INTRODUCTION TO THE CUSTOMER SERVICE PARADIGM

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1. INTRODUCTION TO THE CUSTOMER SERVICE PARADIGM

A fundamental change in understanding business success has occurred. The new paradigm stresses that sales and profit are the result of customer satisfaction (Anton 1996) (see Figure 1).

Competitive advantage is most likely to come from innovation and creativity, flexibility to shift quickly as markets and customers change, marketing and tailoring value to the specific needs of profitable customers, and developing and creating long-term customer relationships. Today (and even more so in the future) competitive advantage will come from doing things sooner and better than the competition to a customer who will want to do business with you for an extended period of time.

The essence of business is to create satisfied customers who purchase your products and services and come back for more, and products that do not come back. The lifetime value of a customer is often overlooked in the day-to-day strategic and operational decisions. But this lifetime value is the critical issue for understanding why investments in service quality and customer satisfaction are not just expense lines in some budget but investments in bottom-line profit and the future of the company

Customer Service and Service Quality-0367

(Rust et al. 2000). Service quality and customer satisfaction must be calculated as a function of the sales and profitability related to the length of time a customer stays with your company as well as the costs involved in losing dissatisfied customers (see Tables 1 and 2). Research clearly shows that the longer a customer stays with a company the greater the sales and profits to the company because that consumer will buy more, buy more profitable items / services, requires smaller sales expenses, and be responsible for new customers through positive recommendations (see Figure 2 for a hypo- thetical look at this relationship).

Customer Service and Service Quality-0368Customer Service and Service Quality-0369

Service quality and customer satisfaction are not new constructs. As early as the mid-1960s, Peter Drucker, the original management guru, prescribed the following questions for all businesses: Who is your customer? What is the essence of your business? What does your customer value? And how can your business serve the customer better than the competition?

It is clear that although the 1990s were an era of talking about service quality and customer satisfaction, business has a long way to go in delivering on a customer satisfaction promise. It would certainly be depressing if all we have accomplished since the 1982 publication of Peters and Water- man’s In Search of Excellence is to add a customer service customer satisfaction statement to the mission statements of our Fortune 500 companies. Five years ago, we would have been pleased to

state that customer satisfaction was being discussed in the boardrooms and had a chance to become

a part of business strategy. Now this is not enough. Delighting customers must become a focal strategy. Every business, every executive, and every manager must assess how their ‘‘function / work’’ contributes to customer satisfaction.

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