Chapter 4:

Customer Service Management

Process Management: Creating Value Along the Supply Chain (1st

edition)
Wisner and Stanley

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Chapter Outline
Introduction
Customer Service Defined
Customer Behavior and Expectations
Customer Perceptions and Satisfaction
A Framework for Managing Customer Service
Integrating the Customer Service Process

along the Supply Chain

Summary
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Learning Objectives
After completing this chapter, you should be
able to:
Define customer service and describe its
contributions to firm success.
Understand how customer behaviors and
expectations influence elements of customer
service.
Describe several customer service strategies.
Explain how customer service audits are
conducted.
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Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Learning Objectives (cont.)

After completing this chapter, you should be
able to:
Define customer service quality and explain
how it is measured and improved.
Describe some of the trends in customer call
centers.
Understand the importance of customer
service integration throughout the supply
chain.
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Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Introduction
Companies spend a great deal of time, money to

deliver great or acceptable customer service

Customer service is generally presumed to be a
means by which companies attempt to
differentiate their product, keep customers loyal,
increase sales, and improve profits
Customer service means :
Allowing customers to access products in the most
fair, effective and satisfying way
Activities that support orders
Product delivery, advice, handling complaints
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Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Customer Service Defined

Customer service is a series of activities
designed to enhance the level of customer
satisfaction that is, the feeling that a
product or service has met the customer
expectation.
Logistics plays a vital support role.
Pretransaction customer service

elements (before sale) : occur prior to

or apart from the sale of
products/services.
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Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Customer Service Defined (cont.)

Transaction elements of customer

service (during sale): occur during

order cycle.
Posttransaction customer service
elements (after sale): occur after the
product or service has been sold.

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Customer Service Elements

Customer
service

Pretransaction
elements

Designing and using

CS policies
Written statement of
policy
Statement in hands
of customer
System flexibility
Hiring/training CS
personnel

Transaction
elements
Ability to back
order
Delivery
Elements of order
cycle
Time
Order entry
System accuracy
Warehousing
Product substitution

Posttransaction
elements
Installation, warranty
alterations, repairs,
parts
Product tracking
Customer claims,
complaints
Product packaging
Temporary
replacement of
product during repairs

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Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Customer Service Defined (cont.)

Customer service failures
Neglecting or performing customer
service activities poorly
Stockouts, unwillingness to honor
customer service policies, lost orders,
late deliveries.
Effective hiring practices, increased
general communication, training, better
design of service activities help
minimizing such failures.
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Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Customer Behavior and Expectations

Customer behavior: Mental, physical activities that
result in purchases (affected by needs, wants)
Important to understand the motivations behind
each customer purchase
Customer wants: desire to make an already

satisfactory condition better

Vary based on financial resources, cultural
influences, availability of technology
Customer needs: desire to make an
unsatisfactory condition better
Vary based on age, gender, culture,
experiences, perceptions

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Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Customer Behavior and

Expectations
Customer expectations: can be formed
and modified by knowledge of products,
based on previous experiences, advertising,
reputation of firm

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Four types of customers based on

expectations
Economizing Customer

Pricing is important
Ethical Customer
Social & environmental responsibility is
important
Personalizing Customer
Recognition & conversation is important
Convenience Customer
Fast service is important
Firms need to consider ways to design
products/services to appeal to customer
classifications.

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Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Customer Perceptions and Satisfaction

Customer interpretations of product, service information

Influenced by senses, memories, the setting of the item, or prior

expectations
Perceptual biases causes selective bias

Perceptual biases

Selective exposure:

People's tendency to expose themselves predominately and

preferentially to information that is consistent with their own beliefs and
attitudes.
Selective attention: individuals have a tendency to orient themselves
toward, or process information from only one part of the environment
with the exclusion of other parts.

Selective interpretation, perceptual distortion

Companies must be mindful of how perceptual biases can be
influenced.

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Customer Perceptions and Satisfaction

(cont.)
Customer satisfaction
Result of comparing products perceived
performance or outcome relative to expectations
Raising the bar of expectations too high
Service-profit chain: The Service Profit Chain is a
concept developed by authors at the Harvard Business
Review which directly addresses the relationship of
customer loyalty and profitability. The concept requires
a paradigm shift from the traditional focus of quantity of
market share, instead focusing on the quality of market
share.
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Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Customer Perceptions and Satisfaction

(cont.)

