March, 2003 Newsletter

 
 

Our March, 2003 newsletter is entitled "Dealing With Customers." Our newsletters feature articles on various aspects of preparing a business plan and over time should lead you through the entire business planning process.  

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Dealing With Customers
Courtesy of Ralph Brown, Sequus Inc.

We are all generally aware of the importance of good customer service, however we do not always realize just how important customer service can be to the bottom line. The ability to attract and maintain customers is one of the major keys to profitability. This can be emphasized further by the following statistics:

  • Only 17% of customers dissatisfied with a recent customer service experience intend to continue to do business with the offending company.
  • The identifiable reasons why customers left typical companies are as follows:
    1. 15% switched because they found a cheaper product,
    2. 15% switched because they found a better product,
    3. 29% switched because they had experienced too little contact and individual attention, and
    4. 41% switched because the service they received was poor quality.
  • The average business never hears from 96% of its dissatisfied customers.
  • Of customers who do complain, between one half and one third will continue to do business with the firm if their complaint is satisfactorily resolved. This goes up to 95% if the complaint is resolved quickly.
  • The average customer tells ten other people about unresolved service problems, but only five people when the complaint is resolved.
  • It takes five times the resources to get a new customer as it does to retain an old one.
The Customer Service Scale
Think of the last time you were a customer. How were you treated? Where would this treatment fall on the following scale:

The Customer Service Scale

1 2 3 4
Discourteous Indifferent Courteous Extra Special
Confrontational Doesn't Care Polite Beyond courteous
Rude Bored Friendly Problem solver
Impolite Uncaring Positive Adaptable
Aggressive Avoiding Good eye contact Empathic

You are likely to encounter people working in customer service in all four categories. In fact, if you observe them you will find it is very easy to determine where they are on this scale as they provide service to their customers. The customer service that you provide in your business should never be to the left of three or four on the above scale.

If a business can consistently provide courteous and extra special service, it can expect to:
  • Minimize customer complaints.
  • Increase productivity because less time and energy is spent on conflict.
  • Have a more positive work environment.
  • Gain greater job satisfaction.
  • Create more business.
A business that provides discourteous and indifferent customer service can expect these results:
  • Communication problems increase between workers and with customers.
  • Work becomes more difficult and thankless.
  • The number of customer referrals decreases.
  • The amount of business decreases.
Providing Good Customer Service is A Management Challenge
Research indicates that it is not the customer contact person who is most responsible for poor service. Very often it is the management systems that prevent the customer service person from providing excellent service on a consistent basis.

For example:
  • The customer service person cannot provide level four service to a customer who is complaining about defective merchandise if he/she is not authorized to replace the merchandise.
  • A waiter cannot provide good service if the restaurant food preparation system is not able to provide consistent quality.
  • A bank teller is not able to provide excellent service if customers have a long wait in line because the manager has not made a staff schedule.
One cannot achieve service excellence with merely a program that trains customer service people. Service excellent businesses have:
  • A clear uninterrupted vision, or concept, of what service and service excellence happen to be.
  • Customer orientated contact people (People who consistently provide excellent service). Customer service is not achieved merely by providing "smile training". Most customer service people do not need to be taught how to be nice to customers - they know how to do that naturally. But they do need a support system that allows them to better service the customer.
  • A long-term commitment to customer service made by the entire organization from the top all the way to the bottom. Short lived motivation programs do not work.
  • A system for managing the customer's experience within the company. Businesses that excel at providing customer service are aware that, from the very first contact with a customer, until he or she decides whether or not to come back, there are countless opportunities to impress or disappoint a customer.

The REACH Formula

How can management develop systems that inspire employees to consistently be at the top of the service scale? The REACH Formula provides some answers.
R - Research
An effective customer service strategy includes research in areas such as the market environment, employee needs, customer needs, market intelligence and competition.
E - Empowerment
The owner/manager must accept responsibility for developing and maintaining service attitudes, and identify and supply the tools necessary to reinforce them.
A - Acknowledge
This refers to the fact that service standards must be established and quality service must be expected. The fact that customers want quality and consistency must be acknowledged and then met.
C - Communicate
The service concept must be clearly communicated to all employees. Those who are not serving and working with customers need to realize that the most important aspect of their job is supporting the people who are in front of the customer.
H - Help
Management must provide help to employees through a training and reward system. The service culture must be continually reinforced through a single minded dedication to training, and quality service achieved by employees must be encouraged and rewarded.

Applying the Principles Of Customer Service

In this section we will revisit each of the elements of the REACH strategy and identify the management principles that are associated with each element.

R - Research

Principle 1 - Listen.

Research the ideas that your customers, employees, suppliers and competitors have about your business and the market. Excellent service companies figure out countless ways to listen to their customers and use their input regarding their services. They query customers through interviews, focus groups, surveys, callbacks and questionnaires.

