Chapter 1 The Customer Service Profession

Learning Objectives Define customer service Describe factors that have impacted the growth of the service sector in the United States Identify societal factors that have influenced customer service Recognize the changes in consumer behavior that are impacting service This chapter defines customer service, describes factors that impacted the growth of the service sector in the United States, identifies societal factors that have influenced customer service, and recognizes the changes in consumer behavior.

Learning Objectives List the six major components of a customer- focused environment Explain how some companies are addressing the changes impacting the service sector The chapter further lists the six major components of a customer-focused environment and explains how some companies address the changes that impact the service sector.

Customer Service Employee’s ability to deliver products and services to internal and external customers Satisfying their needs and resulting in positive word-of-mouth publicity and return business Service industry: Businesses and organizations engaged primarily in service delivery LO 1-1 Defining Customer Service The ability of knowledgeable, capable and enthusiastic employees to deliver products and services to internal and external customers in a manner that satisfies identified and unidentified needs, resulting in positive word-of-mouth publicity and return business Service industry: Engages in service delivery, rather than working with products Product: Something produced or an output by an individual or organization

Figure 1.1 - Customer-Focused Organizations LO 1-1 Defining Customer Service Figure1.1 – Customer-Focused Organizations Customer relationship management (CRM): Understanding and influencing customer behavior through ongoing communication strategies in an effort to acquire, retain, and satisfy the customer Customer-focused organization: Company that spends energy and effort on satisfying internal and external customers by first identifying customer needs, then establishing policies, procedures, and management and reward systems to support excellence in service delivery

Growth of Customer Service Post-World War II Increase in the number of people in service occupations in the U.S. Shift to service Economy shifted focus from manufacturing to providing timely quality service LO 1-1 Defining Customer Service The concept of customer service started with cottage industries Cottage industries: Small businesses started by people in their homes or cottages, to barter products or services with neighbors Post-world war II service in the United States Increasing number of workers were pulled into the service sector due to increasing demand Shift to service due to the increasing importance of the service economy Service economy: Trend in which businesses have shifted from primarily production and manufacturing to more service delivery Many organizations have developed specifically to provide services to customers

Figure 1.2 - From Pre-World War II Occupations to Service Occupations LO 1-1 Defining Customer Service Figure 1.2 - From Pre-World War II Occupations to Service Occupations Typical former occupations Farmer Ranch worker Machinist Engineer Steelworker Homemaker Factory worker Miner Tradesperson Railroad worker Typical service occupations Salesperson Insurance agent Food service Administrative assistant Flight attendant Call center representative Repair person Travel professional Child care provider Security guard

Figure 1.3 - Numeric Change in Wage and Salary Employment in Service-Providing Industries, 2010–2020 (projected) LO 1-2 Growth of the Service Sector Figure 1.3 - Numeric Change in Wage and Salary Employment in Service-Providing Industries, 2010–2020 (projected) As with goods-producing industries, growth among service-producing industries will vary Technology-related service jobs such as those of database administrators, computer support specialists, computer scientists, computer engineers, and systems analysts are expected to continue to grow at a rapid pace Source: Bureau of Labor Statistics National Employment Matrix

Figure 1.4 - Percent of Labor Force by Race and Ethnic Origin LO 1-2 Growth of the Service Sector Figure 1.4 - Percent of Labor Force by Race and Ethnic Origin Data from the Bureau of Labor Statistics that apply the changes in the service industry include: The U.S. labor force is growing slower than in the past, becoming more diverse and aging By 2020, projections are that the U.S. workforce will become even more diverse than it is now Overall employment in goods-producing industries is expected to increase, driven largely by rapid growth in construction Productivity gains, automation, and international competition are projected to reduce the demand for labor in most manufacturing industries Note: The four race groups add to the total labor force; the two ethnic origin groups also add to the total labor force; Hispanics may be of any race Source: Bureau of Labor Statistics Division of Industry Employment Projections

Impact of the Economy on the Quantity of Jobs being Created Prevailing interest rates and consumer demand cause companies to evaluate: How many people they need Which jobs should be maintained Technology Increased the need for new technical skills Automation of tasks that were previously performed by employees LO 1-2 Growth of the Service Sector Impact of the economy Quantity of jobs being created Prevailing interest rates and consumer demand, typically cause companies to evaluate how many people they need and which jobs will be established Technology Has increased the need for many new technical skills in the areas of computer hardware and software operation and maintenance Has created an opportunity for organizations to transfer to automation tasks previously performed by employees

