Identify how retailers can use excellent customer service as a differentiation tool

What you’ll learn to do: Identify how retailers can use excellent customer service as a differentiation tool

In biology, cells sometime differentiate by changing form from a relatively generalized state to a more specialized life form. Likewise, retailers have found success in differentiating themselves from other similar businesses by distinguishing themselves by providing unique service qualities from offering faster, timely product deliveries to emphasizing more reliable, dependable performance. (Source: dictionary.com.)

LEARNING OUTCOMES

• Define customer service
• Discuss the value of customer profiles in retail customer service
• Categorize services offered by retailers as basic or luxury
• Compare and contrast personalized and standardized service

Customer Service

cus·tom·er serv·ice

noun

noun: customer service; plural noun: customer services

1. the assistance and advice provided by a company to those people who buy or use its products or services.

Depending on who you ask, the definition of customer service varies widely depending on the understanding of the basic terms “customer” and “service.” A quick Internet search reveals thousands of interpretations of this ubiquitous business terminology. For example, the American Marketing Association defines customer service as ”a customer-oriented corporate philosophy that integrates and manages all of the elements of the customer interface within a predetermined cost-service mix.” Meanwhile, the National Retail Federation often describes customer service as something that’s not a skill but rather the result of learning and applying a combination of skills including planning, problem-solving, decision-making, critical thinking, and professionalism.^[1] Luxury automotive retailer Carl Sewell wrote in his bestselling book, Customers for Life: How to Turn That One-Time Buyer Into a Lifetime Customer, that customer service is simply asking what customers want and giving it to them.

Regardless of the definition, customer service is dependent on the act of meeting (and hopefully exceeding) the wants and needs of customers.

Customer Profiles

What is a customer?

When asked, most people understand what a customer is since virtually everyone  on the planet is, at one time or another, a customer of something or somebody else. Whether buying socks at a clothing store, eating at a restaurant, or streaming an online movie, the customer is, in fact, the very essence of retail. Customers, though, can be defined into two distinct groups: internal and external.

Internal Customers

Internal customers are all the employees, vendors, and other stakeholders of a business. This concept, attributed to quality management expert Joseph M. Juran, was only introduced in the late 1980s. Previously only those individuals or organizations who purchased goods or services were considered customers. Today, those traditionally viewed as customers (e.g., those who shop in store, buy products, etc.) are now considered external customers.

W. Marriott, of Marriott International, a corporation renowned for providing exceptional customer service, emphasizes taking good care of their employees because, “If you take care of them, they’ll take care of your customers and the customers will keep coming back again and again.” Not only is Marriott International currently the world’s largest hotel company but it’s also continuously mentioned as one of the best places to work in the world.

Diana Dosik, a principal for Boston Consulting Group, further emphasized the importance of focusing on internal customer service during her TED talk, “Why we need to treat our employees as thoughtfully as our customers.”

External Customers

Being able to answer five fundamental questions, the “5Ws,” who, what, when, where, and why about any customer, is vital in providing excellent customer service. The answers to the 5Ws create a profile of varying demographic, psychographic, and product usage characteristics. “Who”question factors, for example, may include age, gender, income, race, religion, sexual orientation, education, location, marital, and familial status. Likewise, “why” questions may help determine the purpose of the purchase, such as a business buying a ream of paper for printing invoices or for parents buying the same paper for their children to draw pictures. Together answering the 5Ws helps retailers identify ideal customers through a process called market segmentation, the grouping of prospective customers into groups, or segments, that have common needs and respond similarly to a marketing action. (Source: Investopedia.com.)

Offered Services

Customer service, including complimentary services offered, is one way that retailers differentiate themselves in a crowded marketplace. Perspective point: According to a 2011 survey conducted by Harris Interactive, 86% consumers indicated they would pay more for a better customer experience and 89% switched to a competitor following a poor customer experience.^[2] Looking forward, customer experience consulting firm Walker projects that by 2020 customer experience will become the key brand differentiator, outweighing both price and product.^[3] And, unlike competing on price – sometimes categorized as “a race to the bottom” – customer service can be a source of enduring brand and business value.

EXAMPLE: NORDSTROM

Nordstrom—a brand synonymous with customer service—is a case in point. Nordstrom has been cultivating customer service excellence for over 115 years and author Robert Spector has translated that experience and expertise into three, highly rated (4+/5 on Amazon) The Nordstrom Way books. As noted in the publishers write-up on The Nordstrom Way to Customer Service Excellence’s back cover: Nordstrom is “one of only five companies” to be ranked on Fortune’s “Best Companies to Work For” and “Most Admired” list every year the surveys have been conducted. While bragging rights are great, revenue is what keeps a business in business. While 9/11 and the Great Recession took a toll on many retailers, Nordstrom’s focus on both internal and external customers paid off. According to Wiley, Nordstrom never experienced a quarterly loss during the recent economic downturn.^[4]

In a Shopify blog post, author Humayun Khan notes that one of the ways Nordstrom delivers exceptional service is by eliminating customer’s “pain points.” For example, rather than pointing a customer to a particular brand, product or department, a Nordstrom salesperson will walk you there.^[5] That level of attention is the difference between basic and exceptional or luxury service.

