Session Customer Service. Session Quality Value Adding Transactional Experiences Value Potential Classification RFM Formula.

Session

Customer Service

Session

Quality Value Adding Transactional Experiences Value Potential Classification RFM Formula

This Session

Weekly Activity: e-Marketing Click on the following link: http://www.e-marketingclass.com/intro/e-mar

keting-introduction-presentaion.htm This is a presentation by Mykola

Sarazhynskyy on what is e-marketing. Answer the following:

How do people shop online? How are customers acquired? What are the pro’s and cons? Word Count: 200 – 300.

Customer Service

Saville & Reid “Customer service means giving

customers what they want, when and where it suits them and at a price they are willing to pay.”

Customer Experience

Explanation: It is the elements of customer service

that an organisation presents which are intangible, fleeting and experiential that the customer feels, senses and touches.

As a consequence, customers expect organisations to assume they fully understand their needs and requirements.

Organisations Lose Customers

Statistics: 1% die 3% move away 4% just naturally float 5% change on friend’s advice 9% can buy cheaper elsewhere 10% are chronic complainers and 68% go elsewhere because the people

they deal with are indifferent to their needs.

Topic Example Video

The following video discusses what is quality customer service.

Take note of the key points. http://www.youtube.com/watch?v=jFGxf1q-3y4

Quality Customer Service Reasons

Why it is important! Growth – more businesses providing

services than ever before Increased competition – provides a

competitive edge Better consumer understanding – increased

knowledge about buying/spending habits Economic sense – repeat business and

larger customer base ingredients for success.

Quality Customer Service

Why is it so rare? Lack of understanding/awareness Business focus on bottom line

profitability Organisations don’t want to spend

the money Organisations are unwilling to take

positive action

Quality Customer Service Quality

More than just keeping the customers happy It is the ability to sustain excellence in relation to an

established benchmark Within larger organisations this will relate to students eg

TQM Total Quality Management Why? Quality gives a company a competitive edge Keep your customers

Customer Internal/external

Service Face to face Telephone

Quality Customer Service Established expectation of service Equality & Diversity Physical access Information Timelines & courtesy Complaints Appeals Consultation & evaluation Choice Official language equality Co-ordination Incorporation of internal customers

Quality Customer Service

Organisations need to: Take it seriously at executive level. Ask customers what the business

does well, what it does badly and what it needs to do differently.

Value customer service staff and encourage them to assess situations and make decisions.

Fix things when they go wrong.

Quality Customer Service

Ensure that staff are courteous, friendly and helpful, and capable of providing quick service.

Provide customers with all available information.

Be open with customers about problems and provide alternative solutions.

Treat customers individually rather than as members of a group.

Quality Customer Service

Make customer feel important Acknowledge customers in friendly

and professional way Address customer by name (if known) Acknowledge waiting customers or

apologise to those who have been waiting

Quality Customer Service

Help customer in every way Demonstrate willingness to assist Use positive tone of voice, gestures

and other body language Volunteer additional assistance

whenever possible

Quality Customer Service

Empathise with customer Use reassuring and supporting

comments Explain what you are doing and

why/when

Quality Customer Service

Thank the customer Offer your future service, where

appropriate

Activity: Standards of Service

Why is it important to provide excellent standards of Customer Service?

Take a couple of minutes and list down all the reasons why you believe organisations should be aiming to provide excellent standards of service.

How many reasons did you come up with?

Topic Example Video

The following video highlights examples of poor quality and it’s costs.

Take note of the key points. http://www.youtube.com/watch?v=Xo0_8CNNT

Wk

“The degree of excellence of a thing” (Webster’s Dictionary)

“The totality of features and characteristics that satisfy needs” (ASQ)

Fitness for useQuality of design

What Is Quality?

Definitions of Quality

American Society of Quality: Product characteristics & features that affect customer satisfaction

User-Based: What consumer says it is Manufacturing-Based: Degree to which

a product conforms to design specification

Product-Based: Level of measurable product characteristic

Fitness forConsumer Use

Fitness forConsumer Use

Producer’s PerspectiveProducer’s Perspective Consumer’s PerspectiveConsumer’s Perspective

Quality of ConformanceQuality of Conformance

• Conformance to criteria

• Cost

Quality of DesignQuality of Design

• Quality characteristics• Price

MarketingMarketingProductionProduction

The Meaning of QualityThe Meaning of Quality

The Meaning of Quality

Quality of Conformance

Ensuring product or service produced according to design

Depends onDesign of production processPerformance of machineryMaterialsTraining

OperationReliability & durabilityConformanceServiceabilityAppearancePerceived quality

Quality

Quality Dimensions for Goods

Under-standing

TangiblesReliability

CommunicationCredibility

Security

Responsiveness

Competence

Courtesy

Access

© 1995 Corel Corp.

