Canadian Marketing Blog

Service is NOT a Strategy

Many firms today like to look at their customer service departments as a strategic advantage. They believe that the quality of their service will be a significant differentiator between themselves and their competition. Let me be provocative and say that in today’s world, customer service is not a strategic advantage! This does not mean that effective delivery of customer service is not important, but rather, that customer service as a strategy within an organization, will never be a differentiator. There are several factors which lead me to this conclusion:

•Consumers have a different expectation of customer service than what firms want to provide.
•The flow of thoughts, information, people and technology are too free flowing to maintain a competitive advantage.
•For most industries, there is a lack of causality between improved customer service and better financial results for the firm.

For a whole host of other reasons, what customers believe to be a good service experience differs greatly from what many firms believe a strategic service experience should be. High customer satisfaction scores are usually grounded in a firms ability to do ‘what they say, when they say, how they say’. While firms are looking for ways to add the illusive and often undefined “value added” service in their customer interactions, their customers are looking for customer service to simply be a painless experience. What this has lead firms to do is to design customer service departments which they can tout as “World Class” or “Industry Leading” as part of their strategy. All the time, however, these firms overlook points of customer dissatisfaction. The end result is that the focus on differentiated service becomes more of an annoyance to customers as their core issues remain unresolved.

Even if a firm was able to both fix customer dissatisfaction points as well as developing value added features in their service offering, the longevity of that strategic advantage would be short lived. The free flow of thoughts, ideas and people along with the supporting technologies between competing firms is too large to be controlled. If one firm were to find a way to add bottom line value to their firm through their customer service department, it would be easy to duplicate at competing firms. Furthermore, the speed at which a competitor could reproduce a customer service experience would mitigate any uplift the originator of that experience would have seen as being first to market.

Many within the customer service industry would argue that higher customer satisfaction leads to lower attrition, or increased spending, or higher loyalty which is a bankable impact to a firm. The issue with this argument is that it is somewhat anecdotal and does not account for the net impact of “value added” service compared to regular customer service. There are a multitude of reasons why customers change their spending habits which are both internal and external to firms. Also, the investment that firms make in their customer service departments to ‘differentiate’ them may not be what drives any additional value from customers. One may be able to argue that competent service, rather than value added service is what drives value from customers. The stories of bad customer service experiences travel more rapidly than those of exceptional customer service experiences. The end results is that although many firms could find a corollary relationship between customer service and a customers value to the firm, this relationship is not one of causality.

The conclusion that one should derive from this position is that customer service is an important part of any organization. It should be effective, painless to the customer and reproducible across the business. Many firms have already started down this path with increased focus on items such as first contact resolution which drives down cost while alleviating a customer pain point. Trying to shape a customer service center into a strategic advantage for a firm is bound to fail. Firms would be better served by investing excess capital in product development, marketing or creating a price point advantage in their product than they would in trying to evolve customer service into a corporate strategy. Personally, as a manager, I want my customer service department to be the best in the world. As a consumer, however, I just want my issue resolved to my satisfaction quickly and painlessly. I would invite others to tell us about their experiences with customer service as a strategy. Have you seen a customer service strategy paying significant return on investment to a firm?

Richard, interesting read raising some important points.

Firstly a strategy is defined as steps/actions that will help achieve an objective
On that basic level, service very much a strategy and if deployed in conjunction with other elements will yield a powerful strategic advantage. The problem as you have noted – is that the competition tends to copy successful market adaptations brought forward by the competition – to stay in the game. And so by its very definition the entire brand value chain is a journey – not a destination.

The whole thing, customer service included is an unfair game of snakes and ladders. As you noted, customers more readily attribute negative experiences to the brand and withhold their applause for rare extraordinary service. But this is simple basic human nature that expectations are high(er) whenever there are ready alternatives. Providing a service standard that avoids disappointments is indeed the most important first step.

The service delivery of customer delight – however is not a mechanized process extension from the basic “do no harm standard”. Rather it is built on allowing front line staff to have the authority to (borrowing from Nordstrom’s playbook) “do what you think is in the best interest of the customer” If you need other examples look to the concierge service standard higher end hotel staff (up and down the chain of command) are expected to deliver, or FedEx’s legendary customer service stories (see Powered by Purple http://www.1to1media.com/View.aspx?DocID=30701&m=n) which has consistently earned it high rank in the ACSI.

