Providing flawless service to customers is the best strategy for keeping them and for distinguishing your company from the competition. This article tells how quality service is driven by - and impacts - all levels of your organization, as well as listing resources you can call on for help.
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Every interaction with a customer - such as a new sales opportunity or handling of a complaint - is a chance to develop a relationship and build an emotional connection. Because it's essential to every company's success, customer service is one of the most critical business areas in today's fast-paced, competitive marketplace. Any company that gets customers but can't keep them will go out of business. Any company that keeps customers but doesn't expand those relationships will not be successful.
Statistics show that it costs much more to find a new customer than to maintain a current one. Too many companies, however, spend substantial amounts of time and money on winning new customers and relatively little trying to keep the customers they already have. Just a small investment in making customers feel special is bound to yield a lot of incremental business.
Consumers and business-to-business customers alike have a tremendous amount of choice when buying today. In many cases, customer service is the deciding factor in weighing a purchasing decision. If no one at your company bothers to make customers feel important, they will almost certainly switch to another supplier. Companies that are successful in retaining customers generally are those that make the effort to understand what their customers value and then provide it to them consistently.
DEFINITION
Simply put, customer service is whatever enhances customer satisfaction. Satisfaction, or lack of it, is the difference between how a customer expects to be treated and how he or she perceives being treated. If you give customers even better service than they expect, they are sure to notice it, and they will recommend your company to others. There is no more effective advertising than word-of-mouth.
RESEARCH AND STATISTICS
Among the service-sector industries in the U.S. - which include retail, hotel and catering, health care, airlines, utilities and professional/financial - the hotel industry continues to score high in pleasing customers, according to a 2006 survey by the American Customer Satisfaction Index (ACSI).
In the 2006 rankings, the hotel industry improved by 3 percent over the previous year's study, to match its historical high set in 1994. It is the significant improvement among lower-cost hotel chains such as Days Inn, Best Western and Ramada that is driving much of the overall gain for the industry. Companies that do the basics with few frills and do them well are proving appealing to budget-conscious, services-focused travelers, according to the ACSI findings.
On the flip side, IDG News Service reports customer dissatisfaction in the personal computer industry is on the rise, with results from a 2005 ACSI survey indicating respondents complained mostly about the quality of customer service, not about products.
The survey results, with 250 customers polled for each company, were part of a periodic ACSI survey in the manufacturing/durable goods sector. The index measures buyer satisfaction with the most recent industry product they purchased, which allows ACSI to obtain data on the freshest experience.
Recurring complaints included the length of time on hold with customer service representatives, as well as quality of the help eventually received. ACSI experts said that when market leaders increase their product shipments, sometimes they fail to increase service capabilities at the same rate.
Overall customer satisfaction with the PC industry remains well below the scores received by other consumer product industries, such as household appliances and automobiles. Despite all the work the PC industry has done to try to make its products easier to use, customers are still frustrated by PC technology, said ACSI leaders.
Customer management spending in 2006 indicates an increase of more than 8 percent over 2005, an AMR Research survey shows. The vast majority (91 percent) of companies are either increasing customer management budgets or keeping investment constant in 2006. Customer management continues to top the list of technology investments in 2006, with 50 percent of companies increasing budgets about 8 percent on average.
A 2004-2005 study by Portland Research Group showed much room for improvement across all industries in customer satisfaction and loyalty among U.S. call centers. Key findings include:
- Three out of five customers (59 percent) were satisfied with the response they received when contacting a company for assistance.
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Fifty percent of customers calling into a U.S. company are likely to purchase additional products and/or services from the company they contacted.
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Customer loyalty drops by 76 percentage points when a contactor is less than satisfied with the response he or she receives.
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The average caller is transferred 1.5 times before speaking with the appropriate rep for assistance. No significant impact is made on customer satisfaction or loyalty when a person is transferred once during a call, but when transferred a second time, there is a large drop in loyalty - and future purchase intent drops from 64 percent to 48 percent.
