BSBCUS501 Readings

Customer service

Good customer relations largely depend on good customer service – all the activities carried out by organizations that meet customer needs and expectations. It is concerned with both external customers who purchase goods or services and internal customers within an organization who rely on the services provided by others to carry out their work.

Customer needs will be expressed in terms of the types of products or services they want. Expectations will consist of what customers believe to be a satisfactory level of quality and reliable service in terms of providing what they want (service delivery), attention to their needs, value for money, speed in dealing satisfactorily with orders, enquiries and requests, level of support and after-sales service, and willingness to listen to complaints and respond to them.

An external customer who makes a purchase enters into a relationship with the supplier or provider, who is obliged to meet the customer’s expectations if they want to create a satisfied customer. External customers can be distinguished from:

1. users, who simply take advantage of a service that is available to them, eg the National Health Service;
2. clients with whom suppliers, eg management consultants, enter into a fiduciary relationship for the provision of paid advice or other services
3. payers who, for example, are members of an accounts payable department and arrange the payment, eventually, for something another person has purchased.

Users and clients expect good service and should be provided with the same level of service as other customers. Payers need to be treated with courtesy even if an invoice from a supplier has not been paid for three months or more (it may not be their fault).

Internal customers also have relationships with their colleagues that involve expectations about levels of service.

Customer service is concerned with both product (what the customer actually gets) and process (the way in which the service is delivered). These two facets of customer service are closely interlinked. Customer satisfaction is only attained if they are both attended to.

It is not enough simply to offer what the organization believes to be good products or services to external customers. An organization will only succeed if its products or services meet consumer or user requirements. These may be expressed as service standards or targets in public sector or not-for-profit organizations, or quality, value for money and service level expectations in private sector companies. If these are not met, a public or not-for-profit sector organization will be deemed to have failed in achieving its purposes, with adverse consequences for its future. In the private sector, poor levels of customer service will result in inability to attract and, importantly, retain customers, and thus falling sales and therefore profitability, again with undesirable consequences for the management and staff of such organizations.

Aims of customer service

The overall aim of customer service for external customers is to meet and exceed customer expectations in order to increase the profitability of a business or the effectiveness of a service provider organization. Specifically, the aim is to provide a reliable product to fit customer needs, complemented by helpful and efficient service and support. This involves improving customer service by managing all customer contacts to mutual benefit and persuading customers to purchase again – not to switch brands or change to another supplier.

The aim for internal customers is to ensure that efficient services are provided for colleagues, bearing in mind that it is the customer who buys the products or services who matters and that everyone’s efforts within the organization should be channelled towards helping those at the ‘sharp end’ deliver the best possible service to the customer.

The following ways in which customer care can increase profitability have been listed by Stone (1997):

• less lost business;
• fewer lost customers;
• repeat sales through increased customer loyalty;
• better opportunities for communicating effectively with customers to increase sales;
• more scope to identify the potential for increasing revenue from existing customers;
• increased revenue and profit through targeting sales to customer needs;
• more revenue due to the ability of sales staff to concentrate on calling on higher-revenue prospects;
• better and more efficient arrangements for service delivery and therefore lower staff and administration costs.

Customer service priorities

The customer service ethos in an organization should be founded on the principle that everything that anyone does will ultimately impact on customers and that meeting their needs should be given priority. As the slogan in one retail organization put it: ‘If you’re not serving a customer, you should be serving someone who is’. This is a good reason for developing improved standards of service for internal customers, as well as focusing on the needs and expectations of external customers. Customer service priorities should be reflected in statements of core values, training, performance management and reward policies and practices, which influence the behaviour of employees to customers, as well as developing better customer service processes.

Customer service activities

The following are the main customer service activities:

• ascertaining customer needs and expectations;
• using CRM processes to identify those needs and target sales;
• developing products and services that meet those needs and expectations;
• seeking and taking orders for products or services by advertising, promotions, direct selling, and the use of call centres or telesales;
• delivering the product or service effectively and efficiently;
• conducting effective interpersonal working relationships between employees and external customers and between individuals within the organization and their internal customers; 
• setting standards and targets for customer service;
• developing customer service skills and influencing the behaviour of staff to customers; 
• setting up customer service centres and websites; 
• providing after-sales service – help, advice, repair and maintenance; 
• dealing with customer queries and complaints; 
• measuring the effectiveness of customer service and taking remedial action when necessary.

Elements of customer satisfaction

The fundamental aim of an organization’s customer service policies and practices is to create and maintain customer satisfaction and retention. Loyal customers are worth nurturing. They buy more and buy more regularly. And the cost of selling to them is low, whereas finding new customers can be expensive.

Satisfied customers will recommend products and services to others. Dissatisfied customers will complain to as many as 10 other customers and potential customers.

To achieve and sustain customer satisfaction the following requirements must be met:

• Quality – the product or service meets customer expectations on the degree of quality they require by delivering what was promised. For products this will refer to such criteria’s fitness for purpose, reliability, durability and low maintenance. For services it will be concerned with the achievement of an acceptable level of provision, reliability and accessibility.
• Value for money – the product or service meets customer requirements on value for money in the sense of giving them at least what they paid for and preferably more.
• Belief on whether value for money is provided will often be on a comparative basis, setting off one manufacturer or supplier against others.
• Reliability – customers are most likely to be satisfied when the manufacturer or supplier ‘delivers the deal’ by achieving a consistent level of performance and dependability.
• Responsiveness – increasingly, customers expect their supplier to be willing and ready to provide prompt service and help at the point of sale and afterwards. Individual attention, speed and flexibility are required.
• Competence – the supplier must have the required skills and knowledge to produce value for money and to provide a satisfactory level of service.
• Access – customers must be able to gain access to the supplier or provider with the minimum of trouble. They have learnt to put up with mechanized answering services but hate endless delays in getting through listening to The Four Seasons and to seemingly insincere assurances that their custom is valued. They like to talk to human beings who will respond to their query or complaint.
• Courtesy – customers require politeness, respect, consideration and friendliness from the people they contact over the counter, in a call centre or when faced with a service problem.
• Communication – it is essential to keep customers informed in language they can understand about the product or service and how they can make quick and easy contact if they have a problem. It should be obvious that when they make contact they are listened to so that their specific query is dealt with quickly.
• Credibility – customers are more likely to be satisfied if they find as a result of their experiences that the supplier or provider is trustworthy, believable and honest. This is based on the knowledge and courtesy displayed by staff and their ability to inspire trust and confidence.
• Security – customers want to be confident that the product or service will be safe.
• Tangibles – physical facilities, equipment and staff appearance.

