Keeping Customers at the Center of Your Business

Customer satisfaction is the vital sign that acts like a pulse to the health of the rest of the organization. Companies that keep their customers in focus win over the long run. Ensuring that policies & procedures, training, recruitment, facilities and resources are focused on customer satisfaction is important for sustainability.

All businesses are in the business of serving customers. How many cars would sell if they didn’t serve the needs of their customer? Would it be any different for a spa or vacation? Companies that make the mistake of not running their daily operations with the customer in focus eventually start seeing the errors of their ways through poor customer retention and sales. 

Policies & Procedures: The internal mechanisms and operations should ensure every activity is focused on the customer. 

Training: Training should seek to ensure quality completion of jobs and friendly customer interactions; it should set the standard for employees. 

Recruitment: The right kind of personality should be sought after in all recruitment decisions. 

Facilities: All organizations should be designed around the needs of their customer through décor, functionality, and proper use of space. 

Resources: Reinvesting in value producing products and services. Resources should not be wasted on activities not in alignment with strategic initiatives

Service Industry Not the Cause of Wage Polarization

Wage polarization is a growing concern among both academics and government officials. Wage polarization is an occurrence where lower skilled workers and higher skilled workers are vastly different in their earning potential. Research by Author and Dorn (2013) discuss the reasons why such polarization is occurring and which industries are raising lower skilled employment opportunities.

The advent of technology is here! Computerization of routine tasks is apparent and those who have not mastered new skills are finding their jobs displaced. The past 25 years have experienced a decline in lower skilled earnings and employment opportunities. The authors indicate that changes are likely to occur across four dimensions:

1.) Greater adoption of information technology;

2.) Reallocation of low-skilled workers from routine tasks to service occupations;

3.) Larger increases in both employment and wages at both the highly skilled and lower skilled labor markets;

4.) Larger inflows into both the high and low skilled labor markets.

The news isn’t all bad for lower skilled labor markets. Service industry workers have an easier time finding employment and higher wages. Between 1980 and 2005 the share of hours worked in the service occupations rose by more than 50%. Real wages also increased 11 log points significantly exceeding every other low skilled industry in the country.

The reason why this phenomenon occurs is because routine tasks are easily replicable by computers while the skills of communication and flexible customer care cannot be easily programmed into strict computer processes. The ambiguous nature of handling customers and their needs requires people who can make decisions on a constantly changing basis.

Who is capitalizing on new technology? Higher skilled and educated workers can use computers to complement their creative, abstract, problem-solving, and coordination skills. This is raising their productive power in society and naturally raising their compensation. A greater divide between the lower skilled displaced worker and the higher skilled worker is apparent.

The service industry is helping employ a greater proportion of displaced workers. It will be necessary to train low skilled workers to find value on the market and raise their market earning potential. Some will be able to move into the service industry while others will need to move into training programs. Those that do neither are more likely to enter the chronically unemployed market.

Does Combining Customer Service with Sales Improve Company Performance?

Customer service and sales are both important functions for an organization. What happens when we put them together? A study by Jasmand, et. al. (2012) delves into the nature of creating ambidextrous sales-service functions. Their findings determine a net positive result of helping customers with their problems and offering those products/services that better suit their needs. It creates some confusion among employees but seems to improve customer satisfaction and overall sales volume.

There is a natural mental barrier between customer service representatives and sales. Customer service representatives do not view their job as including sales and therefore are less focused on this activity. A lack of perspective limits the abilities of firms to create higher sales through a level of mental merging of the two functions. Training, time and commitment will be needed to bridge the gap and improve upon the integration of both constructs.

Ambidextrous goals and behavior in service and sales can be difficult for representatives. It creates confusion on what actions should be taken and toward which goal. It is a complex skill that low cost providers will have a hard time teaching as the representative will need to know when a better product or service will provide higher levels of customer satisfaction. Most organizations have trained employees to focus on a single activity based on the definition of their job function.

Let us see how this works in a real life scenario. A customer calls in to complain about a product. The customer service representative can log their complaint and check the warrantee to make a return. However, if the customer service representative listens closely and asks important questions they may be able to suggest an alternative product that fits the customer’s needs better (customer satisfaction). The sales portion may come into play if the returned product can be used as credit for a higher level product that actually satisfies the customer (improved sales).

The study found that ambidextrous sales-service activity increases customer satisfaction and sales but reduces efficiency. The total net effect is positive on organizations whereby sales and customer satisfaction improves the company beyond the loss in efficiency. The authors acknowledge that if proper training occurred, organizational resources were adjusted, and the measurements of activities improved, efficiency may rise. For example, if fewer resources are needed from the sales department because the organization is fulfilling some of that function in customer service and developing higher customer retention rates then the sales-service activity improves net efficiency between the varying functions.

