Chap19

CHAPTER 19: CUSTOMER SERVICE INSTRUCTOR NOTES

ANNOTATED OUTLINE •

Customer Service is the set of activities and programs undertaken by retailers to make the shopping experience more rewarding for their customers. These activities increase the value customers receive from the merchandise and services they purchase. All employees of a retail firm and all elements of the retailing mix provide services that increase the value of the merchandise.

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Most of the services provided by retailers furnish information about the retailer's offering and make it easier for customers to locate and buy products and services.

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Retailers can take advantage of the opportunities to develop strategic advantage by providing high-quality service.

See PPT 19-3

Generate a discussion among students about their experience with customer service at various retailers. What were the possible reasons for good service at some retailers versus bad service at others?

I. Strategic Advantage Through Customer Service •

Successful retailers differentiate their retail offerings, build customer loyalty, and develop a sustainable competitive advantage by providing excellent customer service. Good service keeps customers returning to a retailer and generates positive word-ofmouth communication, which attracts new customers.

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Providing high-quality service is difficult for retailers. Automated manufacturing makes quality of most merchandise consisted from item to item. But the quality of retail service can vary dramatically from store to store and from salesperson to salesperson within a store.

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In addition, most services provided by retailers are intangible – customers can't see or feel them. Intangibility makes it hard to provide and maintain high-quality service because retailers can't count, measure, or check service before it's delivered to

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Ask students if they had chosen to buy a branded good at a specific retailer, even though it was available at other stores in the area. If so, was the decision to patronize a specific retailer due to the better service at that store?

customers. •

The challenges of providing consistent highquality service provides an opportunity for a retailer to develop a sustainable competitive advantage.

A. Customer Service Strategies See PPT 19-4

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Customization and standardization are two approaches retailers use to develop a sustainable customer service advantage.

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Successful implementation of the customized approach relies on the performance of sales associates and service providers, while the standardized approach relies more on policy, procedures, and store design and layout

Ask students for examples of retailers that use customized and standardized service approaches. What are the advantages and disadvantages of each of these approaches? What are the factors that retailers should consider when deciding which approach to use?

1. Customization Approach •

The customization approach encourages service providers to tailor the service to meet each customer's personal needs.

See PPT 19-5

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Some retailers, such as Lands' End, are introducing a human element into their electronic channel. At Lands' End, customers can simply click on a button and chat – referred to as instant messaging – with a service provide.

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At other retail stores, such as Target, several employees called guest ambassadors roam the store looking for customers who need assistance.

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The customized approach typically results in customers receiving superior service. But the service might be inconsistent because service delivery depends on the judgment and capabilities of the service providers.

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In addition, providing the customized service is costly since it requires more welltrained service providers or complex computer software. 2. Standardization Approach

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The standardization approach is based on establishing a set of rules and procedures and being sure that they are implemented consistently. By strict enforcement of these procedures, inconsistencies in the service are minimized.

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Store or website design and layout also play an important role in the standardization approach. See PPT 19-7

3. Cost of Customer Service •

Providing high quality service, particularly customized service, can be very costly.

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However, from a long-term perspective, good customer service can actually reduce costs and increase profits.

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A study by Anderson Consulting estimates that it costs5 to 15 times more to acquire a new customer than to generate repeat business from present customers and a 5 percent increase in customer retention can increase profits by 25 to 40 percent.

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Thus, it costs a business much less to keep its existing customers satisfied and sell more merchandise to them than it costs to sell merchandise to people who aren't buying from the business now.

II. Customer Evaluation of Service •

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See PPT 19-6

Quality See PPT 19-8

When customers evaluate retail service, they compare their perceptions of the service they receive with their expectations. Customers are satisfied when the perceived service meets or exceeds their expectations. They are dissatisfied when they feel the service falls below their expectations.

Ask students to describe a situation in which they received good and poor service from a retailer. What factors influenced their perceptions?

A. Role of Expectations •

Describe the role of expectations. Relate the role of expectations to the student descriptions of service encounters. Ask students what factors influence their expectations?

Customer expectations are based on knowledge and past experiences with a retailer and its competitors.

