Customer Service: Role in the Value Chain July 26, 2013

Agenda Today A Quick Look at Value Value Oriented Retailing The Significant Impact of Customer Service A Framework to Design Customer Service Strategy Strategy to Tactics

A Quick Look at Value

What is Value? Channel Perspective: Value is a series of activities and processes (the value chain) that provides a certain value to the consumer Customer Perspective: Value is the perception the shopper has of the value chain It is the view of all the benefits from a purchase made versus the price paid + % …..

Wear the shoes of a customer for a moment? How often does each of us talk about receiving excellent customer service? AND How often do we recount horror stories of bad customer service?

Retail Value Chain Represents the total bundle of benefits offered to consumers through a channel of distribution Store location and parking, retailer ambience, customer service, brands/products carried, product quality, retailer’s in-stock position, shipping, prices, image, and other elements….

Value Oriented Retailing

Value-Oriented Retailing Involves Defining it from a consumer perspective a clear value/price point a value position that is competitively defensible what are expected and what are augmented value chain elements a distinct market segment to which it is targeted a process to communicate the value-oriented approach effectively to the target market ……. customer satisfaction goals ways to measure customer satisfaction levels periodically

Common MISTAKES in building a Value Oriented Retailing Strategy… Planning value with just a price perspective Providing value-enhanced services that customers do not want or will not pay extra for (understand your customer!!!!!) Competing in the wrong value/price segment (identify your customers!!!!!) Believing augmented elements alone create value (know your customer!!!!!) Paying lip service to customer service (assuming that the customer is stupid)

The Significant Impact of Customer Service

What happens when Customer Service falls short.. In 2012, SMG, a customer insight agency, found in the UK that : Retailers lose out on an estimated £45.38 billion a year by not giving their customers the best possible experience in store A survey of over 100,000 UK retail and leisure customers discovered that improved interaction with the customer could increase average spend per person from £23.36 to £32.47- close to 40%!

In this world of High-tech: we all crave High-touch!

And Retailers are Responding… % Respondents who stated: Perishable/ Food Durable/ Hard goods Fashion/ Short Life Cycle “We offer a high touch customer service strategy and think skilled employees are critical 50% 63% 64% “Employees play a critical role but do not require special skills or training” 38% 27% Source RSR Research, December 2012

The Stated Importance of Customer Service in their Value Chain Clearly Impacts Performance…. % Respondents who stated: Retail Winners Average Performers Laggards “In the last 3 years our workforce has become more important in enabling customer service” 83% 85% 73% “We offer a high-touch customer service strategy and skilled employees are critical” 66% 47% 53% Source RSR Research, December 2012

In this world of high-tech: we all crave high-touch! Successful Retailers recognize the Role of Customer Service and Invest in it

A Framework to Design Customer Service Strategy

Cost of Offering the Customer Service High Low Customer Service Approach Patronage Builders Patronage Solidifiers Disappointers Basics High Value of the Customer Service to the Shopper Low

Value of the Customer Service to the Shopper Cost of Offering the Customer Service High Low Customer Service Approach Patronage Builders High-cost activities that are the primary factors behind customer loyalty Examples: Credit, Gifts Patronage Solidifiers Low Cost “little things” that increase loyalty Examples: courtesy, referring to the customer by name, Magic Words, Suggestion Selling (BCCSM Skill Set) Disappointers Expensive activities that do no real good Examples: Weekday deliveries for dual-earner families Basics Low Cost activities - “naturally expected”. Do not build patronage, but absence can reduce patronage Examples: Free parking, in-store directories, store hygiene High Value of the Customer Service to the Shopper Low

Strategy to Tactics in Making this Fail-Safe Investment

Fundamental Decisions What customer services are expected and what customer services are augmented for a particular retailer? What level of customer service is proper to complement a firm’s image? Should there be a choice of customer services? Should customer services be free? How can a retailer measure the benefits of providing customer services against their costs? How can customer services be terminated?

Fundamental Decisions How can store managers be empowered to ensure consistent delivery of the chosen customer service configuration? How can each customer facing store associate or employee be empowered to ensure consistent delivery of the chosen customer service configuration? How can the cost and benefits of the empowerment be measured: Training? Process monitoring? Decision making?

Fundamental Decisions How can technology be leveraged to support processes that deliver chosen customer service elements: Consistently? In a scalable manner? With a quick turnaround?

Logistics & Supply Chain Strategy & Planning Logistics & Supply Chain Merchandizing Store Operations Marketing Customer Experience How strong is your Customer Service Link? Even Mothers often need to be reminded by their crying child.. Is it time for a little attention?