Impact of the Economy on the Distribution of jobs More jobs are likely to develop in major metropolitan areas Need for telecommuting LO 1-2 Growth of the Service Sector Impact of the economy Distribution of jobs Need for employees to be able to have regular access to personal and professional networks and to engage in collaborative exchanges means that more jobs are likely to develop in major metropolitan areas Need for telecommuting Telecommuting: To reduce traffic and pollution and save resources many organizations allow employees to set up home offices and from there electronically communicate and forward information to their corporate offices

Impact of the Economy on the Quality of Service Jobs Competition for prime service jobs will become much more intense in the future Successful employees will be: Better educated, trained, and prepared Those who have tapped into the concept of professional networking LO 1-2 Growth of the Service Sector Impact of the economy Quality of service jobs The 2007–2009 recession affected job security . It is likely that competition for desired prime service jobs will continue to become much more intense into the foreseeable future. Employees who obtain and maintain the better customer service jobs that provide good working conditions, security, and benefits will be: Those who are better educated, trained, and prepared. Those who understand and have tapped into the concept of professional networking. Networking: The active process of building relationships and sharing resources.

Global Economic Shifts Sales in brick-and-mortar stores are down, owing to the growth of online retailing Post-recession, organizations have: Cut back on the size of their workforce Sold off, merged, or closed operations Taken dramatic steps to attract and retain customers LO 1-3 Societal Factors Affecting Customer Service Global economic shifts New legislation impacting healthcare and taxes, job elimination in the government sector, and shifts in consumer spending have impacted many organizations, forcing downsizings and in many cases closures. Sales in brick-and-mortar stores are down for many retailers and suppliers as consumers turn to the Internet for their needs. Companies have made drastic shifts in the way they do business and attempt to attract and hold customers.

Shifts in the Population and Labor Force The present labor force is: Older, more diverse, and has more women Expected to grow at a slower rate than in previous decades LO 1-3 Societal Factors Affecting Customer Service Shifts in the population and labor force Today’s labor force: Is older, more racially and ethnically diverse, and composed of more women than in the past Is expected to grow at a slightly slower rate than in previous decades The future population There will be a significant increase in the older population. Immigration will continue to play a major role in the growth and makeup of the racial and ethnic composition of the U.S. population. Will have a higher need for more consumer goods and services.

Increased Efficiency in Technology Has resulted in: Increased production and quality Equipment working continuously Enhanced ease of service delivery and faster processing LO 1-3 Societal Factors Affecting Customer Service Increased efficiency in technology Has increased production and quality and has resulted in: Acquisition of equipment that enhances customer service. Increased need for service organizations. Decrease in manufacturing and blue-collar jobs. Machines and equipment can work 24 hours, seven days a week with few lapses in quality, with no need for breaks, and without increases in salary and benefits. They also potentially enhance the ease of service delivery and provide faster processing.

Globalization of the Economy Information, knowledge, and resource sharing around the world Focus is on business-to-business (B2B) customer service Globalization Relocation of business services by an organization from one country to another Offshoring Contracting with third-party companies to deliver products and services to customers or produce products Outsourcing Making internal employees assume functions and perform work instead of contracting to third parties or outsourcing Insourcing LO 1-3 Societal Factors Affecting Customer Service Globalization of the economy Globalization Ongoing trend of information, knowledge, and resource sharing around the world. As a result of a more mobile society and easier access to transportation and technology, more people are traveling and accessing products and services form international sources than ever before. Offshoring Relocation of business services by an organization from one country to another to cut costs with cheaper worker salaries and/or tax savings. Outsourcing Refers to the practice of contracting with third-party companies or vendors outside the organization to deliver products and services to customers or produce products. Insourcing The opposite of outsourcing, this occurs when organizations decide to have internal employees assume functions and perform work instead of contracting out to third parties or outsourcing it.

Deregulation Governments remove legislative or regulatory guidelines that inhibit and control an industry Deregulation of U.S. public services led to: Breakdowns in service quality Closure or restructuring of the company Opportunities for new companies to step up and to better serve customers LO 1-3 Societal Factors Affecting Customer Service Deregulation of many industries Deregulation: Occurs when governments remove legislative or regulatory guidelines that inhibit and control an industry. Create opportunities for newly established companies to step in with improvements and innovations to close the gaps and better serve customers. Disadvantages Major industry shakeups. Breakdowns in service quality. Closure or restructuring of the company. These events have created opportunities for newly established companies to step in with improvements and innovations to close the gaps and better serve customers.

