thema 6 customer service

8/3/2019 Thema 6 Customer Service

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ThemaLogistics/Supply Chain Customer

ServiceAssoc. prof. dr. Ieva Meidut


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Customer service is the way logistics interfaces

with marketing and as such represents the outputof the firm's entire logistics effort. Given thatpivotal role, it is reasonable to assert thatcustomer service is the most important logisticsconcern.The level of customer service provided has adirect impact on the company's market share,costs, and, by implication, its profitability. Yetdespite the importance of customer service to theoverall success of the organization's marketingstrategy, managers often do not understand thecrucial role that logistics plays in keepingcustomers happy.


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Customer service can be viewed in one of several ways. Sometimes customer service isseen as an activity; that is, something thatthe organization provides.A customer service department that handlescomplaints, special orders, billing, etc. oftenevidences this aspect of customer service.Similarly, customer service can be viewed asa measure of performance.


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For example, if the firm can ship completed orderswithin 24 hours of receipt 95 percent of the time, it isproviding good customer service.

Unfortunately, both of these views are very narrow. Inthe former case, customer service activities seem tofocus on resolving problems rather than proactivelymeeting customer needs.


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In many retail stores, for example, the customerservice department is hidden away in a farcorner of the building where it serves as a placefor customers to take their grievances. In thelatter instance, attaining some desired level of functional performance can lead management

to focus on those tasks required to meet someinternal standard rather than truly satisfying thecustomer.


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Visionary firms view customer service as a

corporate philosophy that defines the way thebusiness is conducted.

Certainly, this type of organization may also have acustomer service department or utilizeperformance standards, but the focus in this case ison the customer not the process, in other words,the logistics system is managed so as to provide the

customer the level of service they desire which, inturn, leads to customer satisfaction, repeatbusiness, and profit


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Since logistics customer service isnecessarily a part of a firms serviceoffering, we will begin with service

from thefirms

perspective and thendistill out those elements that arespecific to logistics.


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Kyj and Kyj observered that:...customer service, when utilized

effectively, is a prime variable that canhave a significant impact on creatingdemand and retaining customer loyalty.


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To another customer service expert,customer service:...refers specifically to the chain of sales-

satisfying activities which usually begins withorder entry and ends with delivery of productto customers, in some cases continuing on as

equipment service or maintenance or othertechnical support.


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More simply, Heskett states that logisticscustomer service for many firms is:

...the speed and dependability with whichitems ordered (by customers) can be madeavailable...


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More recently, customer service has beenreferred to in terms of a fulfillment process,which has been described as:

...the entire process of filling the customers order.


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This process includes the: receipt of the order (either manual or

electronic), managing the payment, picking and packing the goods, shipping the package, delivering the package, providing customer service for the end user and handling the possible return of the goods .


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Customer Service Elements

From a corporate-wide perspective, customerservice has been viewed as an essentialingredient in marketing strategy.

Marketing has often been described in termsof an activity mix of four Ps product, price,

promotion and place , where place best

represents physical distribution.


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A comprehensive study of customer service,

sponsored by the National Council of Physical Distribution Management, identifiedthe elements of customer service accordingto when the transaction between thesupplier and customer took place.These elements are grouped into:

pretransaction , transaction, and prosttransaction categories.


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Pretransaction elements establish a climate for good customer service.

Providing a written statement of customersservice policy, such as when goods will bedelivered after an order is placed, theprocedure for handling returns and backorders, and methods of shipment, let

customers know what kind of service to expect.


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Establishing contingency plans for times whenlabor strikes or natural disasters affect normalservice, creating organizational structures toimplement customer service policy, andproviding technical training and manuals forcustomers also contribute to good buyer-supplier relation.


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Transaction elements are those that directlyresult in the delivery of the product to thecustomer.Setting stock levels, selecting transportationmodes, and establishing order-processingprocedures are examples.These elements, in turn, affect delivery times,accuracy of order filling, condition of goods onreceipt, and stock availability.