Changing customer dynamics and satisfaction

When considering how to satisfy customers it should be remembered that customer expectations tend to rise. They expect continually rising levels of service and more choice and will be dissatisfied if standards are only maintained at a level that they once found acceptable.

Customers are changing the way in which they purchase, especially through the internet, which gives them more choice and enables them to compare product prices and attributes. It should also be noted that other organizations will improve the services they offer and competitive edge will be lost if these improvements are not matched or preferably exceeded.

Simply to seek satisfaction is not enough. It is necessary to go beyond satisfaction by exceeding expectations in anticipation of what customers will want in the future and what competitors will be doing. It is for this reason that careful attention has to be given to assessing and meeting customer needs, as discussed in the next chapter.

Tips for Improving the Service Encounter

The following tips for improving the employee-customer service encounters are based on several decades of research and logical extensions of this knowledge:

• Attempting to micromanage employee service encounter behavior through measuring and rewarding or punishing employees based on compliance with behavioral specifications such as canned greeting, sales, and thanking scripts is counterproductive and actually creates an organizational climate that is less likely to lead to customer satisfaction. This type of strategy reduces employee feelings of autonomy, intrinsic motivation, and genuine emotion. Therefore, Tip 1: Don't ignore the basics. Create an organisational environment in which employees feel valued, treated fairly, and supported by management. This type of climate, coupled with standards and expectations for quality service, creates the kind of environment where employees genuinely want to give good service and represent the organization in a positive light. 
• Both positive and negative emotions on the part of employees are readily "caught" by customers, and vice versa. Therefore, Tip 2: Remember that human resource and management practices need to be aligned with the goal of creating an atmosphere when employees feel positive emotions at work. Management policies and practices that support the goal of quality service, considerate and fair treatment by management and internal service providers, employee involvement in decision making and problem solving, and other strategies that show management concern for both employee and customer welfare are all part of creating a climate where employees feel positively about the organization and their contribution to it. This is particularly true for service jobs that are low in task attributes associated with intrinsic motivation due to low autonomy, little task variety, and low skill challenge, such as call center operator. Because the job is so inflexible and structured, supervisors of these jobs need to exhibit high consideration toward employees. 
• Quality data on customer views of service quality are vital for decision making. Organizations need multiple strategies for collecting this data. So, Tip 3: Get help from your employees. Involve employees in systematically recording customer complaints for a given time period and forwarding this information up the chain of command. No punishment of employees or managers based on these complaints can follow, or these complaints will not be recorded. This can work only in an organization where there is a high level of trust in management's word that there are no consequences for accurate recording of employee complaints. A modest incentive could also be offered. This approach is a way to collect quality data and also communicates to employees that they are partners with management in working on service quality management.
• Tip 4: Involve employees in diagnosing service quality palms and subsequently developing solutions to service quality problems. This approach has several benefits. It generates good information about service quality concerns and weaknesses. Employees, who are close to the customer and bear the brunt of customer dissatisfaction, often have valuable ideas about how to improve service quality. In addition, this process communicates to employees that their input, knowledge, and ideas are valued, creating a sense of ownership and empowerment in resolving service quality issues. These feelings and attitudes will be noticed by customers during the service encounter and can translate into improved customer views of service quality.
• Organizations need a multipronged approach to reducing the gap between customer expectations and perceived service quality.

Tips 5, 6, and 7 are three approaches to reducing this gap.

Tip 5: Revise policies and practices that customers dislike when possible. These policies and procedures may cost more in terms of customer good-will than the benefits gained through administrative efficiency.

Tip 6: Communicate with customers through a variety of means, including advertising signage, and interpersonal communications, to provide customers information about policies and procedures in order to create realistic expectations about the service delivery system and the rationale for any policies and procedures disliked by customers. When a policy or procedure is not amenable to change, clear communication about the policy and its rationale can reduce or prevent customer dissatisfaction.

Tip 7: Train employees to communicate effectively in difficult service encounter scenarios, such as handling a customer complaint. Behavior modeling training, which involves observation of a model using the behavior, practice, and feedback, is the appropriate method for teaching this type of communication skills. Employees can be involved in developing the key learning points to be used in this training.

Tip 8: Create an organizational climate where employees feel attached to the organization and are internally motivated to be helpful to customers. When employees are satisfied with their jobs, feel well treated by management, and believe that organizational policies and practices support the goals of customer service as well as concern for employee needs, they are more likely to be helpful to customers during service encounters on a voluntary basis, without need for close supervision and monitoring, formal reward and punishment, or service scripts.

Conclusion
The bottom line in trying to improve the service encounter is that it is resistant to overt attempts on the part of management to use the typical management control mechanisms of behavioral specifications, close supervision and monitoring, performance appraisal, and contingent reward. It is more amenable to influence through indirect strategies that focus on creating a climate for service, employee feelings of fair and supportive treatment, and a work environment that causes employees to care about customers.

Customers can sense the difference between "positive vibes" and "fake greetings," and only one of these will have a positive influence on customer views of service quality. While many of the principles discussed in this chapter sound a lot like the golden rule, we propose a slightly revised version: "Do unto employees as you would have your employees do unto customers." Consider it organizational karma, but how management treats people counts.

Systems and Standards

All your systems and standards of performance should be measured against the following criteria:

• Relevant to customers (outside-in) 
• Agreed with staff (not imposed on them)
• Measurable (using customer measures) 
• Achievable (lots of small wins) 
• Controllable (by the staff). 
• Relevant to Customers

If you look at the systems that are used within your organisation you will probably find that most, if not all, of them were designed to serve some internal purpose. (We touched on this in the section about "Success Strategies".)