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Technology is dramatically changing the ways in which customers and firms interact. Customers can now interact with companies through automated voice response systems and place orders and check on delivery through the Internet. But customers still expect dependable outcomes, easy access, responsive systems, flexibility, apologies, and compensation when things go wrong.

Get students to provide examples of unusual service situations, both good and bad. Then get them to provide examples of ordinary service. They won’t know what to do about the ordinary service situation question because they won’t remember any. They will remember, however, really good or really bad service.

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Expectations vary depending on the type of store. Since expectations aren't the same for all types of retailers, a customer may be satisfied with low levels of actual service in one store and dissatisfied with high service levels in another store.

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When retailers provide unexpected services, they build a high level of customer satisfaction, referred to as customer delight.

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Customer service expectations vary around Ask students if they had received unexpected the world. Although Germany's manufacturing capability is world renowned, services from a retailer. its poor customer service is also well known. Because Germans are accustomed to good service, they don’t demand it. On the other hand, Japanese expect excellent customer service.

B. Perceived Service

See PPT 19-9 and 19-10

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Customers base their evaluation of store service on their perceptions.

Discuss the factors to consider when evaluating retail service.

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Five customer service characteristics that customers use to evaluate service quality are reliability, assurance, tangibility, empathy, and responsiveness.

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Employees can play an important role in customer perceptions of service quality. Customer evaluations of service quality are often based on the manner in which store employees provide the service, not just the outcome.

III. The Gaps Model For Improving Retail Service Quality

Ask students to indicate how store employees affect their perception of service offered by a retailer. Why do employees have such an important affect on service perceptions? Do students feel that technology -- computers, robots -- will replace store employees? Would this improve service?

See PPT 19-11 and 19-12

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When customers' expectations are greater than their perceptions of the delivered service, customers are dissatisfied and feel the quality of the retailer's service is poor. Thus, retailers need to reduce the service gap – the difference between customers' expectations and perceptions of customer service -- to improve customers' satisfaction with their service.

Four factors affect the service gap: •

Knowledge gap: The difference between customer expectations and the retailer's perception of customer expectations.

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Standards gap: The difference between the retailer's perceptions of customer’s expectations and the customer service standards it sets.

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Delivery gap: The difference between the retailer's service standards and the actual service provided to customers.

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Communication gap: The difference between the actual service provided to customers and the service promised in the retailer's promotion program.

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These four gaps add up to the service gap. The retailer’s objective is to reduce the service gap by reducing each of the four gaps.

IV. Knowing What Customers Want: The Knowledge Gap

See PPT 19-13

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The most critical step in providing good service is to know what the customer wants.

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Retailers can reduce the knowledge gap and develop a better understanding of customer expectations by undertaking customer research, increasing interactions between retail managers and customers, and improving the communication between managers and employees who provide customer service.

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A. Researching Customer Expectations and Perceptions •

Market research can be used to better understand customers’ expectations and the quality of service provided by a retailer.

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Methods for obtaining this information range from comprehensive surveys to simply asking some customers about the store’s service.

See PPT 19-14

Work with students to develop a questionnaire that could be used to assess customer satisfaction Some retailers have established programs for with service provided by a local retailer. assessing customers’ expectations and service perceptions. For example, every year J.C. Penney sales associates pass out questionnaires to shoppers in each store and its mall.

1. Comprehensive Studies •

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Over 50,000 completed questionnaires are collected and analyzed. Since the same questionnaire is used each year, Penney can track service performance, determine whether it's improving or declining, and identify opportunities for improving service quality. 2. Gauging Satisfaction with Individual Transactions

Have students go to a shopping center and ask customers about the service they received.

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Another method for doing customer research is to survey customers immediately after a retail transaction has occurred.

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Customer research on individual transactions provides up-to-date information about customers' expectations and perceptions. The research also indicates the retailer's interest in providing good service.

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Since the responses can be linked to a specific encounter, the research provides a method for rewarding employees who provide good service and correcting those who exhibit poor performance. Work with students to develop a procedure for conducting a customer panel. How many

3. Customer Panels and Interviews

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Rather than surveying many customers, retailers can use panels of 10 to 15 customers to gain insights into expectations and performance.

customers? What types of customers? When and where would it meet? What specific questions would be asked?