Apple’s Genius Bar, the free in-store technical services team available to troubleshoot Apple devices, is another example of exceptional customer service that serves as a market differentiator and builds brand loyalty. Luxury product – $1,000 for the current iPhone X, before factoring in cases and other accessories – luxury service.

Of course, not every consumer is a Nordstrom or Apple customer. Some customers just want—and just want to pay for—the basics. McFIT, the largest fitness center chain in Europe,^[6] serves that market with a just-the-essentials gym with a “Simply look good” tagline.^[7] In order to keep membership fees low, there are no premium services such as fitness classes, saunas and swimming pools.^[8] McFIT has also launched fitness studios at very low budget and premium price points, offering a range of fitness experiences.

While customer service level expertise and service offerings vary, It’s important to understand that customers have expectations of a basic level of service. For example, accurate pricing and labeling are basic expectations. Having products in stock—in particular when a retailer’s website indicates stock on hand—is a basic service expectation. Grocery stores with self-check options are outliers; in general, accurate billing/checking—including removal of any security devices—is a minimum customer expectation. The key is to understand your customer’s value proposition and deliver a relevant level of service.

Personalized vs. Standardized Service

The industrial age and the advent of mass merchandising introduced the concept of ready-to-wear garments to the fashion industry. Before industrialization, clothing was handmade. Each dress, shirt, pant, or suit was individually measured,  cut, and sewn by a tailor to fit one person. This process was both time-consuming and relatively expensive for most people. Shortly after the end of World War II, ready-to-wear, or “off-the-rack,” clothing made in factories became very popular, in part, because clothing manufacturers could make standardized outfits that were affordable and did not require any timely alterations. Most Americans viewed the standardization of the apparel industry as an advancement in service. (Source: Design Quarterly.)

Service Standardization

A recent study from the Center for Leading Innovation & Cooperation suggests that standardizing services will continue to play an important role in further developing the service economy, which includes retail. By making similar services with different characteristics and structures comparable, service standardization promotes reliability, effectiveness, trust, and improved economic efficiency. The CLIC defines standardization as a process of unification, especially in terminology, capabilities of personnel, technology, and organizational processes. In essence, “standardization simplifies everyday life.” (Source: CLIC – Service Standardization.)

Retailers often employ standardization strategies in store layouts, purchasing, labeling, branding, and a myriad of other operational activities. Retailers standardize customer service specifically to ensure uniform quality of treatment of all customers, both internal and external. Some examples of customer service standardization within the retail industry include ensuring product availability, emphasizing customer courtesy, safeguarding branding consistency, practicing pricing accuracy, demonstrating promotional responsiveness, and enabling overall service efficiency. (Source: Customer Service Experts.)

Personalized Service

Ironically, many 21st century retailers might appear to be headed back in time, returning to the days of less service standardization and instead more personalized service. This, however, is not a business regression but instead another method of service differentiation. Personalization is a method of adding value to  customer choice. In fact, personalization today often relies on technology to more effectively and efficiently implement a new range of services that would otherwise be impossible.

For example, the Container Store, a leading specialty retailer of storage and organization products in the United States, introduced a new “next generation” architectural design, merchandising strategy, and proprietary digital resources to its flagship store specifically to help customers accomplish their projects, maximize their space, and make the most of their homes on a personal basis. According to company officials, the technology components were chosen after many rounds of customer testing, which showed that customers’ biggest hurdle in beginning a project was feeling overwhelmed. The store features 18 digital screens supporting customers as they shop, featuring everything from inspiration and tips, to an interactive design tool and even a new proprietary digital experience called The Organization Studio. This technology allows customers to upload a photo or video of their organizational challenge online, describe the challenge, and set an in-store appointment to meet with a store Organization Expert. The Organization Experts then present the personalized solution they developed for the customer free of charge and with no purchase commitment.

“We know that countless retailers are building digital tools and using them to innovate the shopping experience, but combining the human element with technology is when things really get powerful,” said Val Richardson, vice president of real estate at The Container Store. “The Organization Studio offers the convenience of an online experience and marries it with a personalized in-store engagement that offers a curated solution created by a real person.” (Source: containerstore.com.)