This usually means that at the point where the system interfaces with the customer it is friendly to your organisation and staff but not so to customers. These systems I have described as inside-out systems. The best systems are outside-in. These are systems which are designed from the customer's viewpoint back into the company. They begin by looking at ways of providing the most simple and service-oriented link with customers. Once this has been established the links with other internal systems are then created.

You should therefore look at all your systems from the customers’ point of view and change any that are inside-out to become outside-in.

Agreed with Staff
It's no good imposing customer service rules or regulations on people. This may get their compliance but it will not achieve commitment. If you want people to be committed to a customer service initiative you need their full commitment to it. You will only get their full commitment if you involve them in all stages of the program.

This means letting them take part in the gathering of customer feedback, involving them in the analysis of the feedback, collecting and using their ideas on what to do about what has been learned, and letting them plan and implement the agreed strategies and systems. There is an acronym which is used to describe the elements of good objectives — SMART:

Specific rather than general or vague
Measurable to allow monitoring
Agreed with all parties
Realistic and realizable
Time-related – by when?

These same five elements can be used to describe good customer service systems. So make sure that yours are all SMART and that you don't have any that are SMART, where the 1" stands for Imposed. Imposed objectives are not owned by the people they are imposed on, so those people have no real commitment to their achievement.

Measurable (Via Customer Measures)
One way of knowing what an organisation views as important is to look at the things that it measures. Companies only measure what they view to be important.

Therefore, companies that view customer service as important measure the levels of customer service they are providing. But what is most important here is that you measure things from the customer's point of view. You need to measure what is important to customers. It is all too easy to measure things that you think are important but that don't matter to customers. That way you may kid yourself that you are achieving success when you are not. A good example of this comes from research done in the US into what matters to people attending seminars and conferences. The researchers first asked the venue staff what they thought was important.

They listed things like:

• Good quality coffee 
• Good china 
• Hot coffee 
• Friendly staff 
• Fresh biscuits.

The researchers then asked attendees at seminars and conferences what they viewed as important. The things listed at the top of their list were:

• Access to toilets with no queues
• Plenty of telephones around 
• No queues to get tea or coffee
• Places to sit.

As can be seen these lists are very different. The list that was created by the staff obviously covered key things that they viewed to be important. However, if they were to measure them they would get a false picture of their service performance because they are not the things that the customers viewed as important. Another example comes from the Marketplace Performance Unit in British Airways.

Checking the Right Things at Check-in Time
When Sir Colin Marshall became chief executive of BA he realised that it was vitally important to see things from the customer's perspective. He therefore created a Marketplace Performance Unit that had the job of measuring and benchmarking operating performance. Their job was to find out what the customers really want, rather than what the management thought they wanted.

A good example of this came at check-in time. The management view had always been that what concerned passengers most was the time it took to get to the front of the queue. However, when the Marketplace Performance Unit asked passengers, they found that they were far more concerned with the length of the queues and the rate at which they moved.

This obviously meant a different approach was needed than had been adopted before.

It is therefore vital that you learn from customers what they think is important. You need to see things from their perspective and then measure what's important to them.

Achievable
One sure way to demotivate people is to set goals and targets which they cannot achieve. By doing so you create a team of failures. It is therefore important to make sure that any targets set are challenging but also achievable. My simple Daffy's Law is as follows: Most targets or goals should be achieved most of the time.

Experience and research has shown that 100 small steps get people there much quicker than one large step. Therefore, if you can find lots of little steps that will lead to an overall major goal, that approach is more likely to create success than going for one big step.

This also applies to systems for implementing customer care programs. A "wild fire" approach is much better than a "grand slam". The grand slam is trying to achieve major steps in one big swoop. This generally fails. Most success is achieved by having lots of small initiatives, all started at once, some of which may fail and some that will succeed. Don't worry about the failures, concentrating on the successes is what's important. Fan the flames of those that succeed and spread them to other departments and teams so that the success gradually spreads throughout the organisation. This approach provides lots of positive examples that show what can be achieved and encourages others to do the same. (This is covered in more detail in Chapter 14.)

So go for the little-by-little approach, have lots of rewards to match the successes and you will find that the overall goal is achieved more easily and quickly.

Controllable (and Simple)
Just as bottom-up ideas work best in the overall planning of a customer service strategy, bottom-up control works better as well. This means it is not a good idea to create an elaborate system of inspection to check that people are doing what they are supposed to do.

With product or production quality, you know you've got it when you don't need a team of inspectors to check other people's work. It's just the same with customer service quality. You will know you are succeeding when there is no need to check whether people are doing what they are supposed to. When they do it because they want to, when they measure and control their own quality of service and correct anything which is wrong without having to be told to, you have achieved real success.

The key, therefore, is to build in this level of trust at the beginning. Help people to develop their own systems of checking and control. Let them know that you expect them to monitor their own performance. Then, once the system is agreed, let them get on with it. Let them know that you are interested to help with problems and keen to reward successes. But don't sit on their shoulder, watching everything they do and picking on them when they make a mistake. Hand the monitoring and the control over to them.

The systems must also be simple for front-line people to use if they're going to help them in delivering high service. The simple rule is that all the best things are simple, and simple things are always best. So if your systems are complicated they must be wrong — so change them.

Above all, make the measurement and analysis of all systems and standards positive. Measure and report what's been done right, not what's been done wrong. Measure and recognise progress towards the goal rather than the achievement of it. Remember the purpose of these systems and standards is to motivate people to strive to do better. They are not there to make them feel guilty when they get things wrong. The Daffy's Law is: In the best systems, the staff are involved in setting their own standards of performance. They also create and operate their own methods of measurement and control.

Make Sure You're Not Rewarding the Wrong Customers

There seems to be a strange logic in what many companies are doing regarding their treatment of customers. Some appear to be more interested in attracting new customers than in keeping the good ones they've already got. Others seem to be more keen to reward the small or infrequent purchasers than they are to reward their large or regular customers.

