Strategic Customer Service

Overview

A new approach to customer service that will transform the entire organization...and create true competitive advantage.

The success of any organization depends on high-quality customer service. But for companies that strategically align customer service with their overall corporate strategy, it can transcend typical good business to become a profitable word-of-mouth machine that will transform the bottom line. Drawing on over thirty years of research for companies such as 3M, American Express, Chik-Fil-A, USAA, Coca-Cola, FedEx, GE, Cisco Systems, Neiman Marcus, and Toyota, author Goodman uses formal research, case studies, and patented practices to show readers how they can:

• calculate the financial impact of good and bad customer service

• make the financial case for customer service improvements •

systematically identify the causes of problems

• align customer service with their brand

• harness customer service strategy into their organization's culture and behavior

Filled with proven strategies and eye-opening case studies, this book challenges many aspects of conventional wisdom—using hard data—and reveals how any organization can earn more loyalty, win more customers...and improve their financial bottom line.

About the Author

John A. Goodman (Arlington, VA) is Vice Chairman and co-founder of TARP World?wide, an organization Tom Peters has called "America's premier customer service research firm.?

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Excerpt

INTRODUCTION

Why Strategic Customer Service?

EVERY ORGANIZATION'S SUCCESS depends on its keeping customers

satisfied with the goods or services that it offers, yet most executives

tend to view the customer service function of their business as little

more than a necessary nuisance. That strikes me as paradoxical. Companies

that spare no expense to build their brands, improve their operations,

and leverage their technologies often skimp on investments that preserve

and strengthen this final, vital link in their revenue chain. Indeed, leaving

aside the investment aspect, many of these same companies simply

don't have a customer service strategy to manage the end-to-end customer

experience, from sales to billing.

That is why I have aimed this book at all senior management, with

an emphasis on finance and aspiring chief customer officers. The book

will not focus on answering the phone, but rather on the revenue and

word-of-mouth implications of having or not having a strategic approach

for all customer touches and managing an end-to-end experience.

As we all know from being customers ourselves, poor service can

undermine all of a company's efforts to retain and expand its customer

base. As customers, we know how we respond to poor service: We go

elsewhere, and we often tell our friends and colleagues to do the same.

But as businesspeople, we undergo a kind of amnesia that prevents us

from seeing how that same mechanism applies to our customers. Not long

ago, I was speaking with the CFO of a leading electronics firm who suffered

from this amnesia. As an engineer, he felt that the superiority of

his company's electronic products ensured their superior market position.

I then asked him what brand of car he drove and how he liked the dealership.

He scowled and said, ''I hate them! They're just terrible.'' When I

pointed out, ''You have customers who feel the same about your company,''

he immediately saw my point.

Some executive teams, blessed with extraordinary empathy or insight

(or perhaps competitiveness), do understand the role of customer service

in the growth of their revenue, profits, and business. My work with organizations

that consistently excel at this responsibility has led me to conclude

that they have one thing in common: a strategic view of, and

approach to, customer service.

A strategic view perceives customer service as vital to the end-to-end

customer experience, and thus to the customer relationship. This view also

considers customer service to be a full-fledged member of the marketingsales-

service triumvirate. Such a view starts with setting expectations,

moves on to selling and delivering the product in ways that suit the customer,

and extends through superb support and clear, accurate billing. A

strategic approach also recognizes that the service function produces a

wellspring of data on customer attitudes, needs, and behavior. These data,

when combined with available operational and survey data, can be used

as input in virtually every effort to shape the customer experience, from

product development to marketing and sales messages, and from handling

of customer complaints to the overall management of the entire customer

relationship. In these ways, customer service acts as a strategic catalyst

for every organizational function and process that touches the customer.

Why a strategic catalyst?

Strategic customer service stands at the point where all organizational

strategies come to fruition in a great customer experience—or

do not. Product development, operations, marketing, sales, finance,

accounting, human resources, and risk management all affect the cus-

tomer in myriad ways, for better or worse. But when something goes

wrong, customers don't call the director of product development, the

manager of operations, or the vice president of marketing (and they probably

shouldn't be calling salespeople—about which more in Chapter 3).

They call customer service. When they do, customer service must preserve

the relationship, gather information, and improve the process,

wherever the problem originated.

As a catalyst, strategic customer service can, like any catalyst, transform

the entities and functions it touches, making the organization more

proactive, accelerating its responsiveness, and boosting its effectiveness.

Service can help marketing, for instance, move from sales messaging to

capitalizing on customer intelligence and improving products and services.