Service Quality Attributes

Service Quality Determinants

Reliability – consistency and dependability Responsiveness – willingness/readiness of

employees to provide service; timeliness Competence – possession of skills and

knowledge required to perform service Access – approachability and ease of contact Courtesy – politeness, respect,

consideration, friendliness of contact personnel

Service Quality Determinants

Communication – keeping customers informed in languages they understand

Credibility – trustworthiness, believability, honesty

Security – freedom from danger, risk or doubt

Understanding/knowing the customer – making the effort to understands the customer’s needs

Tangibles – the physical evidence of the service

8 Service Quality Dimensions

Consistency

CourtesyOutcomeorientation

Accessibility / convenience

Accuracy Timeliness Responsiveness

Completeness

Time

8 Service Quality Dimensions

Time (length of waiting time for service) Timeliness (service delivery at agreed time) Completeness (everything delivered as ordered) Courtesy (in customer contact) Accessibility & Convenience (ease in obtaining) Accuracy (correct performance the first time) Consistency (each service delivery the same

way) Responsiveness (speed in reacting to

unexpected problems or circumstances).

Topic Example Video

The following video outlines quality management scenarios.

Take note of the key points. http://www.youtube.com/watch?

v=RlQw7FOe1is

Activity: Quality of Service

There is considerable concern and complaint about the level of service given within the hospitality industry.

Assume that you are trying out a new café on the recommendation of some friends.

For each of the eight dimensions of service quality, write a brief statement of your expectation.

The statements may be general statements about expectations of a café or specific to a previous experience.

Time: 15 minutes (approx.)

Topic Example Video

The following video discusses quality management.

Take note of the key points. http://www.youtube.com/watch?

v=QJNVrY_Z2NM

Measuring and Reporting QualityLabor index

Quality cost / labor hoursCost index

Quality cost / manufacturing costSales index

Quality cost / salesProduction index

Quality cost / units produced

Improving Productivity With Quality

Sales Gains Improved response Higher Prices Improved reputation

Reduced CostsIncreased productivityLower rework and scrap costsLower warranty costs

Increased ProfitsImproved

Quality

Costs & market share

Company’s reputation

Product liability

International implications

Costs of Quality Prevention costs - reducing the potential for

defects through planning, design, process, training, information

Appraisal costs - evaluating products, inspection and testing, test equipment, operator suitability

Internal failure - of producing defective parts or service, scrap/wastage, rework, process failure, process down-time, price reduction

External costs - occur after delivery, customer complaints, product returns, warranty, product liability, lost sales

Quality–Cost Relationship

Increased prevention costs lead to decreased failure costs

Improved quality leads to increased sales and market share

Quality improvement at the design stage

Higher quality products can command higher prices

Typical Quality Process

SpecifiesNeed

Customer

InterpretsNeed

Marketing

DesignsProduct

Defines

Quality

Engineering

ProducesProduct

Plans

Quality

MonitorsQuality

Operations

Quality is

Quality is

customer driven!

customer driven!

TQM

Encompasses entire organization, from supplier to customer

Stresses a commitment by management to have a continuing,

company-wide, drive toward excellence in all aspects of

products and services that are important to the customer.

Topic Example Video

The following video discusses the Edwards Deming philosophy to TQM.

Take note of the key points. http://www.youtube.com/watch?

v=GHvnIm9UEoQ

Total Quality Management

1. Customer defined quality2. Top management leadership3. Quality as a strategic issue4. All employees responsible for quality5. Continuous improvement6. Shared problem solving7. Statistical quality control8. Training & education for all employees

Organizational Practices

Quality Principles

Employee Fulfillment

Attitudes (e.g., Commitment)

How to Do

What to Do

EffectiveBusiness

EffectiveBusiness

CustomerSatisfaction

CustomerSatisfaction

Achieving TQM

Activities to Achieve TQM

Organizational Practices

Quality Principles

Employee Fulfillment

Customer Satisfaction

Customer service, quality and marketing work in harmony, with:

Measurement of customer needs and competitor performance.

Quality determined through customer perspective.

The total quality concept associated with relationship marketing influences the process elements (e.g. managing the 'moments of truth' in the customer encounter).

Relationship Customer Service

Marketing

Customer Service

Quality

RM

RM Orientation

Topic Example Video

The following video discusses relationship marketing.