You can find examples of these practices in all types of business. The following are just a few I have noticed recently.

Holiday Companies
Buy early and pay top prices — leave it until the last minute and get a great deal!
The holiday companies are notorious for selling at the maximum prices they can until they have lots of holidays they can't sell which they then have to discount. Perhaps if they began by offering good discounts to existing, regular customers they would not be left with so many unsold holidays each year.

Supermarkets
Small purchasers get dealt with quickly —big spenders can wait in line!
Most supermarkets have express checkouts for people with just a few purchases while their better customers, who have spent many times more, have to wait in a queue. Why can't we have express checkouts for the big spenders?

Mail Order Catalogues
The quicker you become a customer — the worse the deal you will get!
Most catalogue sales companies have big budgets for attracting new customers — and for keeping the worst ones. Once a catalogue has been sent to a prospective new customer, the longer that customer waits to place their first order, the bigger the discount they will be offered to do so. Good customers, who order quickly, aren't offered discounts. Also, if an existing customer stops spending or starts spending less, they will be offered special deals that are not offered to the good, regular spenders, to resume or increase their spending. So the worst customers get the best deals!

Banks
While you are a customer we will charge the highest price we can — if you threaten to leave, we'll suddenly give you a great deal!
A colleague recently decided to take advantage of offers to people who moved their mortgage to a new lender. There's a lot of hassle associated with remortgaging but some lenders are trying to make it worthwhile. He therefore applied and was accepted by a new lender. When he then advised the bank that provided his existing mortgage of his decision it suddenly found it possible to offer him a rate equal to that being offered by the new lender.

He was really annoyed by this. It appeared to him that they were happy to keep charging him a high rate as an existing customer, so long as he didn't notice, and only offer him a lower, more competitive rate when he threatened to leave.

In the short term the bank may get more interest from existing customers with this policy, but in the long term it stands to lose them and will then have to spend massive amounts on marketing and offer big discounts to attract new ones. It must make more sense to have policies that ensure that it keeps the customers, like my colleague, who it already has.

Clothes Retailers
Regular customers pay full price — sale-only customers get discounted prices!
I really like the clothes from one British retailer but hardly ever buy from them during the normal trading year because they tend to be too expensive for me. However, I'm on their mailing list so they always tell me when their sales are due. I then rush in to purchase the same clothes at sale prices. I'm therefore not a very good customer because I only shop at sale times. If they were to provide special offers for being a regular customer throughout the year, I would become a more regular customer and shop at non-sale times as well.

Insurance Companies
If you never spend a penny with us before you, can have a gift, if you've spent a Fortune over the last few years you get nothing!
Many insurance companies offer gifts to attract people who have never been customers before. Why aren't similar gifts offered to the existing, good customers as a bonus for loyalty or renewing a policy?

Mobile Phone Companies
If you’re a new customer you can have the latest phone at a giveaway price — if you're an existing customer you’ll have to pay a lot more!
Most mobile phone companies offer the best deals on new phones to those potential customers who have never contributed anything to their profits. I think that even better deals should be offered to the existing customers who create the profits that allow the silly deals to be offered to new customers. (Maybe this will happen when we get the right to keep our telephone numbers if we change suppliers.)

Building Societies
New customers get a discount - existing ones don’t!
The recent drops in mortgage interest rates have yet again shown that building societies seem to value new customers more than existing 011%. They all seem to have offered the reduced rates to new customers instantly while existing customers have to wait a month. Surely this is the wrong way around.

These are just a few examples that come to mind. I bet you could think of some from your own experience. But isn't this really daft? Surely it makes more sense to invest in keeping the good customers that we’ve already got rather than spending a fortune on trying to attract new ones. It also seems silly to provide incentives and rewards for the small spenders and nothing for the bigger, better customers.

I've discussed this topic with many of my customers and attendees at my seminars. They often justify these practices with one or more of the following:

• Offers are the best way to attract new customers from competitors.
• We need to encourage the smaller-spending customers to become bigger spenders.
• It's more cost-effective to take defensive actions to keep the few good customers who threaten to leave.

This all makes sense, so long as it is not adding unnecessary expense to the business, it doesn't damage relationships with existing customers, and it's sustainable. But often it is, it does and it isn't!

In most instances of offers for new customers the competition is making similar types of offers. So what happens is that the least loyal customers move around to the company with the bat offer at the time. Existing, good customers soon notice when new or low -spending customers are getting better deals.

They then conclude that being a good, loyal customer means little or nothing and look for an alternative supplier. These types of campaigns are constantly having to be changed or improved to react to the latest moves from the competition. They are therefore not sustainable and do not appear capable of providing a worthwhile long-term return.

In Edward de Bono's book Sur/Petition he explains how he believes it is possible to move out of the rat race of competing with others in the same marketplace and onto a higher level where you are in a race of your own. He calls this sur/petition as opposed to competition.

I work with many companies that seem able to do this. They have a clear long-term vision of where their business is going. They have a loyal customer base and steady growth through recommendations, repeat purchases and referrals. They are relatively untouched by recessions or volatile markets.

They are able to attract and retain high-caliber staff who look forward to Monday mornings.

These organisations reward the right customers and provide them with sound reasons to stay, no matter what the latest deals or promotions are from the competition. They provide great service and the best value all the time, not just at the times they wish to attract new customers or when they think they could lose existing ones to the competition.

They take the trouble to listen to and learn from their customers so that they know precisely what they want and expect. They are then prepared to exceed these expectations with products and services that go beyond those of the competitors. This enables them to sur/pete, rather than having to compete. It is, to my mind, the best strategy for building a successful business.

Increasing customer expectations

The number of complaints is on the rise across the globe as customers are no longer prepared to put up with poor service. Undoubtedly businesses in the 21st century are now more focused on the need to deliver an excellent customer experience, yet many do not welcome complaints or encourage their employees to see them as opportunities for improvement. They view complaints as an unnecessary evil rather than an incentive to learn and improve as a business.