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Posttransaction elements represent the array of services needed

to support the product in the field; to protect consumers from defective products; to provide for the return of packages (returnable

bootless, reusable cameras, pallets, etc.); and to handle claims, complaints, and returns. These

take place after the sale of the product, but they mustbe planned for in the pretransaction and transactionstages.


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Corporate customer service is the sum of allthese elements because customers react tothe total mix.

Of course, some elements are moreimportant than others.


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Also a firm's customer service strategy is builtaround five key concepts explained below:

Dependability is perhaps the most important concernfrom the customer's point of view simply because itaddresses very basic parts of the buying process.Dependability may be in the form of productavailability; that is, the item is on the shelf when thecustomer wants to purchase it. It may also refer to suchthings as meeting promised delivery dates, filling orders

correctly, and providing accurate billing statements.Indeed, dependability simply means that the firm canbe relied on to do what it claims it will do.


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Time relates to the order cycle; that is, how long it

takes for the goods to be delivered after the order hasbeen placed. The emphasis today in many developedmarkets is on speed - the faster the better. However, inemerging nations merely getting a product to thecustomer on a regular basis may be more importantthan how long it takes the item to make the journey.

For example, the William Wrigley Jr. Company sells approximately 400million sticks of chewing gum each year in China. The firm relies on athousand-mile system of trucks, rusting freighters, tricycle carts, andbicycles to connect their factory in Guangzhou with the myriad of small shopowners and street vendors throughout the country that ultimately sell theproduct to customers. In short, though complex and risky, their distributionsystem routinely provides the buyer with a fresh, soft and sugar-dustedproduct, but little else in the way of customer service


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Convenience deals with things like orderingaccessibility, hours for pick-up and delivery, frequency;of sales calls, technical assistance, and after-salesservice.

For instance, the British department store Marks & Spencer faces a unique setof problems as they continue their European expansion. Merely puttingproducts on the shelf is not enough to satisfy customers in France, forexample. When the company opened its second store in Paris, it offered carry-

to-car service, a terminal for mobile phones, public telephones, and cash-dispensing machines. Furthermore, customers can utilize home computers tofind out about the store through the French home shopping and informationnetwork Minitel.


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Communications encompasses activities like cargo tracing,answering customer inquiries, billing, arid information

management.

Federal Express and UPS both rely on extensive proprietary communications systemsthat allow carrier personnel to tell a shipper exactly where a given piece of cargo is inthe transportation process.

In addition, communication also implies that the firm listens to itscustomers, finds out what their needs are, and makes every effortto satisfy them.

For example, Terrence A. Austin, an associate partner with Andersen Consulting LLP inSan Francisco, suggests that personal computer (PC) manufacturers have traditionallybeen obsessed with technology features and price performance while ignoringcustomer needs. "PC manufacturers routinely announce 10 day order lead times ('butwe wanted it in three days,' customers say), 90 percent order fill rates ('we think thatshould be at 95 percent or 99 percent'), and three days between request and commit('we would like to see that drop to one day')," Austin says. "Yet when you ask PCcustomers what they actually got from the PC industry, you hear of order lead times of 20-30 days, 50 percent to 65 percent fill rates, and a 10-day to 30-day differencebetween request and commit


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Honesty implies that the company keeps thepromises it makes to its customers. Pledgingmore than can be delivered virtuallyguarantees that customers will be dissatisfied,so managers must be careful not to overstatecustomer service levels when there may beconsiderable pressure to do so.


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The way in which these elements arecombined determines the firm's customer

service strategy.


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Customer service within thelogistics system

DependabilityTimeConvenienceCommunication

HonestyCost


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In addition, this mix of variables directly affects logistics

costs, so managers must ensure that revenues justifythese expenses. That is, the level of service offeredmust be consistent with customer needs. Providing toolittle service leaves customers dissatisfied and virtually

guarantees that they will take their business elsewhere.Often, however, firms provide more service than theircustomers require. This practice raises costs becausethe company would have had many of these buyers

anyway. It also elevates their expectations for the nextencounter and, at times, can even be off-putting.