4. Interacting with Customers •

Owner-managers of small retail firms typically have daily contact with their customers and thus have accurate first-hand information about them.

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In large retail firms, managers often learn about customers through reports so they miss the rich information provided by direct contact with customers.

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5. Customer Complaints

See PPT 19-15

Complaints allow retailers to interact with their customers and acquire detailed information about their service and merchandise.

Ask students what retailers could do to stimulate comments and complaints about service.

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Handling complaints is an inexpensive means to isolate and correct service problems.

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Although customer complaints can provide useful information, retailers can't rely solely on this source of market information.

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Typically dissatisfied customers don't complain. To provide better information on customer service, retailers need to encourage complaints and make it easy for customers to provide feedback about their problems. 6. Using Technology

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New, affordable information technology packages are enabling even small retailers to improve their customer service by maintaining and providing customer information to sales associates. 7. Feedback from Store Employees

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Ask students what retail managers can do to improve communications with contact people.

Salespeople and other employees in regular contact with customers often have a good

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understanding of customer service expectations and problems. This information will improve service quality only if they're encouraged to communicate their experiences to high-level managers who can act on it. Ask students if retail managers really need to interact with customers to determine customer expectations and perceptions? Can't they learn this through talking with employees and looking at market research?

B. Using Customer Research •

The service gap is reduced only when retailers use this information to improve service.

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Feedback on service performance needs to be provided in a timely manner.

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Feedback must be prominently presented so service providers are aware of their performance.

V. Setting Service Standards: The Standards Gap

Ask students what a retailer can do to remind employees about the need to provide good customer service.

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Service standards should be based on customers’ perceptions rather than on internal operations.

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To close the standards gap, retailers need to (1) commit their firms to providing highquality service, (2) develop innovative solutions to service problems, (3) define the role of service providers, (4) set service goals, and (5) measure service performance.

A. Commitment to Service Quality •

Service excellence occurs only when top management provides the leadership and demonstrates commitment. Top management must be willing to accept the temporary difficulties and even increased costs associated with improving service quality.

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Store managers are the key to achieving service quality standards.

B. Defining the Role of Service Providers •

See PPT 19-16

Mangers can tell service providers that they

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need to provide excellent service, but not clearly indicate what excellent service means. Without a clear definition of the retailer’s expectations, service providers are directionless. C. Setting Service Goals •

Retailers often develop service goals based on their beliefs about the proper operation of the business rather than the customers' needs and expectations.

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Employees are motivated to achieve service goals when the goals are specific, measurable, and participatory in the sense that they participated in setting them.

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Employee participation in setting service standards leads to better understanding and greater acceptance of the goals.

Ask student to give specific example of services goals that might be set for a sales associate in a Gap store.

D. Measuring Service Performance •

Retailers need to continuously assess service quality to ensure that goals will be achieved.

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Retailers also use mystery shoppers to assess their service quality. Mystery shoppers are professional shoppers who “shop” a store to assess the service provided by store employees and the presentation of merchandise in the store.

Query students on the types of information that could be collected by mystery shoppers.

E. Giving Information and Training •

Store employees need to know about the retailer’s service standards and the merchandise they offer, as well as their customers’ needs. With this information, employees can answer customers’ questions and suggest products.

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In addition, store employees need training in interpersonal skills.

VI. Meeting And Exceeding Service Standards: The Delivery Gap •

See PPT 19-17 and 19-18 Ask students to indicate the kind of information a salesperson in the following departments of a

To reduce the delivery gap and provide

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service that exceeds standards, retailers must give service providers the necessary knowledge and skills, provide instrument and emotional support, improve internal communications and reduce conflicts, and empower employees to act in the customers’ and firm’s best interests.

department store should have: china, consumer electronics, men’s ties, women’s hosiery, and men’s suits.

A. Providing Instrumental and Emotional Support

See PPT 19-19 Ask students to give examples of emotional and instrumental service support they might have received when working in a retail outlet.