I certainly could not begin talking about complaints without focusing on customers and the trends that impact on their expectations of the service they receive.

Today’s customer is far more informed and vocal than when I first started in the customer-service industry over 20 years ago. Then, customer service as a profession was in its infancy. Power lay with large manufacturing companies who dominated the marketplace and who were chiefly concerned with satisfying their distributors. The focus was on business to business (B2B) rather than business to the consumer.

In the intervening years, the way we live and our expectations as customers have changed dramatically. Today is a much faster-moving society where customers are better informed, more knowledgeable and better travelled. Globalization has led to greater choice for customers. As marketplaces have become more sophisticated, there has been a growth in service industries rather than in manufacturing in many parts of the world. For example, according to the Office for National Statistics, in the UK manufacturing industry accounted for 40 per cent of jobs in post-war Britain, compared with 8 per cent today.

In Western society, increasing economic pressures mean that today’s consumers seek excellent service as well as value for money. In emerging markets such as Brazil and India there is a growing middle class who are attracted to brands that offer good-quality service. In countries such as China and Russia, there is strong demand for luxury consumer goods and the levels of service that are expected of these. As a consequence, many more organizations are aware of the need to deliver an outstanding customer experience.

Service organizations such as retailer Nordstrom and low-cost carrier Southwest Airlines, both based in the United States, were at the vanguard of a sea-change in how organizations viewed their customers. These companies developed a culture of customer excellence that transformed the way businesses thought and interacted with their customers. Management gurus, starting with Tom Peters, encouraged a generation of business leaders to aim to differentiate their companies from their competitors via the quality of service they provided. Professors Heskett, Sasser and Schlesinger’s book The Service Profit Chain, published in 1997, established the link between high levels of employee satisfaction and engagement and great customer service.

Today, countries such as Singapore, the UK, the Netherlands, the United States and Canada have sophisticated customer-service industries that operate in mature marketplaces. Customer service in these countries is typically aimed at retaining customers and preventing churn. In the UK for example, customer contact centres are now the norm when dealing with customers in the banking, telecommunications, retail, IT and insurance industries. Contact centres employ approximately 4 per cent of the UK workforce.

Customer service in countries such as Turkey, South Africa and Russia is focused on building relationships with customers, whereas in emerging markets such as Brazil, Peru, China and India customer service is aimed at acquiring new customers.

The power of the customer

Not only has the structure of business changed, but in recent years customers have become more empowered. No longer prepared to accept poor service, power now increasingly lies with the consumer.

There are a number of reasons for this, some of which I have touched on above:

• Today we live in a fast-moving society where people are time and attention poor.
• There is more competition in the marketplace and therefore more consumer choice.
• De-regulation and in some cases government regulation have opened up marketplaces to more competition and greater customer empowerment.
• The economic climate, particularly in the Western hemisphere, has led to a greater emphasis on cost and value for money, driving down prices and increasing the need for high-quality service in order to differentiate.
• People are more travelled and better informed.
• There is increasing demand for international brands and corresponding service experience.

In addition, one of the biggest influencers is the rapid growth of social media.

Social media

‘Word of click’ is now becoming more powerful than ‘word of mouth’. Increasingly people throughout the globe are using the internet, and the voice of the consumer has more power than that of today’s organizations. In March 2011 Internet World Stats claimed that 31 per cent of the world’s population use the internet. This figure varies from 78 per cent penetration in North America to 11 per cent in Africa. In the year 2010-11, there was a 480 per cent increase overall in its use. The internet has been adopted worldwide faster than any other modern invention such as the telephone or television. Sites such as Facebook, Twitter and LinkedIn have grown in popularity and have been instrumental in social change.

But it is not laptops, tablets and PCs that are being used most to access the internet; research by mobiThinking.com shows that half a billion people accessed the internet using mobile phones in 2010. Seventy-seven per cent of the world’s population owned mobile phones in 2010 and there were 5.3 billion subscribers. The Japanese are the world’s most sophisticated mobile users while China has the fastest growing usage.

By 2016 application-to-person messaging (A2P) is expected to overtake person-to-person SMS. This will include offers from retailers and updates from banks as well as re-payments. It is estimated that between 500 million and 1 billion people will access financial services by mobile phone (tap-and-go) in the next five years to make payments and transfers. In China alone, it is estimated there will be 169 million users of tap-and-go payments in 2013. M-ticketing for airline, rail and bus travel, festivals, cinemas and sports events will become the norm.

Generation Ys, the people born between 1977 and 1994 as well as Generation Zs (those born after 1995) have an inseparable connection to technology, and this is spilling over into older generations. New communication channels are altering customers’ expectations about service. Internet-based social networking is giving customers a vehicle for spreading good and bad news at the click of a mouse. The effect of the rise in access to social media is that the customers of today and the future are more likely to trust their peers than the organizations from which they buy products and services. Aggregator sites such as TripAdvisor, Amazon and eBay, which constantly provide customer feedback, are examples of how customers can shape future purchasing choices. Jeff Bezoz of Amazon.com is quoted as saying: ‘If you make customers unhappy in the physical world, they might each tell six friends. If you make customers unhappy on the internet, they can each tell 6,000 friends.’

Customer complaints

Unfortunately, many companies have negative NPSs. This indicates that there are many customers who receive a level of service that is below their expectations and become detractors of the organization. At this point the customer may decide to complain.

Research in the UK by the Institute of Customer Service reveals that around three-quarters of customers are prepared to complain, compared with about half some 10 years ago. Think of a poor example of customer service that you have received recently and I am sure that something will come to mind. Psychologists believe that negative experiences are more memorable than positive ones. In developing the contents for this book, I asked various colleagues, friends and clients for examples of when they have been dissatisfied about the service they received and what they did about it. Here is an example that I received in an e-mail of the kind of things that make customers dissatisfied:

Yesterday I was waiting in for an engineer to come to activate my phone line. The highlights of the engineer’s visit were:

He asked me how much I paid to rent my flat and advised me that renting was a bad idea and that everyone should be on the property ladder like him. When I explained I had no deposit for a house, he advised me to gamble everything I have on Arsenal and Manchester United winning each week; over the course of a season I was bound to have enough money!