Principle 2 - Measure Customer Service from the Customer's Point of View.

Not only must the research be done, but the data must be quantified so that objective decisions can be made. Here are some suggestions for measuring:
  • Ask customers why they chose not to reorder.
  • Ask customers why they purchase your product or service.
  • Ask employees to evaluate the supervisor's performance.
Once the data has been collected, review company policies and procedures to assure that they do not inconvenience the customer.

E - Empowerment

Principle 3 - Make a Commitment to Service

Empower your employees to be the best in customer service by committing the business to customer service. The financial returns for companies achieving uniqueness in service are significantly higher than for those companies that do not have that reputation. If price is a company's only competitive advantage it will probably be unsustainable.

To succeed in the service business, a proactive customer service philosophy must be in place - one that will create positive experiences for the customer so they will go out and tell others about it. Good customer service brings in new customers through word of mouth advertising. A satisfied customer will tell three more about the excellent service they received. Those three new customers will each tell three more and so on.

Principle 4 - Good Service Delivery Requires Good Management

Management must be responsible and responsive to the customer service people so that they can be responsible and responsive to the customer.

It is up to management to create an environment in which customer service employees can deliver excellent service. If management gives adequate support, encouragement and recognition, employees will perform.

Management must not only provide direction but at the same time provide customer service people with autonomy to serve the customer well. This involves being directive about mission, goals, objectives and policies and then allowing customer service people to be flexible problem solvers in the way that they honor those guidelines. The idea is to create an environment in which everybody has the freedom they need to work but are still held accountable for following policies and producing results.

Principle 5 - Manage each "Moment of Truth"

Empower your employees to manage each "moment of truth" so that it makes a favorable impression on the customer. A moment of truth is defined as a contact between a customer and some aspect of the business. Some moments of truth for a restaurant would be:
  • The signage that attracts customers off the highway and into the parking lot.
  • Parking facilities.
  • Greeting received at the door.
  • The appearance of the menu.
Good service management helps companies to recognize, manage, and improve upon those essential moments of truth. To start, list the opportunities you have to make an impression on your customers. Start with the customer's first contact with your work group and trace his or her journey through your organization. Identify who is responsible for good performance at each "moment of truth."

A- Acknowledge

Principle 6 - Provide Autonomy to Customer Service People so They Can Do What is Required to Satisfy the Customer.

Acknowledge that, to the customer, the customer service person is the company and should be informed enough to solve a wide range of problems.

If your goal is excellent customer service, then you must acknowledge that it is management's job to provide employees with the tools and education required to fulfill their goals. Educate them. This is different than training. Without education your customer service people are bound to reply to customer questions with the following: "I don't know, it's just our policy." "I don't know, we've always done it that way." "I don't know, I just work here."
Educating employees about the "whys" of your business is the only way to avoid these kinds of responses.

Principle 7 - Hold Customer Service People Accountable for Consistently Delivering a 3 or 4 on the Service Scale.

Once the business acknowledges autonomy, it must also demand accountability. Accountability is not a dirty word. To be accountable is to be responsible, to take appropriate action that meets the customer's needs or solves the customer's problem.

C - Communicate

Principle 8 - Develop and Implement a Recovery Strategy

A recovery strategy is deciding what to do when things go wrong. It is about developing an action plan that will correct mistakes and therefore "recover" your reputation for good customer service. Properly communicated and carried out, this strategy can reverse customer dissatisfaction and serve as an opportunity to continue to get repeat business.
  • 70% of all dissatisfied customers will do business with a company again if a complaint is resolved in their favour.
  • 95 % of all dissatisfied customers will do business with a company again if a problem is resolved right on the spot.
Principle 9 - Define Roles

This involves defining and communicating to each employee a clear description of their role in the customer service process. Create guidelines (not restrictions). Remember, the idea is to provide direction but at the same time give employees the freedom to meet each customer's individual needs.

For a company's values to be considered important by its employees they must be:
  • Repeatedly communicated at meetings, training sessions and conferences.
  • An integral part of the company's recruitment, training, promotion and performance appraisal systems.
  • Practiced, not merely theorized, by management.

H - Help

Principle 10 - Assure That Customer Service is Continuously Improving.

Rapid, continuous improvement is no longer an option for the small business person - it is necessary for survival. Continuous improvement is the core value of the successful small business.

The manager's role is to encourage every employee involved to be involved in developing and implementing new ideas that will improve present performance levels.

Principle 11 - Celebrate Success

Many businesses that provide excellent customer service are also known for the creative ways in which they celebrate service performance. These companies make a big deal out of small improvements. They reinforce progress and therefore, help employees to practice continuous improvement and the other principles of excellent customer service.

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