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The average consumer must call a company 2.3 times before having issues resolved, and future purchase intent drops from 76 percent to 55 percent with the second contact.
According to the results of a 2005 study by Dr. Jon Anton of BenchmarkPortal and the Purdue University Center for Customer Driven Quality, consumers' general perception of online customer service - a view that many firms have spent years battling - is that it is second-rate, and none too accurate.
The study, sponsored by eGain Communications, evaluated 147 small businesses in the retail, travel and hospitality, financial services, e-business and high-tech manufacturing industries. Researchers posed as customers and made e-mail inquiries suggesting they were considering the purchase of a product or service.
Besides the outright failure to respond to a customer's e-mail, the study revealed that even when firms did respond, they often got the answer wrong or were not specific enough. This failure is the result of many factors, according to the analysis, mostly behavioral. For instance, there is the problem of siloed channels, with one system managing e-mail responses and another managing phone inquiries . . . and no one in leadership implementing an integrated marketing communications plan for the company.
In addition, decision-makers in many firms simply are not cognizant of the best practices that have developed around the Internet channel, with many viewing it as an afterthought to other customer service operations. As a result, many do not respond within the 24-hour window mandated by current best practices.
Slightly more than half of the companies in the study - 51 percent - did not bother to respond at all. This disregard for the customer is not limited to small business, said experts associated with the study, although they added that small businesses performed worse than their enterprise-sized counterparts, reviewed in an earlier project.
In that survey of larger companies, it was determined that 41 percent did not respond to customer inquiries. Of the small companies that did respond, 70 percent did not answer within 24 hours, versus 61 percent for enterprises. Also, 79 percent of the companies responded with an inaccurate or incomplete answer. Here, small businesses performed better than enterprises, where 83 percent of the companies responded with an inaccurate or incomplete answer.
Responses did vary by industry, with e-business performing the best, not surprisingly. In the e-business sector, 52 percent responded within 24 hours.
Conversely, the financial services and retail companies were the least responsive, with 72 percent and 60 percent, respectively, not providing any response at all. The answers' accuracy also was studied, with the travel sector performing the worst, i.e. two-thirds of the companies provided inaccurate or incomplete answers.
THE CRITICAL ROLE OF TRAINING
Sixty-eight percent of customer defection takes place because customers feel poorly treated, reports TARP Worldwide. Employees must be trained in good customer service, a learned skill. Slogans, buzz words, and a list of guidelines do not make superior customer service happen. Nor does leaving employees to their own devices without thorough knowledge and understanding of company products, policies and marketing messages. Only training, dedication, and commitment will reduce employee turnover and create an effective customer service team.
Research by Gallup shows that employee turnover can cost organizations 30 percent to 176 percent of the annual salary of each vacant position. According to the U.S. Bureau of Labor and Statistics, median annual earnings for customer service representatives (CSRs) in 2004 were $27,020. Based on these figures, the minimum costs of call center turnover can be estimated at $8,106 per employee.
Depending on the turnover in a given call center - and turnover in many call centers is chronically high - a big chunk of the company's profits is walking out the door annually as CSRs leave and are replaced.
Training requirements vary by industry, with almost all customer service representatives provided some training prior to beginning work. Once on the job, training generally covers customer service and phone skills, products and services and common customer problems with them, the use or operation of the telephone and/or computer systems, and company policies and regulations. Length of training varies, but it usually lasts at least several weeks. Because of a constant need to update skills and knowledge, most customer service representatives continue to receive instruction and training throughout their careers.
This is particularly true of workers in industries such as banking, in which regulations and products continually are changing. Within insurance agencies and brokerages, a customer service representative job usually is not an entry-level position. Workers must have previous experience in insurance and often are required by state regulations to be licensed like insurance sales agents. A variety of designations are available to demonstrate that a candidate has sufficient knowledge and skill, and continuing education and training often are offered through the employer. As they gain more knowledge of industry products and services, customer service representatives in insurance may advance to other, higher-level positions, such as insurance sales agent.