He explained that his current employer was rubbish and that he previously worked for another telephone provider for 10 years and they were very good. I asked him why he didn’t work for them anymore. His answer was, because he was sacked.

He had a couple of colleagues come around and assist him. It was all looking good, but after they left the engineer couldn’t get the phone line to work. He suggested to me that his colleagues had sabotaged his work so somebody else would get the credit of finishing the job instead of him.

He twice went to check the ‘cab’. It turns out this is a box down the street where all the phone lines go into. Both times he was gone for over an hour. I do suspect he may have been in the pub across the road from the cab.

Whilst in my presence he took a call from a colleague and explained to him how his manager ‘did a disciplinary’ with him that morning and had accused him of gross misconduct. Apparently he swore at his manager and didn’t answer his phone. He then decided to fill me in with all the details: he openly told me that he may have an attitude problem and that is why he may have got into trouble.

He seemed to be talking to himself on numerous occasions and swearing at himself.

He told me that he was going to take the following week off work to consult legal advice about his disciplinary.

All in all from start to finish he was on the job for nearly five hours and seemingly achieved nothing; he advised me another engineer would contact me.

He rang me today to enquire whether he had left some tools at my flat.*

^{* Thanks to Callum Lafferty of Waitrose who was the customer in this example.}

Unfortunately I am sure that many other people have had similar experiences as customers. The issue today is that consumers are no longer prepared to put up with poor service. If we do not complain directly to the organization, we certainly do tell other people. Businesses are as much at the mercy of the ‘power of the internet’ and social networking as they are negative word of mouth

The risks involved in poor complaint handling

So there are numerous potential risks to an organization if complaints are not handled well. From a customer’s perspective there is the irritation and frustration experienced by the minority of people who do try to complain directly to the organization but find it difficult to know where to complain, or who are met by indifference and lack of care about their needs. For the organization the customer risk in ineffective complaint resolution results in:

• reduced customer trust and loyalty;
• reduced uptake of products and services;
• customer attrition;
• customers becoming detractors, actively criticizing the organization and not recommending it to others.

Ineffective use of complaints information can result in continued customer dissatisfaction with recurring issues. Poor complaint handling is estimated to result in between 5 and 15 per cent lower revenues, and corresponding reductions in profits. When an organization does not welcome complaints, this can result in a huge hidden cost as a business does not have any feedback from customers about why they are defecting.

In addition, as many companies operate in a regulatory environment, there is a risk of non-compliance with relevant regulation and legislation, resulting in regulatory censure, sanctions, fines, withdrawal of license to operate, and capital and revenue loss. For example, in July 2011 in the UK, energy provider British Gas was fined £2.5 million by the energy regulator Ofgem for the mishandling of customer complaints.

British Gas is the UK’s largest energy supplier, serving nearly half of British households. Specifically, Ofgem found that British Gas failed to re-open complaints when customers indicated that their complaint was not resolved, and that the company did not have adequate procedures in place for dealing with complaints from micro businesses employing fewer than 10 people. This was the largest fine that Ofgem has made to date in terms of customer service and was indicative of its, and other regulators’, aim to ensure suppliers treat customers fairly and transparently.

In the financial services sector in the UK, ineffective complaint resolution and use of complaints information can result in regulator intervention and enforcement action. Banks and insurance companies also run the risk of incurring costs in relation to independent arbitration services, such as the Financial Ombudsman Service fees in the UK.

There are also risks to a business operationally if complaints are not welcomed and dealt with well. Staff morale can be affected if they are not given appropriate training in how to deal with complaints, and when they see recurring complaints not being addressed. In addition staff capacity can be wasted in recording repeat complaint details.

If businesses do not seek to learn from complaints and make effective use of complaints information, they will not be able to address the root causes of problems. Therefore they will lack the ability to improve their products, services, processes and policies. In addition they will not be able to identify and address ineffective complaint-handling procedures or complaint handlers.

If businesses do not undertake root-cause analysis of why people are complaining, they will not see a reduction in complaints and therefore will continue to incur large handling costs. They may see a high volume of re-opened complaints that results in higher costs, including redress payments and loss of competitive advantage.

The positive power of effective complaint handling

The previous section dealt with the negative impact of not welcoming complaints and of not dealing with them fairly and effectively. However, we must not forget the positive power of complaints.

Studies show that, depending on the industry, 54-70 per cent of customers who register a complaint will do business with the organization again if their complaint is resolved in a timely and thoughtful fashion. The figure goes up to a staggering 95 per cent if the customer feels that the complaint was resolved quickly and fairly. In fact a well-handled complaint tends to breed more customer loyalty than the organization had before the negative incident. Typically customers whose complaints have been handled well rate their overall satisfaction and propensity to recommend the organization as 4 per cent higher than those who did not have a problem at all. In addition the customer is more likely to stay with the organization for longer, and some even spend more money than before.

Referring to the customer pyramid I mentioned earlier, a complaint is a ‘moment of truth’ and the way the organization deals with it either makes or breaks the emotional connection that the customer has with the business. When a complaint is handled well, the customer is more likely to become emotionally engaged with the organization and have a stronger desire to stay with the service provider. A customer can be transported from Level 1 to Level 3 on the pyramid.

Furthermore, complaints can drive business improvement, improve internal communications and increase operational efficiency. In Australia for example, the Public Transportation Ombudsman made a study of the taxi and hire car industry in the state of Victoria; it found that when complaints were viewed positively and handled professionally and non-defensively, they drove industry improvement. This in turn led to fewer dissatisfied customers, increased customer loyalty and promoted greater confidence in the industry.

Complaints handled well can enhance a brand’s reputation. A complaining customer who experiences a good recovery from a problem will become a promoter of the organization and build positive word of mouth (and clicks), openly spreading positive stories about their experience. Studies show that a 5 per cent reduction in the customer defection rate can increase profits by 25-85 per cent, depending on the industry. (All facts drawn from US Technical Assistance Research Program (TARP) Studies 1979-2010.)