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The challenge, then, is to combine thesevariables in a way that meets customer needs atthe lowest possible cost. Note that the firm mayspend a significant amount on customer servicewhen its buyers demand a great deal of attention. As long as the revenues generated

justify those expenses, managers should becomfortable with those costs.


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Barriers to Quality CustomerService

There are a number of impediments toproviding quality customer service on a

continuous basis.Some of these variables are controllable bymanagement, some are not


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Controllable factors Lack of customer segmentation.

Some firms offer all customers the same level of service. This strategy could result from a consciousdecision by management, but it may also reflect a lackof appreciation for customers' needs. The fact is thatall customers should not necessarily receive the sameservice.Any organization has a small number of customersthat generate a large share of corporate revenues. Infact, Pareto's Law (also known as the 80/20 rule)

states that 80 percent of the firm's profits come from20 percent of its customers.


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Management would probably do virtually anything tokeep these people happy. Most buyers will not fall intothis category and, although management wants tosatisfy this group as well, these customers simply do notbuy enough to warrant the higher service levels

provided to the company's most important customersWhen only one level of service is offered, it often tendsto be high. Thus, managers find they are spending moreon customer service than they need to and may in fact

be alienating those premier buyers by making them feelless valued by the organization


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Misuse as a selling tool.Occasionally, better customer service is promised asan incentive to close a sale. Faster delivery, liberalreturn policies, or other benefits may be offeredeven though they are not, in fact, a part of the firm'scustomer service strategy.This misuse of customer service virtually guaranteescustomer dissatisfaction since the firm may beunable or unwilling to keep those promises.


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Uncontrollable factors

Unfortunately, despite management's bestprocedures and intentions, customers may stillbe dissatisfied. Factors outside the control of the organization can also bear on the buyers'overall assessment of their experience.


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Uncontrollable variables impacting customer satisfaction


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Customers.

Sometimes customers can seem like their own worstenemies. They don't follow directions, comply withprocedures, or generally do what they are supposed todo. In other words, individual traits, characteristics, andexperiences can also influence the buyer's perceptionof satisfaction.

Unfortunately, if the customer is having a bad day they

may end up feeling dissatisfied regardless of theinstitution's intentions.


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Other customers.In instances where many customers are present,the number and behavior of others can impactone's level of satisfaction.

If a restaurant is crowded with loud people, forexample, customers seeking a quiet leisurelymeal will probably be dissatisfied with their

experience.


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Employees.Workers can have bad days just like customers.Though indoctrinated to behave a certain way,they can occasionally let their emotionsoverride their training with respect to customertreatment. An indifferent or rude employee cantotally undo the firm's entire customer service

effort.


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Script.A script describes a typical sequence of behaviors a customermust undertake to accomplish a task at a particular business.It is rarely written down; the customer's expected to simply knowwhat to do based on experience or observing others.For example, when customers walk into a restaurant for the firsttime they must make some immediate decisions.

Should they simply sit down or wait to be seated? If they seat themselves, where should they sit? How do they order their food?

Are they served or do they serve themselves?After the first experience or two, people generally learn the scriptfor that particular situation. If the script is too confusing ordifficult to understand, however, customer dissatisfaction mayresult.


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Improving Customer Service

Performance


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Understand customer needs.It is absolutely essential that management learnswhat services its customers most value and howmuch they are willing to pay for those amenities.Invariably, this sort of research will show that allcustomers do not seek the same things.

This effort will, in turn, give managers theinformation needed to conduct an ABC analysis,whereby customers can be categorized based onthe profits they provide to the firm. Customerservice strategies can then be developed to meetthese specific needs.


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For example, the company's most important buyers (i.e.

the top 20 percent in terms of revenue generation) wouldbe included in the "A" group and could be offered veryhigh service levels, while the "B" group might encompassthe bulk of the firm's customers (the middle 60 percent)

that buy less than the "A" group and would be satisfiedwith somewhat less attention.