HOW TRAINING HELPS
It's an inevitable problem: An irate customer who is very loud returns with a complaint about your product or service. Should the customer service representative:
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Tell the customer he doesn't have to take his verbal abuse and walk away?
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Tell the customer to wait while he gets a manager?
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Empathize with the customer and tell him that, if he will calmly explain the problem, everything will be done to make sure he's satisfied?
Most people recognize that No. 3 is the correct answer, but that doesn't mean they act accordingly. Unfortunately, if a person doesn't know what action to take, instinct takes over and he or she either fights or runs away. That's why training is important.
That goes double for salespeople who often find themselves in the front lines fielding customer complaints. An inability to satisfy unhappy customers often undermines a salesperson's confidence in the product, making it more difficult to approach prospective customers, face rejection, and be enthusiastic. Salespeople, like customer service personnel, should be taught to view complaints as valuable information that can be used to solve other probems. And, if they are treated fairly, dissatisfied customers will become faithful customers.
Incoming Calls Management Institute (ICMI) recently published a customer service training study guide and included information on evaluating training effectiveness. The following is an excerpt:
“At a basic level, evaluation consists of defining objectives, specifying those objectives measurably, and then assessing the extent to which learners have mastered those objectives. To determine the results of training, management must establish baseline performance metrics based on the needs assessment. That is, ‘What measurement is used to identify the gap?’ After the training has been conducted, these performance metrics can be evaluated to determine the effect of the training. Of course, other influences (e.g., a change in procedures, new technology) should be noted to ensure the positive or negative effect was due to training.”
Training programs should be evaluated on four levels:
Reaction: What are the participants' feedback on the training? This is typically measured through a survey and usually covers such items as program methodology, group and individual exercises, quality of materials and media, facilitator capabilities, facilities, etc.
Learning evaluation: This is the process of collecting, analyzing and reporting information to assess how much the participants learned and applied in the learning environment.
Application to the job: This step assesses the degree to which the knowledge, skills and abilities taught in the classroom are being used on the job.
Evaluating the impact and ROI: This is the process of determining the impact of training on organizational productivity, improved customer satisfaction, and the organization's strategic business plan. What is the change in business metrics attributable to training? What is the return on the training investment (usually calculated by dividing the net dollar value of the benefit by the costs of training)?
HOW TO ACHIEVE EXCEPTIONAL CUSTOMER SERVICE
The basic precepts of customer service are simple. Every customer is an individual entitled to be treated with friendliness, honesty, and respect. Treat customers exactly the way you want to be treated when you are a customer. Customers are entitled to full value for their money, fast delivery, a complete guarantee of satisfaction, and knowledgeable answers on inquiries. Word to the wise: If you don't provide these things, your competitors will.
Following are key strategies that, when combined with a comprehensive training program, will help you achieve a high level of customer service:
Commitment from management to the objectives of a first-rate customer service program is vital. Members of the management team, from the CEO on down, must be role models if changes in employee behavior are expected. Management has to uphold the customer service program with continuous training and reinforcement.
Remember, everyone in your organization is responsible for customer service. Service does not stop with the people who regularly talk to customers. Customers often deal with employees in sales, shipping, or accounting. So all employees should be involved in the service strategy. Ironically, companies that are most effective in customer service often don't have a separate customer service department.
Develop a service strategy. In order to do this, you must describe your customer in great detail. What do your customers want, need, and expect? If you don't know who you're trying to satisfy and what their needs are, it will be difficult to satisfy them. Make a distinction between customer needs, demands, and preferences.
Here are six important words to remember in your need-development process: who, what, where, why, when, how? Ask them and you'll get a lot of information to help you understand people's needs.
Treat your employees well. An organization will not have employees who treat customers right if the company does not treat its employees right.