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A Framework for Managing Customer

Service
Evaluate and improve employee satisfaction:

derived from the internal work environment,

including comfort factors, hiring and training
practices, reward system
Happy-productive worker hypothesis: job
satisfaction increases employee service
performance.
Steady Eddies
Employee satisfaction surveys - analysis and
strategies

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Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

A Framework for Managing Customer

Service (cont.)
Conduct customer service audits
Determining customer service requirements through focus groups,
interviews, surveys, records of complaints, call center comments
Topics to consider:
Customer service requirements
Customer service characteristics
Average performance requirements from each characteristic
Type of customer
External customer service audits:
To identify any changes in customer service requirements
To determine current customer service performance of the firm and
competitors
Example: McDonalds
Internal customer service audits: Reviewing company's current
customer service measures, policies, and practices

To identify any inconsistencies between the firms view and practice

of customer service and the actual requirements of customers

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Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

A Framework for Managing Customer

Service (cont.)
Creating a customer service strategy

Based on customer service audits

To create value through optimum service levels
The law of diminishing returns: as customer
service levels increase, the incremental value and
benefit created by even higher levels of customer
service becomes smaller.
Should concentrate on high quality customer
service

Reliability, recovery, fairness, wow factor

Creating value with customer service

Example: Overstock.com

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A Framework for Managing Customer

Service (cont.)
Creating a customer service strategy

(cont.)
Fostering

achievements in customer
service: training, communicating
successful service recoveries, rewarding
innovative customer service activities
Aligning customer service with the
mission: firms must live their strategy.
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A Framework for Managing Customer

Service (cont.)
Creating a customer service strategy

(cont.)

Customer

service departments: provide

direction and coordination to customer
service assessment and improvement
efforts.

Importance of personnel: must be

motivated to get the job done, posses a
service mentality, have the necessary
product knowledge and skills, and be wellrespected within the organization.

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Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

A Framework for Managing Customer

Service (cont.)

Customer service teams: consists of executives,

department managers, design engineers to react to a
significant customer service problem.
Customer contact centers: all of the methods
customers can use to contact a business
Focal point for developing, monitoring and improving
customer service strategy
Automated agent (interactive voice response, speech
recognition)
Value of optimizing customer interactions
Customers should be able to contact with the
company easily

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Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

A Framework for Managing Customer

Service (cont.)
Creating a customer service strategy

(cont.)
Customer

participation and self-service

ATMs, website purchases

Web-based

customer service applications

Outsourcing customer service: automated
contact center services, web services

Offshore and virtual call centers

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Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

A Framework for Managing Customer

Service (cont.)
Implementing the customer service

strategy
Organizational

commitment,
management support, commitment,
providing financial resources required
Pilot customer service initiative
Training, equipment and leadership

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Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

A Framework for Managing Customer

Service (cont.)
Measuring and improving customer

service performance
Customer

service measures
Mystery shoppers who pose as
customers to asses the customer
service performance of employees and
the work environment
Total quality management (TQM)
Fishbone diagram

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Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Integrating the Customer Service

Process along the Supply Chain
Share information, make joint decisions

regarding customer service activities

with key supply chain customers
Software applications and use of the
Internet, CRM programs

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Examples of good customer service

personalized attention
vision and goals clear
going the distance/ making an extra effort/ thorough/ following up later if you couldn't give an answer immediately
good humored/ relating personally/ putting people at ease
positive attitude/ friendliness/ smiling
courteousness/ respectful/ humane
accommodating special needs
organized
affordable
cleanliness/ attractive space/ clean bathroom with supplies
compensate user for slow or unsatisfactory service
quick response to request or complain
damage control: trying to make the best out of a situation that is mostly out of the hands of those providing the service
dumb it down: describing technical/complicated processes in layman's terms
lots of information and frequently/ providing updates on issues or situations
good signage/directions/ instructions
advance notice/ planning/ anticipating needs
putting customer needs before what you are doing
timely and convenient
really listening/ tuning in
being intuitive
specialized knowledge
familiarity with procedures/ being able to explain and enforce rules without alienating the customer
staff supportive of each other
offering refreshments
accuracy about services offered
patience
involvement in services by customer/ customer able to evaluate service
avoiding assumptions
flexibility/ making exceptions
share written information
concerned for safety
delivery
world wide access and service

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Examples of bad customer service

getting the right person is not obvious/ service providers inaccessible

bureaucracy that slows everything down/ infighting/ rigid hierarchy
overdoing the personal touch
filth
no eye contact/ apathy towards customer/ ignoring the customer/ minimal aid
personal income and financial gain is above care for the client
not getting what you paid for/ charging for what should be free/ unexplained fees
untrusting behavior
discrimination/ xenophobic
inflexibility/ rigid/ unimaginative
incompetence/ untrained/ lack of knowledge
under staffing
automated systems that don't work (phone trees, etc)
being off schedule (and not acknowledging it)
no advance warning of problems
lying/ blaming/ denying about problems
poor communication (inc. not listening)
transition to new services poorly handled
promised service not available/ false advertising
expert presumes last word
no focus on or consideration for user/ not knowing your audience's needs
failure to follow through/ no response to feedback
callousness/ arrogance/ rudeness/ disrespect/ inconsiderate
poor survey design
inconvenient hours
long lines
customer does not know what the next step is; information service requires prior knowledge
unfairness/ unevenness of service
service provider allows his/her mood to affect the service
no compensation for foul-up
lack of preparation
ambiguity of information
information overload

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Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.