A survey by American Express in the UK showed that more than half of customers would spend more on goods and services if the service experience was guaranteed to be first class.

One organization I am a big advocate of in the UK, and one that consistently tops the Institute of Customer Service league table for customer service, is retailer John Lewis and its supermarket arm, Waitrose. In surveys by retail analysts Verdict, John Lewis has been voted Britain’s favourite retailer for four years running. Waitrose has also featured in the top 10 for many years and John Lewis online was voted best online retailer in 2010.

A personal example of how John Lewis deals with complaints is when I recently ordered a patio table and chairs for my deck. My husband and I went into a store and viewed their garden furniture range. On returning home I checked the measurements of the table and chairs and then placed an order online. I was delighted that the furniture turned up the next day and I duly placed the table and chairs on my deck. However, the first time we used the set, which happened to be at a barbecue with friends, I found the rubber stoppers on some of the legs were missing. This meant sitting on the chairs was rather perilous and we could not use them safely, so we and all our guests ended standing up. The following day I called John Lewis to complain. The lady I dealt with appeared genuinely sorry and offered to arrange for the rubber stoppers to be delivered to me so that the chairs could be made safe. A delivery van with the stoppers turned up the same day and the driver repaired the chairs and checked that these were then stable and safe on the deck. In the post the following day I received a John Lewis token for the inconvenience. The lady I had spoken with also called the day after to check that everything was now resolved to my satisfaction. For me this is an example of excellent complaint handling.

John Lewis’s employees are all partners in the business and have a vested interest in the organization’s success. Partners receive ongoing training on products, sales and service. They have expert product knowledge and go out of their way to deliver excellent service. To be able to do this consistently, John Lewis is keen to find opportunities to listen to customers, be open to feedback and act quickly on what customers tell them, particularly if they’ve got something wrong. The company uses customer surveys, panels, focus groups, online feedback forms and regular mystery shopping to help monitor levels of customer satisfaction and obtain a broad spectrum of customer opinion to respond to. For example, customers’ views have driven the development of Waitrose’s By Invitation and WaitroseDeliver services, as well as Quick Check, the scan-as-you-shop service. John Lewis aims to provide the best value on the high street by offering a ‘Never Knowingly Undersold’ promise to its customers, which is supported by excellent service.

Coincidentally, at the time of our visit to the store my husband misplaced his glasses – he thought that he had left them either at John Lewis or in one of the other two stores we visited that day. He phoned John Lewis and the other stores. John Lewis said that they would check their lost property and call back the next day, which they duly did. Neither of the other two stores returned the call. John Lewis called the next day and the day after to say they were sorry the glasses had not been handed in. Then on day four, they called again to say that my husband’s glasses had been found in the furniture department. My husband was delighted and went to collect them. The assistant in the furniture department had these waiting for him and even gave his glasses a polish before she handed them back to him!

So, in summary, dealing with complaints well saves time and energy from both a customer and an employee perspective. Positive complaint handling saves time, money and materials, and highlights recurring quality or service delivery errors that can be fixed once and for all. It can also identify emerging issues and trends that the organization can address to gain better customer advocacy.

The business case for excellent complaint handling

I and my team of consultants are called in on assignments to help organizations be more customer focused where the business sees complaint handling as an unnecessary evil. In fact, my belief is that the way an organization handles complaints is an indicator of the quality of the customer experience it provides. Too many organizations attempt to minimize complaints and to save money by offering the minimum redress even when the complaint is justified.

Rather than seeing complaint handling as an unnecessary cost to the business, best-practice organizations view complaints as an investment in the organization’s future. They actively welcome them and make it easy for customers to complain via whatever channel they choose. In addition they make complaints the lifeblood of their service and product improvements, using customer feedback to drive the continuous development of their business to better meet customer needs.

At telecoms company, Nokia, special agents are specifically trained in complaint-handling skills. They have discretion, within predefined limits, to offer service recovery gestures. If they cannot resolve the complaint they escalate it to the central team at Nokia Group. Staff are encouraged not to worry about the cost of complaint resolution or recapturing loyalty. They are trained to use a five-step process for fixing problems:

• Listen from the customer’s perspective.
• Create a solution.
• Execute improvement (try new things, not seen as a failure but learning).
• Ensure an excellent recovery process.
• Build ‘wow’ experiences.

A useful way of looking at return on investment in terms of complaints is to use customer satisfaction data and other management information you may have available in your organization to quantify the negative impact of not dealing with complaints well.

For example, you can:

• Identify the percentage of customers who do complain (even though these potentially represent the tip of the iceberg);
• Look at how many of the people who did complain were not satisfied with the way their complaint was dealt with;
• Identify the negative actions customers take as a result, such as ending their relationship with you, not taking up other products and services, or negative word of mouth, and the cost to you of such actions.

In the following chapters I will provide practical examples of how to encourage and respond effectively to complaints, as well as how to act on customer feedback to ensure ongoing improvement.

Ultimately people who handle complaints need to represent the ears, eyes and hearts of your customers. By managing and learning from complaints, you can drive improvements in your overall customer experience.

Key learning points

By welcoming complaints and dealing with them efficiently, thoroughly and fairly, organizations are able to deliver a superior customer experience.

Effective complaint management helps drive improvements in products, services and processes.

It also encourages better employee morale and engagement, as team members can use complaints to represent the voice of the customer and see that actions are taken to improve the organization as a result of customer feedback.

Finally, dealing with complaints well delivers strong and sustainable profitable growth, by increasing customer loyalty and retention and generating an enviable reputation for great service.

Dealing with Difficult Customers

I thought I should include in this chapter some basic principles for dealing with difficult customers. Anyone working in a front-line position will have to do this at some time so it’s worth mentioning the way the real professionals go about it. In the next chapter you will learn about Whole Brain Service and how we basically have two parts to our brain: the left, logical side and the right, emotional side.

