things easy for customers. Complaints should be handled in a timely fashion. Returning or exchanging products should not be difficult. Requests for assistance should be handled in a courteous and efficient manner. Customer-friendly systems add value and build customer loyalty.
CUSTOMER-FRIENDLY FRONTLINE PEOPLE
In many cases, the customer's first impression of an organization comes during contact with frontline people. The cashier at the supermarket, the receptionist at the doctor's office, and the front-desk clerk at the hotel often have the first opportunity to serve the customer. Unfortunately, too often these employees earn lowpay, receive little formal training, and are given little recognition for the important duties they perform. The best frontline employees are both competent and caring. They have a certain level of maturity and possess the social skills needed to build customer loyalty.
The ultimate purpose of every business should be to satisfy the customer. Increased levels of competition require a greater commitment to customer service. Firms that invest the time, energy, and money needed to achieve excellent customer service will be the ones that thrive and grow.
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Reece, B. L., and Brandt, R. (1999). Effective Human Relations in Organizations. Boston: Houghton Mifflin.
Sewell, Carl. (1998). Customers for Life. New York: Pocket Books.
Customer Service (Encyclopedia of Small Business)
The term "customer service" encompasses a variety of techniques used by businesses to ensure the satisfaction of a customer, from friendly and attentive staff to prompt response when confronted with product defects. Successful small business owners often cite this factor as one of the most important in establishing and maintaining a prosperous company. "A cascade of beneficial effects can result when a small business cultivates customer loyalty," wrote Michael Barrier in Nation's Business. "That pattern holds in all kinds of small businesseshose that sell to other businesses as well as those that sell to consumer."
Indeed, some business experts contend that quality customer service can be a more important factor in ensuring company success in some industries than promotion, advertising, and other marketing efforts. "Customer service is a great business advantage," wrote Canadian Manager's John Tschohl. "When you have several competitors in a field and one of them courts customers with service and the others don't, it's the customer-oriented company that pulls ahead. Customers buy more. They return to buy again. And the feed the positive word-of-mouth grapevine about the quality service company." Business owners who make customer service a central guiding principle in their business, then, are far more likely to succeed than those who are indifferent to such practices. As one thriving entrepreneur told Tschohl, "You can't lose sight of the fact that customers come first. No matter what the product ou must always please the customer. If you don't, they can find someone nicer and more accommodating to take their business."
DEVELOPING A CUSTOMER-ORIENTED COMPANY CULTURE
"Good customer service rests on three pillars: the right employees, sound practices, and training," wrote George Paajanen in Discount Store News. "Like a three-legged stool, your customer service efforts will be shaky if they rest on only one of the pillars."
EMPLOYEES Many business observers contend that the most critical facet of ensuring good customer service lies in simply hiring personable and responsible employees. "The good news is that pre-employment screening tests can enhance the interviewing process by helping employers measure the skills and characteristics needed for success in customer service jobs," said Paajanen. "There are a variety of valid tests available, and consistently hiring people who score higher on them will ensure that you select employees who will represent your business to customers in a positive light." In addition, business owners are urged to make sure that they adequately inform potential employees of any customer-relations obligations that they might have. This is typically accomplished through training programs.
TRAINING Employee training is an important component of customer service. Customer service principles should be put in writing, and it should be made clear that all employees are expected to be familiar with them and be prepared to live up to them. Small business owners also need to recognize that customer service training should be extended to all employees who interact with clients, not just those in high profile sales positions. Service technicians, for example, often regularly interact with customers, but all too often they receive little or no customer service training. "More companies are asking their technicians to fill gaps in sales efforts and to repair communication breakdowns," noted Roberta Maynard in Nation's Business. "Some companies are cultivating their technicians' abilities to clarify customer needs and identify and capitalize on sales opportunities Some managers are giving technicians greater authority to do what it takes to keep customers happy, such as occasionally not charging for a service call or a part."
SOUND PRACTICES Finally, businesses need to make sure that they work hard to ensure customer satisfaction on a daily basis. Customer service should be ingrained in the company, commented one entrepreneur in an interview with Barrier: "It has to be part of the organization's mission and vision, right from Day One. Then the rest tends to be simplet carries over to your products, your advertising, your staffing, and everything else."
INSTILLING CUSTOMER LOYALTY
Business experts cite several tangible steps that small business owners can take to ensure that they provide top-notch service to their customers. These include:
- Erection of quality support systemsompanies armed with tangible, easily understood guidelines for establishing and maintaining quality customer service will go far toward satisfying clients.
- Communicationwithcustomersommunication with customers can often be accomplished more easily by smaller businesses than larger companies that are often slowed by layers of bureaucracy. Methods of communication can include telephone calls, postcards, newsletters, and surveys as well as face-to-face conversation. Such interactions can guide small businesses both in meeting current concerns of customers and in anticipating future issues. And while such steps are perhaps most helpful when dealing with regular customers, consultants counsel business owners who specialize in making big-ticket sales to try and maintain communications with their customers as well. Such customers may not make a purchase every month, noted Frederick F. Reichheld, author of The Loyalty Effect, but those purchases that they do make carry a lot of weight. Reichheld notes that big-ticket purchases typically have a fair amount of service and financing associated with them, both of which provide small businesses with opportunities to nourish their relationship with the customer. In addition, consultants observe that communication with ex-customers can be helpful as well. "A defecting customer may offer a reason that points to a potentially serious problem [within your company]," wrote Barrier.