Motivate your employees. Build your employees' self-esteem. The better employees feel about themselves, the more effective they are in providing quality service. An enthusiastic employee will want to learn about your company and its products or services. The more an employee knows, the better, because customers like dealing with people who know what they are doing.
To keep your people at the top of their form, you may want to introduce an incentive program or some other type of recognition. That can be done with a monetary award, a gift, or even a trip. It can be an opportunity to attend a seminar or have lunch with the CEO. Employee-of-the-month awards are good recognition programs, because they create competition and acknowledge individual achievements publicly. And don't discount the simple pat on the back. (For related information, see Article #3010, Incentives Overview, and Article #9200, Employee Recognition.)
Home Depot, the world’s largest home improvement retailer and the second-largest retailer in the U.S., has just announced a new cash incentive program for store employees to boost service and customer satisfaction. The program offers substantial bonuses to stores and certain standout sales personnel whose stores score high in Home Depot's online customer surveys. Employees could earn an extra $2,000 a month - and $10,000 a quarter - under the plan.
Like a growing number of chain retailers, Atlanta-based Home Depot invites customers (via sales receipts) to go to a special Web page and offer feedback on their store experiences. But Home Depot, which receives about 250,000 completed surveys a week, is taking the feedback a step further by tying bonuses to them. It's part of a push to improve service within the retailer's sprawling warehouse stores, which have lagged in external customer service ratings in recent years, said The Atlanta Journal Constitution.
The customer service bonuses are an addition to Home Depot's existing Success Sharing program, which rewards employees when their store beats sales projections. Experts predict the program will make a favorable impression, not only on winning and aspiring employees, but also on customers.
Let employees make on-the-spot service decisions. Front-line employees must be given authority to respond to the needs and problems of individual customers with speed and courtesy. There should be no need for them to go "higher up" when dealing with a customer's problem. This philosophy also makes employees feel important, which, in turn, makes them more enthusiastic. Fair warning: If an employee puts a caller on hold to get someone else's help, the customer's aggravation level increases.
Listen and empathize. It's imperative that employees listen to a customer's complaints and be empathetic. Customers will tolerate mistakes as long as they believe that the company really cares about their feelings. Representatives must be trained to listen to customers and find out what they want and when. Obviously, courtesy must be shown in every contact with customers, whether it's in person, on the phone, or by mail or e-mail. Remember to view complaints as an opportunity for valuable market research. They're an opportunity to discover problems and remedy them before they become damaging.
Reinforce the service commitment. Customer service training should be an ongoing commitment. Continue your training program on a regular basis. Don't look at it as a one-shot deal.
Follow up, follow up, follow up. After the transaction, make follow-up contacts to ensure that your customers are satisfied. Follow-up may be done by phone, e-mail or mail, but remember, any time you can talk to a customer one-on-one, you're way ahead of the game.
MAKING YOUR COMPANY CUSTOMER-DRIVEN
Companies that are customer-driven recognize that, if they don't run their businesses to suit their customers, their customers will suit themselves . . . somewhere else. In less competitive times, simply building a good product would ensure a company of survival. That is no longer the case. At training firm Shift Happens! Seminars, Inc., led by James Feldman, the contemporary operating principle is: Customer service is the distinguishing characteristic among products.
Thriving on Change, by Rick Crandall (see Books), is a compilation of advice from customer service experts, including Feldman of Shift Happens! Here are some tips on becoming customer-driven that are excerpted from the book:
- Be your own customer on a regular basis.
- Ask your customers what they want.
- Listen to those on the front lines.
- Experience your company from the customer's perspective.
- See your customers as individual people with needs, wants, and feelings.
- Experience the marketplace firsthand.
HOW TO SELL MORE TO CURRENT CUSTOMERS
Here are three tips for retaining customers and encouraging them to increase their business with your company:
Interact with customers frequently. By keeping in touch, you'll get a feel for customer needs and what additional products they're likely to buy.