Jasmand, C. et. al. (2012). Generating sales while providing service: a study of customer service representatives’ ambidextrous behavior. Journal of Marketing, 76 (1).

Integrating Manufacturing and Service Revenue Development

Manufacturing is often seen as selling a product but the competitive market indicates they must be more. As global competition increases, product innovation cycles become faster, and imitators copy products companies should seek to create beyond the product. Research by Ivanka Kastalli, Bart Van Looy and Andy Neely from the University of California Berkeley discussed how the concepts of service adoption and service coverage add value and competitiveness.  They analyzed a large international company with growing sales and significant revenue from manufacturing and service functions.

Manufacturing is not simply the building of products but also the raising of value and public interest. A service mentality helps executives understand where their value lays and what customers need in both current and future products to continue sales. The market must continue to drive the options, design, and utility of products.  

To create greater service oriented manufacturing paradigms requires the ability to develop stronger service measures that help influence the product design and development. Even though different metrics are used for manufacturing and service enhancement they have not been well integrated together. This creates two different mindsets when it comes to production and follow up that can damage long-term business. 

The concept of service adoption and service coverage can be seen as breadth and depth. Service adoption entails a quantitative understanding of the amount of customers buy services. Service coverage can be seen as qualitatively understanding the perceived benefits of the service to their customers. 

When customers purchase services they naturally raise value beyond the production of the unit. When that customer buys more services and is satisfied with that service they are engaging in a qualitative assessment with real financial consequences. If companies can encourage more customers to purchase services and higher levels of these services the organization has increased their earning potential beyond the product. 

Open innovation can encourage service development and effectiveness. It affords an opportunity for the customer to provide input on the product and service as well as be a co-creator. When this occurs, business has a better perspective on the overall needs of the customer in a way that is tangible and revenue producing. 

The researchers used Atlas Copco as their case study. The company is in 100 countries, has over 14,000 employees, annual revenues over $4 billion, 40% of revenue from service with rising sales. The first shift in thinking must entail the movement from thinking about service as a support function to an actual revenue generating investment. The second is that conflicting performance measures between product and service need to be bridged to give a better perspective of total organizational development. The customer and their needs should be the driver of the business and understanding what makes them motivated to purchase and willing to return is half the business battle. 

Kastalli, I. et. al. (2013). Steering Manufacturing Firms Towards Service Business Model Innovation. University of California, Berkeley, 56 (1).

Rethinking Service Delivery

Reinventing service delivery requires a new way of thinking about service and challenging basic service assumptions. A paper by Ramdas, et. al. (2012) uses four years of information in healthcare and finance to find four conceptual areas where improvements can be found. Managers can look at the four areas defined below and seek to redefine them for greater service delivery.

The Structure of Interaction: Think of the way in which information is transferred and combined for customers. Is there a way to raise the value to the customer by adjusting how and what type of information they receive? For example, do healthcare patients need more information, relevant information, or interconnected information? Too much information will create noise in their understanding; relevant information will help them understand their condition; while connected information will help them receive better services.

The Service Boundary:  Question the boundaries of services and try and determine if there are better ways to use them. For example, if patients with similar problems are grouped, offered additional information, and provided with guidance they may receive more effective services. If the service becomes more effective and customers evaluate them higher, then you have a winning combination. 

The Allocation of Service Tasks:  Understanding who is fulfilling the service requirements and why they are doing so is important. If the employees you have hired are not qualified to deliver services or you are being wasteful with resources then the service task paradigm should be reconsidered. For example, a doctor who spends a great of his time in paperwork versus actual medical practice is wasting higher order skills on lower order efforts.

The Delivery Location: The delivery of services can be expensive and should be rethought. Many companies have developed service delivery around their needs versus around their customers and this has impacted sales. Sometimes moving online, allowing for home delivery, or having better support within existing services can be beneficial. For example, a proportion of people prefer online banking and forcing them to drive to a physical location is frustrating. Yet this doesn’t mean physical locations should be thrown out but they could be redesigned to focus on core services.

The four areas are only focal points for reviewing and evaluating current service delivery. There are many places where small and large changes can occur. To revamp service requires rethinking the entire service process from the customer’s vantage point while not forgetting the operational and financial constraints of service delivery. 

Kamalini, R. et. al. (2012). 4 ways to reinvent service delivery. Harvard Business Review