For example, Allstate is now contacting the parents of young

motorists as they turn 16, before they pass their driver's tests. The company

suggests a parent-teen contract, explains how the impending rate

increase will be calculated, and provides guidance on coaching new drivers

(including an extremely popular Web video whose music has moved

into the mainstream). This program results in calmer parents who feel

more in control and who exhibit significantly greater loyalty to Allstate.

Likewise, strategic customer service can accelerate product development

and uncover new distribution channels. It can relieve salespeople and

channel partners of troubleshooting duties so that they can focus on selling.

It can transform finance from a countinghouse into a funding source

that is supportive of new processes and services that increase customer

retention, positive word of mouth, and market share.

Moreover, strategic customer service is applicable in any market,

from consumer packaged goods and financial services to health care, from

business-to-business environments such as chemicals and pharmaceuticals

to government agencies and nonprofits. TARP has helped organizations

in all of these arenas to benefit from a strategic approach to service,

beyond the tactical service functions of responding to customer inquiries

and problems.

BEYOND THE COMPLAINT DEPARTMENT

Customer service has come a long way from the days when ''complaint

departments'' received letters from irate customers and decided whether

to ''make good'' on some explicit or implied promise. Today's tactical

service function is often outsourced, offshored, and global, supported by

state-of-the-art technology, aligned with the brand strategy, and integrated

with the customer experience. It is now a support, sales, and relationship

management function. It's a means of tracking the value of every

customer and, on that basis, satisfying customers, delighting them,

explaining why you'll have to charge them more, or gently showing them

the door. Service interactions are also the prime generator of the single

most powerful marketing mechanism: positive word of mouth and word of

mouse.1 Companies with great word of mouth incur almost no marketing

expense because they let their customers do their selling for them.

None of this happens by accident or only at the tactical level. It

happens when senior management grasps the pivotal role of service in

the customer relationship and recasts this outcast stepchild of marketing,

sales, and operations as a guide, problem solver, communicator, reporter,

and breadwinner. Often, the executive committee anoints one of its

number as the chief customer experience officer. Where such a position

doesn't exist, the head of customer service often performs that role.

The evolution begins with an examination of the current customer

experience, all current customer service and customer-touching activities,

and your current sources of information on those activities. Take

market research. Recently a telecom executive told me, ''We're spending

$12 million a year on surveys, and we have almost no actionable information.''

Once the company recognized this, it used customer contact data

to supplement the surveys and produced a real-time picture of the customer

experience. This, along with data on product performance and

problems and on customer attitudes and preferences, enabled the company

to identify massive savings while improving the customer experience.

Some companies know the value of customer contact data, yet even

I was surprised to hear Powell Taylor, the General Electric executive who

established the GE Answer Center, say, ''The average GE customer service

rep can provide the input of data equal to about 10,000 completed

market research surveys, because that is how many customers they've

talked with.'' That makes a strong case for compiling and analyzing data

from customer service interactions. That's also why the GE Answer Center

reports to the Appliance Division's senior management.

So, in both purpose and functionality, customer service has evolved

far beyond the complaint departments of 30 or more years ago to become

pivotal in building and sustaining customer relationships.