Restructure your sales force. Some companies have had success dividing the sales force into two groups: account managers who hunt for new business and client salespeople who regularly visit and survey current accounts.
Conduct seminars. Invite your customers to training seminars.
AN ELECTRONIC DATABASE IS VITAL
A customized database is critical to keep abreast of customer purchasing behavior. Initially, customers may have to be persuaded to reveal their preferences so the information can be used to build a database, but it's worth the effort.
Names and addresses of customers and prospects, coupled with information about their purchasing habits and preferences, should be stored electronically. You can then search for items corresponding to certain criteria. For example, a computer can identify within minutes those clients who have not placed an order in the past six months. Letters, direct-mail offers, e-mail inquiries, or phone calls can then be made with pinpoint accuracy.
One company employing excellent customer service techniques is the Nordstrom retail chain. Along with emphasis on maximizing inventory investment and its perpetual inventory tools, Nordstrom recently renewed the commitment to its industry-leading, service-focused "personal book" system. Every salesperson keeps a computerized personal book - a profile of his or her repeat customers that includes everything from names and addresses to clothing sizes, style and color preferences and purchase history. Armed with this information, salespeople call customers to announce the arrival of items that might please them. The system gives Nordstrom ongoing opportunities to exceed expectations, develop customer loyalty, and drive sales volume.
For related information, see Article #7025, Sales Automation.
THE INTERNET AND CUSTOMER SERVICE
Today, the Internet is one of the most popular ways to communicate a message. Researchers say the Internet is growing at an annualized rate of 18 percent and now has one billion users. An estimated second billion users will follow within the next 10 years.
The Internet provides a key way to develop rapport with customers, and unprecedented numbers of companies are developing and enhancing Web sites to communicate with them. Answering questions, solving problems, demonstrating marketing differentiators, and selling additional products are just a few ways the Internet can play a role in customer service. Overall, the Internet's growth has been remarkable: Ten years ago, it was used primarily by computer geeks; now it's the default way to do business.
HOW TO WIN BACK CUSTOMERS WHO HAVE STRAYED
It's going to happen. Even with the best customer service strategies in place, you're bound to lose a customer here or there. A personal visit from someone in your company is the best way to find out why this customer left. If customers say your product or service wasn't what was expected, ask how the product or service fell short. If customers say they found another company they like better, ask why they sought and chose another company.
Apologize for any inconvenience or misunderstanding and, quite simply, ask for another chance. When trying to win back an account, offer to provide something extra for the client, such as free delivery, or a discount on the first new order.
Winning back an account is only half the battle. You have to service the client on a continuing basis. Contact the company on a regular basis to touch base.
Note: There are some customers worth giving up. That is purely a business decision.
INDUSTRY ASSOCIATIONS
For related associations, go to the Industry Associations page.
INDUSTRY EVENTS
For related events, go to the Industry Events page.
INDUSTRY PUBLICATIONS
For a list of relevant publications, go to the Industry Publications page.
BOOKS
There are hundreds of books about customer service. Here are a few of the most informative:
Best Practices in Customer Service, by Ron Zemke and John A. Woods, includes 35 pragmatic chapters, written by such customer service experts as Chip Bell and Dianna Maul, which illustrate best practices in customer service and provides the tools readers needs to implement those practices in their own companies. Zemke clarifies the connection between great customer service and superior organizational performance and offers cost-effective ways to implement a variety of service plans, designed to help you deliver a higher level of customer service at a lower cost. Appendices include Customer Service Resources on the Internet. $26.37 through Amazon.com. $29.95 through Barnes and Noble.
eBusiness or Out of Business: Oracle's Roadmap for Profiting in the New Economy, is by two Oracle executives, Mark Barrenechea and Larry Ellison. The book encapsulates Oracle's vision for succeeding on the Internet. However, it was written before the meltdown, so it will be interesting to see how the vision measures up to current reality. 236 pp. 2001. McGraw-Hill Higher Education. $0.44 through Amazon.com.
