CUSTOMER SERVICE AND SERVICE QUALITY:HOW TO CREATE A CUSTOMER-FOCUSED BUSINESS

1. HOW TO CREATE A CUSTOMER-FOCUSED BUSINESS

Step 1: Mission, Values, and Purpose

A customer-service focus emanates from the core values implicitly and explicitly expressed through- out the organization. It is represented in the mission statement of the company and the development

of a functional department to oversee customer relationship management and an executive responsible for the voice of the consumer.

A customer-focused mission statement should make it clear to all who work in the company and do business with the company that the customer is not to be ignored and should be the focal point of all components of the business. Every department and every individual should understand how they are serving the customer or serving someone who is serving the customer. The mission can be something as simple as Lands’ End’s ‘‘guaranteed period’’ or the engraving on a two-ton granite rock that marks the entrance to Stew Leonard’s grocery stores in Connecticut:’’ Stew’s Rules—Rule 1. The customer is always right. Rule 2. If you think the customer is wrong reread rule number 1.’’ Then there is the elegant mission statement on the walls of the Ritz-Carlton: ‘‘We are Ladies and Gentleman Serving Ladies and Gentleman. . . . The Ritz-Carlton experience enlivens the senses, instills well-being, and fulfills even the unexpressed wishes and needs of our guests.’’ And the mission statement that helps explain why Wal-Mart is the top retailer in the world: ‘‘We exist to provide value to our customers. To make their lives better via lower prices and greater selection; all else is secondary.’’

The foundation for a visionary company is the articulation of a core ideology (values and guiding principles) and essence (the organizations fundamental reason for existence beyond just making money) (Collins and Porras 1994).

Step 2: Proactive Policies and Procedure

Once an organization has established the principles of customer orientation and service quality as part of its reason for being, it must implement that vision throughout in specific policies and pro- cedures that define doing business as and at that company.

These policies can be taught as simply as they do at Nordstrom’s, where customer service training consists of the prescription ‘‘Use your good judgment always,’’ or as complex as a 250-page policies and procedures manual covering acceptance or orders, handling major and minor accounts, order changes, new customers, phone inquiries, return policies, ship dates, orders for future delivery, and hundreds of other specific policies and procedures.

In a business world that no longer has time for a five-year apprenticeship in which the policies and procedures are passed through in one-on-one learning, how things are done and their standards must be available for all. High levels of turnover means that teaching policies and procedures is a 7-day a week, 24-hour-a-day requirement.

One Very Important Policy: The Guarantee

One of the more important policies and procedures for creating service quality and satisfaction is the guarantee. In a world in which products and services are commodities (interchangeable products that can be purchased at a number of channels), customers want to know that the company stands behind the purchase. Companies may not be able to guarantee that they won’t make mistakes or that the product will never fail, but they can guarantee that they will stand behind it. Unfortunately, many companies have policies that state what they will not do rather than reassuring the customer with what they will do. Lands’ End tells us that everything is ‘‘Guaranteed period.’’ Restoration Hardware tells us, ‘‘Your satisfaction is not only our guarantee, it’s why we’re here. To be perfectly clear, we insist you’re delighted with your purchase. If for any reason, a selection doesn’t meet your expec- tations, we stand ready with a full refund or exchange.’’ Nordstrom’s has been built on its legendary policy of taking back anything (it is part of the Nordstrom’s legend that they once accepted a set of tires despite never having sold tires). Same-day delivery, ‘‘If something goes wrong in 30 days after we fix it we will repair it free,’’ ‘‘We accept merchandise for 30 days after purchase but only with a sales slip’’ are examples of policies affecting guarantees.

In establishing guarantees, there are a number of factors that should be considered. First, the costs of administering return / guarantee policies may outweigh their benefits. For example, if a manager must approve all returns and the approval rate exceeds 90% anyway, the costs of the manager’s time and effort probably exceed the benefit. Second, uncertain and restrictive policies that increase the probability that irate consumers will confront poorly prepared front-line people will decrease morale and increase turnover. Third, guarantees can be a significant source of profit when companies sell extended guarantees for products and services that have naturally low levels of failure. Electronics companies have found these extended policies to be very profitable. Fourth, guarantees, which lay out an organization to outperform historical or market standards, force companies to become extraor- dinary. Making extraordinary goals public may force companies to aim at and reach high levels of customer service and satisfaction. Finally, return policies and product service guarantees must be developed in light of the lifetime value of the customer. The probability of losing a customer for life because of a restrictive policy must be balanced against the value of the potential purchasing power and loyalty of the consumer in the formation of policies. Sewell Cadillac in Texas estimates the value of each customer to be over $250,000 (the value of car sales, leasing, repairs to customers buying cars over their lifetime). To create policies that drive these customers away for what really are insignificant dollar amounts given this lifetime value is tantamount to stealing future income.

On the other hand, very liberal guarantees and return policies may be inappropriate and silly. A contractor who has a satisfaction-guaranteed policy might be giving away the business when the customer is dissatisfied with the room design they selected and approved although the workmanship was outstanding. Although unlimited guarantees are an inducement to consumers and may be a competitive advantage, a profitable business must be run. Unlimited and liberal policies may require higher prices, which will allow competitors to offer comparable products and services at lower prices.

For most businesses, a guarantee in the form of a limited warranty probably makes sense. These limited warranties spell out the conditions that define replacement or exchange. Customer abuses are less likely, but reasonable customers will still find these guarantees an inducement.

3.3. Step 3: Determining What Is Important to the Customer

Perhaps the biggest drawback to developing exceptional customer satisfaction is that information about what is important to customers comes from talking to ourselves (the executives of the com- pany), not the customer. Understanding the customer experience from representative samples of cus- tomers using qualitative measurement and analysis is generally possible, and it guarantees that policies and procedures instituted by a company are not based on idiosyncratic and / or nonrepresen- tative (of all a company’s customers) pieces of data or belief.

The customer satisfaction measurement system must connect to the internal measures of a com- pany and to external customer evaluations. To provide evidence, surveys can be performed to make possible a gap analysis (the gap is the difference between what the customer should experience and what the customer actually experiences). The data of actual-to-expected performance allow the ap- plication of advanced statistical techniques such as regression analysis to determine empirically the relative impact and / or importance of attributes and processes to customer satisfaction (the power of this technique and an example of its application are illustrated in Anton [1996]). To improve customer satisfaction, identifying the specific attributes and processing the most predictive of customer satis- faction decisions about investment of resources will yield the greatest benefit.