1. copyright 2004 Madge M Lyman CUSTOMER SERVICE IS IMPORTANT : FACT OR FICTION ? Presented by Dr. Madge M. Lyman At the SCP Showcase 29 October 2004

2. copyright 2004 Madge M Lyman Why have I been asked to talk to you about this topic? Responsible for Relationship Marketing, courses and research at Henley Management College in the UK. I am a customer, who demands service I am an advocate of customer feedback driving company excellence

3. copyright 2004 Madge M Lyman What is Customer Service? Customer service embraces many different activities to provide benefits: –Before the transaction: (providing information) –During the transaction: (clarifying and demonstrating) –After the transaction: (supporting the purchase) From: Capon,N and Hulbert,J (2001), Marketing Management in the 21 st century,Pearson Education,Inc., New Jersey,USA

4. copyright 2004 Madge M Lyman Excellent customer service: Provides non-users with persuasive information that may lead to purchase Provides current users with external validation of their own purchases Avoids the negative impact of word of mouth due to poor customer service

5. copyright 2004 Madge M Lyman Why worry about Customer Service? Acquiring new customers can cost 5 times more than it costs to satisfy and retain current customers. It takes a lot of effort to induce satisfied customers to switch away from current suppliers. Average customer churn is 10% yearly. A 5% decrease in defection rate can increase profits by 25% to 85%, depending on industry Customer profit rate tends to increase over the life of the retained customers. Therefore, we need to take Customer Service seriously! From:, Frederick F. Reichheld, The Loyalty Effect (Boston: Harvard Business School Press, 1996)

6. copyright 2004 Madge M Lyman The Changing Competitive Environment Forces at Work: Competitor Driven Customer Driven Consequences Fragmentation Sophistication Concentration Intensification Globalization Alternative Technologies

7. copyright 2004 Madge M Lyman The Changing Competitive Environment Changing Balance of Power Transition from Material to Information Economy Rapid Pace of Market and Product Development Key Issues

8. copyright 2004 Madge M Lyman Value Distribution in the Industrial age Information (Virtual) Matter (Physical) Transition to Information Economy Value Distribution in the Information Age

9. copyright 2004 Madge M Lyman THE EMERGING INFORMATION ECONOMY CAPITAL INVESTMENT RATIO* * Ratio of capital spending on computer hardware, software and communications gear to capital spending on machinery and equipment (US data). 74% 81% 107% YEAR

10. copyright 2004 Madge M Lyman Customer Service…. Why Now? Power of customers will continue to increase, driven by competitive intensity Management of information will be central to success Faster technological change makes ability to manage information crucial

11. copyright 2004 Madge M Lyman The changing view towards services: Service is recognized as a key competitive weapon Service is seen as crucial to customer retention Customer databases are often pivotal in service management Loyalty incentives are very common Customer expectations are seen as crucial for customer satisfaction

12. copyright 2004 Madge M Lyman The times they are a changing….. ProductionCustomerServiceExperience Customer ServiceCRM (Customer Relationship Management)

13. copyright 2004 Madge M Lyman Relationship Marketing Relationship marketing is to identify and establish, maintain and enhance and where necessary also to terminate relationships with customers and other stakeholders, at a profit, so that the objectives of all parties are met, and that this is done by a mutual exchange and fulfilment of promises. Gronroos, 1994

14. copyright 2004 Madge M Lyman Six Market Domains Internal Markets Supplier & Alliance Markets Recruitment Markets Influence Markets Referral Markets Customer Markets

15. copyright 2004 Madge M Lyman Services Marketing Mix Product Place Price Promotion Service Marketing Mix Process Physical Evidence People The 7 Ps (4PS)

16. copyright 2004 Madge M Lyman Physical Evidence (and Presentation) Tangible Physical appearance of facilities Physical appearance of individuals Ambiance or Experience of dealing with this service provider

17. copyright 2004 Madge M Lyman Process Do your processes help to eliminate heterogeneity between centres, between people and within people How do you ensure that customers experience the same service over time and situation?

18. copyright 2004 Madge M Lyman People Selection, training and motivation are key Do we have the right people? Do they understand their roles? Are their roles in conflict? Do you check for technology - job fit?

19. copyright 2004 Madge M Lyman So why do we do this? Satisfied Employees Satisfied Customers Greater Profits Loyal Customer

20. copyright 2004 Madge M Lyman I hope Ive convinced you that excellent Customer Service is essential Because: Of the changing competitive environment we work in Need to differentiate in a world of product parity Quality service creates loyal customers who provide greater profits

21. copyright 2004 Madge M Lyman