Thriving on Change, by Rick Crandall, is a collection of advice by 20 experts on organizational change and how to implement it. Includes a chapter on customer service. 327 pp. $20. Select Press.$17.95 through Amazon.com.
The Quest for Loyalty: Creating Value Through Partnerships, by Frederick F. Reichheld and S.D. Cook, concentrates on the importance of loyalty related to a company's growth. 312 pp. $29.95. Harvard Business School Press. $2.80 through Amazon.com.
Customer Centered Growth: Five Proven Strategies for Building Competitive Advantage, by Richard Whiteley and Diane Hessan, explains how businesses can use a customer-oriented approach to enhance profits. It describes five strategies and also offers assessment and planning tools. 320 pp. $25. Addison-Wesley. $0.01 through Amazon.com. $17 through Barnes and Noble.
Getting into Your Customer's Head: Eight Roles of Customer-Focused Selling, by Kevin Davis, offers in-depth case studies of various selling and deal-making situations. 320 pp. $25. Times Books. $16.50 through Amazon.com. $25 through Barnes and Noble.
Turned On: Eight Vital Insights to Energize Your People, Customers, and Profits, by business coach Susan Cook and Marriott executive Roger Dow. The authors give their views on how to create a customer-focused organization. They show how to generate vitality by allowing employees to think for themselves, take control of their jobs, make decisions, recognize problems, and implement solutions. 336 pp. $13.50. HarperBusiness. $10.85 through Amazon.com. $15.95 through Barnes and Noble.
Coaching Knock Your Socks Off Service, by Ron Zemke and Kristin Anderson, offers a series of suggestions for achieving first-rate customer service in any business environment through sustained coaching by management and the employees themselves. 148 pp. $17.95. AMACOM. $12.89 through Amazon.com. $17.95 through Barnes and Noble.
Customer Loyalty: How to Earn It, How to Keep It, by Jill Griffin, covers a wide range of techniques on how to build a loyal clientele. It details a proven strategy to enhance loyalty and describes the techniques of hundreds of innovative companies. 235 pp. $15. Jossey-Bass, div. of Simon & Schuster. $0.56 through Amazon.com. $19.95 through Barnes and Noble.
Achieving Excellence Through Customer Service, by John Tschohl, reveals how to make exceptional customer service a central focus of management strategy. 337 pp. $14.95 plus $3 for shipping and handling. Best Sellers Publishing. $2 through Amazon.com.
Customer Service on the Internet, by Jim Sterne, is for the business professional who wants to learn how to use the Internet to enhance after-the-sale customer relations. 352 pp. $24.95. John Wiley & Sons. $0.85 through Amazon.com. $29.95 through Barnes and Noble.
Total Customer Service; The Ultimate Weapon, by William H. Davidow and Bro Uttal, offers a six-point plan for giving your business the competitive edge in the 1990s. 240 pp. $13. HarperBusiness. $0.01 through Amazon.com. $11 through Barnes and Noble.
Customers Mean Business, by James A. Unruh, chairman and CEO of Unisys Corp., reveals six steps to building relationships that last. Unruh shares the results of interviews with the top managers of more than 100 organizations who spoke freely about the programs and processes they use to attract, develop, and retain customers. 203 pp. $22. Addison-Wesley. $0.34 through Amazon.com.
The Nordstrom Way, by Robert Spector and Patrick D. McCarthy, tells the inside story of a retailer that's tops in customer service. 237 pp. John Wiley & Sons. $1.38 through Amazon.com. $17.95 through Barnes and Noble.
FIND A SUPPLIER
To find a supplier, go to #9520, Supplier Finder.
ARTICLE SPONSOR
Shift Happens!® Inc. Call 312-527-9111; go to http://www.shifthappens.com.
RELATED SMN ARTICLES
See also article #7515, Using the Internet to Improve Customer Service.