And with regards to causality – yes people have not been able to find consistent correlations but that is a matter for a much deeper discussion because there are any number of factors that can mitigate the linkages. In the interim you might consider this study which according to its authors say it is possible to beat the stock market consistently by investing in firms that do well on the ACSI (Customer Satisfaction and Stock Prices: High Returns Low Risk http://www.marketingpower.com/content30985.php)

We tend to presume that all customers naturally want a ‘relationship hug ’ with our brands – but there are any number of relationship types (transactional, logical, emotional and mature) that will be in play. (see What relationship do customers want with your brand)

We must not lose sight that despite all the technological sophistication – for those customers that wish to have a ‘relationship’ - the human/wetware inter phase can easily derail or elevate any initiative. In fact I would go so far and say that with the right people on staff, that team can easily trump any crm program and elevate a normative brand to a higher plateau - any day of the week and twice on the busiest of shopping seasons!

Not all companies can afford to give this kind of service and not all customers are prepared to pay for this service – but to think that the other elements of the brand value chain will not be readily copied by the market place is a dangerous assumption.

Scratch beneath the surface at any of the leading brands and you will find a multifaceted strategic advantage has been created across many/most links of the brand value chain. It is then that deeper relationships are created and bonds formed transforming buyers into customers, and customers into partners.

Cheers
Miro

Richard,
Quite a thought-provoking post on service.
I have to agree with Miro on his many points about service as a differentiator. And, although some companies may not be able to prove it's actual value by the numbers, take a look at the video I've noted on this post (http://www.1to1media.com/weblog/2008/02/the_best_service_story_ever.html) to see what a difference service can make for most any organization.

I, too, must agree with Miro.

What we have found in years of research about differentiated customer experiences, is that people do not want to have a "relationship" with brands, and for the most part don't -- if relationship is defined as some mystical emotional bond.

Simply put, people want a satisfying experience. The expectation that the experience will be equally satisfying next time round (which promotes loyalty-like behaviour also known as repeat business), is an important component, of the net evaluation of the experience. It is this "expectation" that we have historically confused with "emotional bond" or "relationship", and the subsequent behavioural manifestation as "customer loyalty"

From a psychological poiint of view, the emotionality exists between the visceral sense of satisfaction ("that experience made me feel good") and the rational manifestation of this feeling ("I will do it again"). The hurt experienced by people when the "brand" lets them down by not delivering the same experience, is an internal self-evaluation of ability to judge effectively, cognitive dissonance and so on. While it may result in an emotional outburst, it is only vaguely related to the "brand."

This is the way service impacts loyal-like behaviour. The economics of this paradigm are contingent on the business as a whole, and not on the narrow service silo.

Thoughts?

As the Haiku poem goes: “All the time I pray to Buddha, I keep on killing mosquitoes.”

You can pray to the Buddha of delivering breakthrough, customer-delighting service all you want, but you still have to swat the mosquitoes – that is, you still have to do all the basic things flawlessly. And that is indeed the service problem afflicting most firms today.

The Haiku poem is ironically humorous to a Buddhist, because if you’re a Buddhist you’re not supposed to kill any living thing, not even a pesky mosquito. But in the same way mosquitoes will ruin your prayerful concentration, basic service problems will ruin any effort to delight customers with good service. Service mosquitoes will likely drive more customers away than you could possibly attract with even the holiest and most worthy prayers. Most companies really DON’T do the basics well enough to enter customer-service nirvana.

This simple fact, however, doesn’t mean a business CAN’T do it. As products become increasingly commoditized, the one differentiator that many firms are faced with is the service they provide their clients and customers. The type of service that can become a real vehicle for cementing customer loyalty is any service that can be personalized or customized to the individual needs of a particular customer. Such services would range from remembering how a client prefers invoicing costs to be broken down, to adapting the repair schedule to the client’s own manufacturing schedule, to reminding a customer that he already bought the book he is about to purchase (Amazon does this).

If a company can adapt its services to the needs of an individual customer, it can predispose that customer to WANT to remain loyal, rather than going to all the trouble of trying to teach his preferences to another firm. And the more convenience is delivered through customization of services, the more loyal the customer is likely to be. But you still have to kill the mosquitoes.

My addition - your title is service -yet the context seems to imply basic "Call Centre". If that is our definition of service, OK. However if our definition of service is expanded to meeting (or exceeding) a customers needs (or unmet needs) the difference will be visible.

Cemex does not roll and bill cement trucks anymore - their customer service is to take the truckload issue away from their customer - the cement you need where & when you need it.

SKF - their bearings in industrial machinery - forget machine downtime - their customer service tells you - that bearing is ready to die - lets replace it now.

Liguid Air - similar idea -

In these cases - reframing the customers real desires enables different types of customer service. All the above examples really utilize the lens of the customer not wanting to by a drill, but buy a hole

I have experienced the other day with Telus ...that with no reason my phone use was dropped and the telemated phone system directing me to call would only loop...big problem as I don't have a home or land line...The client care rep not only told me that my business lost was rated to a $1 for time lost but put me on hold and after sometime the system hung up the phone...this works and people don' t have time to call back...but I did and I was rewarded with a credit of $35 + taxes.