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Table of Contents

CONTENTS

FOREWORD xiii

INTRODUCTION: WHY STRATEGIC CUSTOMER SERVICE? 1

Beyond the Complaint Department 3

Why Bother with Strategic Customer Service? 5

Everyone Has a Stake in Service 7

The Origins of This Book 9

The Structure of This Book 10

Starting Strategically 11

PART 1: THE IMPORTANCE OF CUSTOMER SERVICE

1. SEEING CUSTOMER SERVICE STRATEGICALLY:

Understanding the True Role of Customer Service in Your Business 15

How Customer Service Affects a Business 16

The Bad News 16

The Good News 18

Making the Business Case for Improvements in Service 19

Clarifying Key Concepts 21

A Model for Maximizing Customer Satisfaction and Loyalty 23

Do It Right the First Time (DIRFT) 25

Respond Effectively to Questions and Problems That Arise 25

Feed Data About Issues to the Right Parties 26

Capitalize on Opportunities to Sell Ancillary or Upgraded

Products or Higher Levels of Service and Create Connection

and Delight 27

First Steps to Strategic Customer Service: Economic Imperative

and VOC 28

Key Takeaways 29

2. WHAT DO CUSTOMERS WANT (AND WHAT SHOULD WE DELIVER)?

Understanding Customer Expectations and Setting Goals Strategically 31

Unexpected Reasons for Unmet Customer Expectations 32

Trends in Customer Expectations About Service 33

Broad Trends in Customer Expectations 34

Operational Expectations for Tactical Customer Service 36

Setting Service Goals Strategically 41

Operationalizing the Process Goals 43

Financial Goals 46

Key Takeaways 48

PART 2: IDENTIFYING IMMEDIATE REVENUE AND

PROFIT OPPORTUNITIES

3. TACTICAL RESPONSES AND STRATEGIC SOLUTIONS:

Dealing with Customers' Problems and Addressing Their Causes 51

Tactical Versus Strategic Problem Solving 53

Five Steps to Tactical Problem Solving 54

Step 1: Solicit and Welcome Complaints 55

Step 2: Identify Key Issues 56

Step 3: Assess the Customer's Problem and the Potential Causes 57

Step 4: Negotiate an Agreement 57

Step 5: Take Action to Follow Through and Follow Up 59

Six Tasks Connecting the Tactical Response to the Strategic Feedback

Loop 59

Task 1: Respond to Individual Customers (and Capture Data) 60

Task 2: Identify Sources of Dissatisfaction 61

Task 3: Conduct Root Cause Analysis 61

Task 4: Triage to Solve/Resolve Systemic Problems 62

Task 5: Provide Feedback on Prevention 63

Task 6: Confirm Improvement of Product and Service Quality 63

Unconventional Management Wisdom 64

Redefine Quality 64

Aggressively Solicit Complaints 65

Get Sales Out of Problem Solving 65

Assume that Customers Are Honest 65

Key Takeaways 66

4. FIXES AND FINANCES:

Making the Financial Case for Customer Service Investments 67

The Case for Great Customer Service 69

How CFOs Think 71

Questions to Guide Modeling the Customer Experience 72

The Market Damage Model: What's the Damage? 74

Data and Output 75

Financial Impact 77

What Is the Payoff if We Improve? 78

Objections to the Market Damage Model 80

The Word on Word of Mouth 81

Quality and Service Allow You to Get a Premium Price 82

The Market-at-Risk Calculation: Identifying Customers' Points of Pain

Across the Whole Experience 84

What About Customers With Limited or No Choice? 87

Impacted Wisdom 88

Key Takeaways 89

5. INFORMATION, PLEASE:

Developing an Efficient, Actionable Voice of the Customer Process 90

The Objective of VOC and Its Key Building Blocks 91

Three Sources of VOC Information and What They Tell You 93

Internal Metrics 93

Customer Contact Data 94

Survey Data 95

The Attributes of an Effective VOC Process 97

Unified Management of the Program 98

A Unified Data Collection Strategy 98

Integrated Data Analysis 99

Proactive Distribution of the Analysis 99

Assessment of Financial Implications and Priorities 100

Defining the Targets for Improvement 100

Tracking the Impact of Actions 101

Linking Incentives to the VOC Program 101

The Two Major Challenges in Using Customer Contact Data in VOC

Programs 101

Developing a Unified, Actionable Data Classification Scheme 102

Extrapolating Data to the Customer Base 104

Getting Started in Improving Your VOC Program 105

Key Takeaways 106

PART 3: RESPONDING TO CUSTOMERS' QUESTIONS

AND PROBLEMS

6. DEFINING PROCESSES THAT WORK FOR CUSTOMERS:

Using the Eight-Point TARP Framework for Delivering Service 111

Framing the Work 112

Tactical Functions 114

Intake 114

Response 115

Output 115

Control 115

Strategic Service Functions 115

Analysis 116

Evaluation and Incentives 116

Staff Management 116

Awareness 117

Why Use the Service Delivery Framework? 117

The Flowchart of the Framework 120

Best Practices for Improving Specific Functions and Activities 122

Activities Within the Tactical Functions 122

Activities Within the Strategic Functions 125

Implementing the Framework 127

Map the Tactical Service Process with Visual Tools 128

Use Employee and Customer Input to Redesign the Process 128

Tweak the Technology to Enhance Tactical Service 129

Create or Strengthen the Analytical Functions 129