Geopolitical Changes Have reduced U.S. business access and competition within some areas of the world North American Free Trade Agreement (NAFTA): Entered into by the United States, Canada, and Mexico Greater need for better understanding of diversity-related issues European Union Economic market made up of 28 states LO 1-3 Societal Factors Affecting Customer Service Geopolitical changes Economic embargoes, political unrest, and conflicts and wars involving various countries have reduced U.S. business access and competition within some areas of the world. North American Free Trade Agreement (NAFTA) Eliminates trade barriers. Promotes fair trade across borders. Increases investment opportunities. Promotes and protects intellectual property rights. There is a greater need for better understanding of diversity-related issues. European Union Ensures free movement of people, goods, services, and capital. Majority of member states have adopted the euro. Eliminates the need for a passport from people of member countries traveling throughout the Union.

Changing Values Companies are attempting to attract and hold customers by: Making changes in their products Changing their manner of service LO 1-3 Societal Factors Affecting Customer Service Changing values As the world changes, so do individual values. As a result of societal values, companies change their approach in doing business as a competitive strategy and to attract and hold customers. This includes shifting the way they do business, the products that they deliver, and their manner of service.

White-collar Workers and Women in the Workforce Increase in the number of white-collar workers has led to the creation of new types of service occupations Women’s traditional roles in society have shifted to service providers LO 1-3 Societal Factors Affecting Customer Service Increase in the number of white-collar workers has led to the creation of new types of service occupations; in effect, the service phenomenon has spawned its own service trend. More women entering the workforce Women’s traditional roles in society have shifted, out of necessity or convenience, to service providers.

Diverse Population and More Older Workers Entering the Workforce Racially and ethnically diverse population Bring new ideas, needs, and levels of knowledge, experience, and ability Bring a better understanding of the needs of the group that they represent More older workers entering the workforce Median age of people in the United States is rising Return to work due to economic necessity and/or social reasons LO 1-3 Societal Factors Affecting Customer Service A more racially and ethnically diverse population is entering the workforce As workers - Bring with them new ideas, values, expectations, needs, and levels of knowledge, experience, and ability. As consumers - Bring a better understanding of the needs of the various groups that they represent. More older workers entering the workforce Median age of people in the United States is rising because of the aging of the “baby-boom” generation. More people return to work due to economic necessity or because they miss the work and/or the opportunity to interact with others and feel useful.

Growth of E-commerce Consumers can surf the net for products and services without leaving their homes or offices Manufacturers can provide products and services worldwide without ever physically coming into contact with a customer LO 1-3 Societal Factors Affecting Customer Service Growth of e-commerce E-commerce: Marketing products and services on the Internet and through other technology, and the process of accessing them by consumers. Shoppers use the virtual market place to satisfy needs or wants that they likely did not know they had before browsing the Internet.

Consumer Behavior Shifts Different mindset Expectation of quality service Enhanced consumer preparation LO 1-4 Consumer Behavior Shifts Different mindset Majority of consumers now are taking a very cautious approach to spending. Younger consumers want to have lesser financial obligations. Expectation of quality service Customers switch to competitors if their needs are not met. Creates a need for better-trained and better-educated customer service professionals. Enhanced consumer preparation Result of advertising and publicity by companies, and activities of consumer information and advocacy groups. The Internet has given consumers a lot of power in dealing with manufacturers. Customer satisfaction is crucial. Customer satisfaction: The feeling of a person whose needs have been met by an organization.

Figure 1.8 - Components of a Customer-Focused Environment LO 1-5 Figure 1.8 - Components of a Customer-Focused Environment Customer External customers: People outside the organization who purchase or lease products and services. Internal customers: People within the organization who require support and service and provide information, products, and services to service providers. Organizational culture Includes an element of an organization that a customer encounters. Experiences, attitudes, and norms upheld by employees set the tone for how service is delivered and for how service providers interact with internal and external customers. Human resources Refers to employees of an organization. Attracting and retaining qualified employees is a challenge for many companies. Younger workers are more likely than older workers to be short-tenured employees. Deliverables Products or services provided by an organization. Quality and quantity determine customer satisfaction. Delivery system Method used by an organization to provide services and products to its customers. Determined by industry standards, customer expectations, capabilities, costs, and current and projected requirements. Service Manner in which employees of an organization treat their customers and each other as they deliver their company’s deliverables.

Figure 1.10 - Competencies of Customer Service Professionals LO 1-5 Figure 1.10 - Competencies of Customer Service Professionals These are some of the competencies required for customer service professionals to be successful.

Addressing the Changes To sustain in the present highly volatile business environment, companies must: Become learning organizations Focus on service recovery LO 1-6 Addressing the Changes In order to sustain and cope in a constantly changing business environment, companies must: Become learning organizations Learning organizations: Value knowledge, education, and employee training and learn from competition and industry trends. Develop systems to support continued growth and development. Focus on service recovery Service recovery: Process of righting a wrong or correcting something that has gone wrong involving provision of a product or service to a customer. Involves not only replacing defective products, but also going the extra step of providing compensation for the customer’s inconvenience.