Take note of the key points. http://www.youtube.com/watch?

v=roVoOm4ivG0

Customer Service + Marketing Mix

CustomerService

Price

Promotion

PhysicalEvidence

Processes

People

PlaceProduct

4Ps to 4Cs

COMMUNIC’N

CONVENIENCE

COST TOCUSTOMER

CUSTOMERNEEDS/WANTS

PROMOT’N

PLACE

PRICE

PRODUCT/SERVICE

Adapted from Kotler et al 1999

Customer Encounters

Build relationships with customers through “service encounters”.

Frequently called the “moments of truth”.

Customers use encounters to evaluate the service.

Customers involvement can vary widely.

Successful relationship building dependent on the result of service encounters.

Topic Example Video

The following video discusses the importance of building and maintaining customer relationships.

Take note of the key points. http://www.youtube.com/watch?

v=parwarCy7Vk

Episodes The transition from a routine episode to

a critical episode determines the adequacy (or otherwise) of customer service performance.

A 'critical episode' can be defined as an episode that is of great importance for the relationship.

Critical episodes are specific interactions between customers and the firm's employees that are especially satisfying or especially dissatisfying.

Long-term relationships are made up of a 'string of episodes'.

Evolution of Relationships

Awareness

Exploration Commitment

Expansion (Re-invention)

Dissolution

Customer Value potential Value potential relates to the net benefits

compared to costs from each particular relationship classification.

Value Category Financial Process & Operational Knowledge, learning &

information Strategic

Relationship Style Price Product Need

Value

Financial Benefits Revenue

Gross profit Net profit Unit price Volume

Costs Costs

Variable costs Fixed cost (allocated) Unit cost

Process & Operational

Benefits Marketing

Effectiveness Predictable demand

referrals Related sales Price premium Long-term contracts Time to market Product development

Costs Operational

Effectiveness Supply Chain & Logistics

Production Logistics, transport distribution Cycle times Other time savings

Knowledge, Learning, Information

Benefits Customer

Information Product

Development Technology Network Effects

Costs Operations Learning Production

Strategic

Benefits Products Value Customer

Satisfaction Market Position

Costs Operations Production

Customer Worth

Kris Cole “Think in terms of a customer’s lifetime

value. Everyone likes to feel you value their business and are interested in looking after them for a lifetime.

See your customers as appreciating assets and appreciate those assets.”

Customer Value

What is it? Customer value is the difference between

the values that the customer gains from ownership and usage of a product or service offset by the costs involved in obtaining it.

The long-term or life-time value (LTV) of a customer relates to the total of all their financial transactions over the active life of that relationship.

Topic Example Video

The following video discusses customer life-time value (LTV).

Take note of the key points. http://www.youtube.com/watch?v=BHDblh9Y1-

o

Customer Lifetime Value The ‘lifetime value’ concept proposes that an

organisation should take a long-term of profit by considering the income derived from it’s lifetime association with the customer.

Retention strategy decisions need to be based on a customer’s estimated lifetime value potential. Cadillac customer worth $332,000 over lifetime Domino’s Pizza customer worth $5,000 over 10

years. Note, there is no guarantee that a customer will

continue to deal at same level or if at all with organisation.

Topic Example Video

The following video discusses the RFM formula.

Take note of the key points. http://www.youtube.com/watch?

v=vNiO9DHK_4A

RFM Formula

Recency/Frequency/Monetary Formula Recency - time since customer last

purchased. Frequency - number of times a customer

purchases within a given time period. Monetary - amount of money spent by

customer enabling identification of customer base segments offering the highest profit potential.

RFM Formula

RFM formula is used to evaluate the value of a clients transactions over a period of time. As a rule of thumb, the buyer who has purchased most recently is the one most likely to buy again.

Reasoning: All customers are not created equal.

(80/20 Rule)

Recap Video

The following video discusses service quality and how it is applied in a Chinese context.

Take note of the key points. http://www.youtube.com/watch?

v=UxLv4EaIovI

Self-Check Quiz

Answer the true/false questions accessed using the following link:

http://wps.pearsoned.com.au/au_pve_dwyer_buscomm_8/100/25624/6559918.cw/index.html

Next Session

Weekly Activity: Internal/External Customers Most organisations serve several kinds of customers:

final customers intermediate customers internal customers external customers and stakeholders.

The chain of intermediate customers places each organisation in a position of dependence. As satisfied customers are the best source of referrals it is important to differentiate between them. Thinking about customers as assets give examples of these differing customers and influencers in a retail, manufacturing and family environments.