Enhance Strategic Service Across the Organization 129

Practice Continuous Improvement 129

Get Your System Framed 130

Key Takeaways 130

7. TECHNOLOGY AND THE CUSTOMER INTERFACE:

Creating Systems That Customers Will Use—and Enjoy 131

Why Customers Love-Hate Technology 132

When Customers Hate Technology 133

When Customers Love Technology 133

Getting the Customer-Technology Interface Right 134

Make the System Intuitive for Both Novices and Veterans 135

Create a System That Will Save the Customer Time and You

Money 135

Educate and Encourage Customers to Adopt the Technology

Cheerfully 136

Start With a Few Functions to Guarantee Success 138

Which Technology Should You Apply? 138

Nine Technological Applications to Consider 138

Interactive Voice Response 139

E-Mail and Chat 140

Web sites 142

Web Video 143

Automated Web-Based Self-Service 144

Recording Interactions 145

Mobile Communications 146

CRM and Data Mining 146

Machine-to-Machine Communication 147

A Few Words on ''Push'' Communications 149

Key Takeaways 150

8. PEOPLE ARE STILL PARAMOUNT:

Four Factors for Creating Sustained Front-Line Success 151

The High-Turnover Mentality and Its Subtle Cost 152

The Alternative to High Turnover 153

Factor 1: Hiring the Right People 154

Positive Attitudes Make a Difference 154

Proper Staffing Is Essential 154

Factor 2: Providing the Right Tools 155

Give Employees the Information They Need 156

Empower Them to Act 157

Use Feedback Channels 158

Factor 3: Offering the Right Training 158

Four Types of Training 159

Factor 4: Supplying the Right Motivation 161

Competitive Compensation 162

Superior Supervision 162

Excellent Evaluations 163

Avoiding Problems with Satisfaction-Based Incentives 166

Recognition and Advancement 168

People Are the Solution 169

Key Takeaways 169

PART 4: MOVING TO THE NEXT LEVEL

9. THE ULTIMATE CUSTOMER EXPERIENCE:

Boosting Revenue by Creating Delight 173

What Is Delight? 175

The Economics of Creating Delight 177

The Cost of Creating Delight 178

The Cost/Benefit Analysis 179

Five Ways of Creating Delight 180

Enhanced Product Value 181

Enhanced Transaction Value 181

Financial Delighters 182

Proactive Communication 182

Creating Emotional Connections 182

Discover Your Specific Delighters 183

Listening Programs 183

Asking Customer Service Reps 184

Customer Compliments 184

Surveying Customers 184

Watching the Competition 185

Cross-Selling and Up-Selling 186

The Right Way to Cross-Sell 187

Establishing a Cross-Selling System 188

Foster Creative Delight 188

Key Takeaways 189

10. BRAND-ALIGNED CUSTOMER SERVICE: Building the Service

Strategy Into Every Function 190

Customer Service as the Guardian of Brand Equity 191

Customer Expectations and Experiences 193

The Nine Building Blocks of Brand-Aligned Service 196

Clear Brand Promise Tied to the Company Heritage 197

Clear Accountability for the Brand 198

Focused Values That Reinforce and Facilitate the Brand Promise 199

Measurement and Feedback 200

Formal Process for Every Touch 201

Ongoing Communication to Everyone 201

Planned Emotional Connection with the Customer 202

Employees Who Deliver the Brand 203

Customized Brands for Market Segments 203

Tiered Customer Relationships and How to Handle Them 203

Brand-Aligning Strategic Customer Service 205

Step 1: Identify the Brand Characteristics Your Company Wants

to Reinforce 206

Step 2: Assess Your Current Level of Brand Alignment 206

Step 3: Identify Opportunities for Improvement 207

Step 4: Measure the Impact 207

Stand by Your Brand 207

Key Takeaways 207

PART 5: INTO THE FUTURE

11. RIDE WAVES WITHOUT WIPEOUTS:

Dealing with Trends in Labor, Technology, and Politics 211

Labor Trends: Challenges in Attracting Human Resources 212

Addressing the Labor Shortage in Customer Service 213

Outsourcing for Better or Worse 214

Technology Trends: The Challenge of Using Technology Intelligently 218

Addressing Product Complexity 218

Using New Communication Technologies 221

Political Trends: Challenges in Regulatory and Safety Concerns and

Environmental Issues 223

Coping with Regulatory and Safety Issues 224

Addressing Environmental Concerns 225

Respond, Don't React 227

Key Takeaways 227

12. A THOUSAND THINGS DONE RIGHT: Translating the Strategy of Delivering

Superb Service Into Organizational Behavior 228

Appointing a Chief Customer Officer 229

The Rationale and Prerequisites for Hiring a CCO 230

Key Functions of the CCO 232

How to Make the Position of CCO Work 233

Focusing All Functions on the Customer Experience 235

Map the Process to Define the Roles in the Customer Experience 236

Rationalize the Process: Clarifying the Roles of Sales and

Customer Service 237

Linking Incentives to the Right Metrics 239

Twelve Guidelines for Linking Incentives to the Right Metrics 239

Use Incentives in Specific Environments 242

Delivering a Great Experience Through Channel Partners 245

Never Declare Victory; Forever Stay the Course 247

Key Takeaways 248

INDEX 251

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