- Communication with front-line employeesmployees who are kept appraised of changes in company products and services are far more likely to be able to satisfy customers than those who are armed with outdated or incomplete information.
- Retention of employeesany customers establish a certain comfort level over time with individual employees salesman, a project coordinator, etc.nd these relationships should be valued and nurtured by the small business owner. "Each customer has special needs," observed Barrier, "and the longer that employee and customer work together, the more easily those needs can be met. Companies that want long-term relationships with their customers need equally healthy relationships with their employees. In particular, they must encourage employee involvement."
- Invest in technology that aids customer servicemall businesses should choose voice mail systems that make it easy for customers to contact the person or department that they wish to reach. Technology systems can also help small businesses gather information about their customers.
- Cultivate an atmosphere of courtesymall gestures such as friendly smiles, use of the customer's first name, and minor favors can have a disproportionate impact on the way that a business is viewed. "Remember that small kindnesses can carry a lot of weight," said Barrier.
- Address mistakes promptly and honorablyo business is infallible. Errors inevitably occur within any business framework, and sooner or later a customer is apt to be impacted. But business experts contend that in many instances, these incidents can actually help strengthen the bond between a company and its customers. "In the normal course of a business relationship, the depth of a vendor's commitment will not be put to the test," wrote Barrier, "but a serious mistake will reveal quickly just how trustworthy that vendor is."
- Avoid equating price with customer serviceany small businesses find it difficult to compete with larger, high-volume competitors in the realm of price, but most analysts insist that this reality should not be construed as a failure in the realm of customer service. Moreover, most experts indicate that many small businesses can triumph over price differences, provided that they are relatively minor, by putting an extra emphasis on service. "For some customers, of course, price is all that matters," admitted Barrier. "Those are customers you probably can live without."
- Create a user-friendly physical environmentriting in Entrepreneur, Jay Conrad Levinson counseled small business owners to "design your company's physical layout for efficiency, clarity of signage, lighting, accessibility for the disabled and simplicity. Everything should be easy to find."
Any one of these traits might not be enough to sway a customer into beginning a long-term relationship with a company. But combined with one another, they can be a potent attraction to other businesses and consumers alike. As Thomas A. Stewart remarked in Fortune, "customer satisfactioneep satisfaction, the kind that creates loyaltysn't likely to result from one big thing A customer's decision to beloyal or to defect is instead the sum of many small encounters with your company."
CUTTING TIES WITH BAD CUSTOMERS
Although smart entrepreneurs and business managers recognize that customer service is an important element in ensuring company success, it is a reality of life that a small percentage of customers are simply incapable of being satisfied with the service they receive. Small business owners are generally averse to letting any customers go, but consultants contend that some clients can simply become more trouble than they are worth for any number or reasons. The solution to determining whether a business owner should sever ties with a problematic customer, observed Nation's Business, "may lie in defining the word 'customer' properly: Someone who costs you money isn't a customer but rather a liability."
Entrepreneur's Jacquelyn Lynn listed several scenarios in which consultants recommend that small businesses consider ending their relationship with a troublesome client. Client attitudes and actions that should prompt an honest assessment include:
- Lack of respect or appreciation for the small business owner's work.
- Excessive demands, either on company or individual staff members.
- Unreasonable expectations in terms of monetary arrangements for work or good provided.
- Proclivity for imposing difficult or unrealistic deadlines.
- Tendency to pay bills late (or not at all).
- Treats company as a commodity that can be discarded as soon as it ceases to be useful to the client.
Lynn noted that, in some instances, honest communication with the client can salvage a deteriorating relationship, but this does not always work. "If your attempts to make the relationship a mutually productive one don't work," said Lynn, "it may be time to move on and focus on more profitable clients or prospective clients. Calculate what you will lose in gross revenue, and decide if you business can stand the financial hit." If the business is able to withstand the loss of revenue, move forward to terminate the relationship in a professional manner. If not, then the company's leadership needs to develop a strategy to expand existing business relationships or garner new clients so that the company can sever relations with the offending customer down the line.
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Levinson, Jay Conrad. "Taking Care: 17 Ways to Show Your Customers You Care." Entrepreneur. October 1997.
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Maynard, Roberta. "Are Your Technicians Customer-Friendly?" Nation's Business. August 1997.
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Reichheld, Frederick F. The Loyalty Effect. Harvard Business School Press.
Stewart, Thomas A. "A Satisfied Customer Isn't Enough." Fortune. July 21, 1997.
Tschohl, John. "How to Succeed in Business by Really Trying." Canadian Manager. Spring 1997.
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Zemke, Ron, and John A. Woods. Best Practices in Customer Service. AMACOM, 1999.