It’s most important to keep this in mind when you’re dealing with difficult customers. You need to match your approach to whichever side of the brain seems to be in use by the customer. In most cases of difficult customers this will be the right side.

Complaining or difficult customers are generally annoyed, angry, upset, disappointed, afraid (yes, some are actually afraid when they have to complain) or in some other emotional state. When this happens, the worst thing that you can do is to respond with a totally logical approach (even though you may feel this may appear to be the “professional” way to deal with it).

If you provide a logical response to an emotional appeal the odds are that you will worsen the situation and heighten the emotion in the customer.

An emotional approach from a customer needs an emotional response from the server. This obviously does not mean that you should match anger with anger or annoyance with annoyance. What it means is that you respond with empathy. Show you care. Try to see it from the customer’s point of view.

Even if the complaint is unreasonable or wrong you could at least say that you understand why the situation could have caused annoyance or irritation to the customer. By providing an emotional or empathetic response to an emotional customer you generally defuse the situation, which allows a sensible and logical problem-solving approach to follow.

In his book, Dealing with Demanding Customers, David M. Marlin refers to someone he calls “Sharp end SARAH”. SARAH is basically a formula for dealing with difficult customers that works well and is easy to remember.

• Stop talking. Never interrupt or try to “talk over” a customer who is complaining. You will annoy the customer even more, ifs very rude, and you’ll not learn properly about the complaint and/or the reasons for it so you won’t be able to deal with it properly. 
• Adopt active listening. This means that you focus your full attention on the customer. Don’t allow anything to distract you. Look the customer in the face. Make eye contact. Ask questions if you’re not dear about anything. Take notes if necessary. 
• Reflect content or feeling. The best way to do this is to repeat or paraphrase the key things that the customer says. You could say, “Let me just make sure I’ve got this right and haven’t missed anything” before you do. By repeating back to the customer the key things they told you, you put yourself on their side of the situation, it ensures that you understand the situation from the customer’s viewpoint, it lets the customer know that you were listening and understand their position and it helps build a rapport between you and the customer that can be used to help find a solution. 
• Reflect content or feeling. The best way to do this is to repeat or paraphrase the key things that the customer says. You could say, “Let me just make sure I’ve got this right and haven’t missed anything” before you do. By repeating back to the customer the key things they told you, you put yourself on their side of the situation, it ensures that you understand the situation from the customer’s viewpoint, it lets the customer know that you were listening and understand their position and it helps build a rapport between you and the customer that can be used to help find a solution.
•  Act with empathy. Here’s where you match feelings with feelings, emotions with emotions. If you have an approach from a customer that is very logical or clinical then you should respond in a similar manner. If your customer is displaying some emotion then bring your own emotions into your early responses. Let your style of reaction be dictated by the customer’s approach. 
• Handle the subject matter. Now you can use your knowledge of your product or service to find a mutually acceptable solution. You will find the section about “Recovery" in Chapter 6 and the piece about "Dotty Logic" in Chapter 15 useful in this regard. I thought I would end this section with one of my Daffy Laws that puts this simply:

When handling complaints, deal with the person first and the problem won't last.

Types of Survey Questionnaires and Their Design

CSM [customer satisfaction management] measures satisfaction with either relationships or transactions. Customer relationships refer to experiences over an extended period (typically a period of three months to a year). All aspects of the customer-vendor relationship — including service quality, product quality and value, and ease of doing business—may be measured. A customer transaction is a single unit of service, typically extending over only a few minutes, hours, or days. Measures of satisfaction with relationships provide strategic and operational knowledge; measures of satisfaction with transactions provide primarily operational knowledge.

Transaction-oriented questionnaires typically ask a subset of the questions in relationship-oriented questionnaires. Either type of survey, deployed either via the Internet or conventionally, usually has three parts:

• Overall measures of satisfaction, such as "What is your overall level of satisfaction with our product or service?" "How likely would you be to recommend our product or service to a friend or colleague?" and "How likely would you be to purchase our product or service again?"
• Ratings of key performance attributes, for example: "How satisfied are you with the promptness of service you received ... the courtesy of our staff ... the accuracy of our service ... the completeness of our solution ... the speed of our system?" Pre-survey interviews and online focus groups can be conducted with a sample of customers to determine these key performance attributes. 
• Demographic questions, which will be used to segment survey responses by category, for example: "What are your company's annual revenues?" "In what geographical region are you located?" "What is your industry?" "Which of our product(s) do you use?" "For how long have you been a customer?" Any significant differences in satisfaction within any of these customer segments will be revealed by cross-tabulating the results by each of these respondent categories. Being able to pinpoint needed performance actions to a specific customer segment helps make survey results actionable.

Many customer satisfaction surveys ask the respondent not only to rate the company's performance for each attribute but also to rate the importance of each attribute. Asking both of these variables enables surveyors to measure gaps between importance and performance (gap = importance rating — performance rating). To prioritize them for management attention, attributes are ordered from largest to smallest gap. Attributes with both high importance and performance (satisfaction) ratings are key strengths; attributes with high importance but low performance ratings should be key concerns for management.

Either instead of or in addition to asking about importance explicitly, survey analysts may derive the importance of attributes by computing the correlation between an attribute's rating and overall satisfaction. This approach assumes that overall satisfaction is a variable dependent upon the key performance attributes, which are assumed to be independent variables (or linear combinations of independent variables). Factor and regression analyses are used to determine the degree of correlation for each attribute. Asking explicitly about importance indicates which attributes customers believe are most important. Deriving importance determines which attributes actually drive overall satisfaction and loyalty. Conventional wisdom for postal mail and phone surveys is that the use of open-ended questions (such as "What can we do to most improve the value of our service to you?") should be limited, because such questions are time-consuming for respondents to complete and the responses are costly to record and tabulate. But with Internet surveys, respondents can complete open-ended questions quickly using keyboard and mouse and, since their responses arrive in electronic form, there's no need for manual data entry. Consequently, customer satisfaction specialists may use open-ended questions more freely in Internet than in conventional surveys.