Finally, the least important users (the bottom 20 percent)would be placed in the "C" category and should receive alower level still Management should provide itscustomers the service they desire without spending moreon customer service than necessary.


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Monitor service delivery.Because the uncontrollable variables discussed earlier canupset the best laid plans, managers must seek constant

customer feedback to ensure that service deficiencies arequickly identified and corrected. Customer surveys andinterviews can provide useful insights, as can personalexperience.

For example, managers may choose to put themselves into theircustomer's place by acting as a patron within their own organization. Theymight purchase items in one of their own stores trace a shipment throughthe firm's logistics system, lodge a complaint, or eat in a corporaterestaurant, and then evaluate their customer service strategies based on

that personal experience. Placing employees in the role of customers toevaluate service performance is sometimes referred to as "shopping," andis a technique that can provide some extremely powerful insights into howwell or poorly management's customer service efforts are being receivedby buyers .


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Train employees.Employees must understand what the firm'scustomer service strategies are so that they knowwhat their role is in implementing those plans.Very often the only interaction the customer hasis with the frontline worker: the vehicle operatororder taker, or clerk.


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Therefore, for many customers, the company is represented by thelowest-ranking people in the entire organization. It is crucial that

these employees understand the critical role they play in providingcustomer satisfaction and receive the training necessary to carryout their tasks. Top management must also give these customercontact workers the freedom and authority to take whatever

action they deem necessary to keep the customer happy. Theimplication is not that unreasonable demands will be routinelysatisfied.However, employees often know the best solution for a givensituation and should be empowered to handle unforeseen eventsas they see fit. Management must always keep in mind that theoptimum service level may not be the alternative with the lowestcost; it is the one that advances the long-term profitability of thefirm.

Relative Importance of Service


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Relative Importance of ServiceElements

Sterling and Lambert studied the office systems andfurniture industry and the plastic industry in somedepth.From a large number of variables (99 and 112

respectively) representing product, price, promotion,and physical distribution , they were able to determinethose that were most important to the buyers,customers, and influencers of purchases from theseindustries.Based on mean scores of importance, as indicated byrespondents on a one to seven point scale, they rankordered the service elements in each of these industries.


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For the office systems and furniture industry, they

concluded the following:The research showed that physical distribution is anintegral and necessary component of the marketingmix, and that it offers a significant opportunity forfirms to gain differential advantage in themarketplace.

Evaluation of the 16 variables rated as most important

by dealers, end users, and architectural and designfirms disclosed that at least one-half were physicaldistribution/customer service variables.


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For the plastics industry, nine of the 18variables relied as most important wererelated to logistics.Of the remaining variables, five related toproduct quality, two to price, and two to thesales force.


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The Sterling-Lambert research certainlysuggests that logistics customer service isdominant in the minds of customers in theoffice systems and furniture industry and theplastics industry.

Although such a small sample of industriesmay not be overly convincing, others haveobserved the same phenomenon.


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In a similar study of the auto glass after market,

Innis and La Londe found that six out of the topten customer service attributes were logisticalin nature.

Notably, high fill rates , frequency of delivery ,and information on inventory availability ,

projected shipping date, and projected delivery date at the time of order placement received high ratings among the retail customer base .


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Further, LaLonde and Zinszer found that

product availability ( order completeness, order accuracy, and stocking levels ) and order-cycletime ( order-transit time and time for assembly and shipping ) were dominant in the minds of users, being most important to 63 percent of the respondents in their study.

Shycon Associates surveyed purchasing and distribution


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Shycon Associates surveyed purchasing and distributionexecutives across a large cross section of Americanindustry, asking them to rate their suppliers.


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In summary, the following are considered themost important logistics customer serviceelements.

On-time delivery Order fill rate Product condition Accurate documentation

thema 6 customer service

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