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Service providers need to the have the instrumental support -- the appropriate systems and equipment – to deliver the service desired by customers.

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In additional to instrumental support, service providers need emotional support from their coworkers and supervisors. Emotional support involves demonstrating a concern for the well-being of others. Dealing with customer problems and maintaining a smile in difficult situation is psychological demanding.

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Service providers need to be in a supportive and understanding atmosphere to deal with these demands effectively. B. Improving Internal Communications

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When providing customer service, store employees must often manage the conflict between customers’ needs and the retail firms’ needs.

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Retailers can reduce certain conflicts by having clear guidelines and policies concerning service and by explaining the rationale for these policies.

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Conflicts can also arise when retailers set goals inconsistent with the other behaviors expected from store employees.

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Finally, conflicts can also arise between different areas of the firm. C. Empowering Store Employees See PPT 19-20 and 19-21

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Empowerment means allowing employees at the lowest level of the firm to make important decisions on how service is provided to customers. When the employees responsible for providing service are authorized to make important decisions, the quality of service improves.

Ask students what effects does empowering store employees have on the employees? On customers? Have students relate work experiences they have had in which their lack of empowerment reduced the quality of service they could provide.

However, empowering service providers can be difficult and the benefits may not justify the costs. Ask students about the benefits and problems with offering incentives. Review the material on incentives in Chapter 17.

D. Providing Incentives •

Many retailers use incentives, like paying commissions based on sales to motivate employees.

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But retailers have found that commissions on sales can decrease customer service and job satisfaction. Incentives can motivate high-pressure selling which leads to customer dissatisfaction.

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However, incentives can also be used to effectively improve customer service when the rewards are tied to solving customer problems and the rewards are provided at about the same time the appropriate behavior occurred.

E. Developing Solutions to Service Problems •

Retailers also use systems and technology to close the delivery gap.

1. Developing New Systems •

Finding ways to overcome service problems can improve customer satisfaction, and in some cases, reduce costs. See PPT 19-22 and 19-23

2. Using Technology •

Many retailers are installing kiosks with broadband Internet technology in their stores Ask students to describe customer service to allow customers to order merchandise and technologies they have encountered in retail to provide routine customer service, freeing stores. employees to deal with more complicated

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customer service issues. •

Other technology applications used to enhance customer service are hand-held scanners and “intelligent” shopping carts.

VII. Communicating the Service Promise: The Communications Gap

See PPT 19-24 Discuss the paradox of wanting to tell customers about great customer service but not wanting to raise expectations too high.

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The fourth factor leading to a customer service gap is a difference between the service promised by the retailer and the service actually delivered.

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Overstating the service offered raises customer expectations. Then, if the retailer doesn’t follow through, expectations exceed perceived service, and customers are dissatisfied.

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The communication gap can be reduced by making realistic commitments and by managing customer expectations.

A. Realistic Commitments •

Advertising programs are typically developed by the marketing department, while the store operations division delivers the service. Poor communication between these areas can result in a mismatch between an ad campaign's promises and the service the store can actually offer.

B. Managing Customer Expectations •

Information presented at the point of sale can be used to manage expectations.

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Communication programs can inform customers about their role and responsibility in getting good service, and can give tips on how to get better service, such as the best times of the day to shop and the retailer's policies and procedures for handling problems.

Ask students to indicate some complaints they have made about service provided by a retailer. Use these situations in a role playing exercise assigning one student to play the part of the customer and the other to be the retail employee receiving the complaint.

VIII. Service Recovery •

See PPT 19-25 Rather than dwelling on negative aspects of

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Have students relate service failures they have

customer problems, retailers should focus on the positive opportunities they generate. •

Service problems and complaints are an excellent source of information about the retailer's offering – its merchandise and service.

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Armed with this information, retailers can make changes to increase customer satisfaction.

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Service problems also enable a retailer to demonstrate its commitment to providing high-quality customer service.

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Most retailers have standard policies for handling problems, however, in many cases, the cause of the problem may be hard to identify, uncorrectable, or as a result of the customer's unusual expectations. In such cases, service recovery might be more difficult.

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The steps in effective service recovery are: (1) listen to the customer, (2) provide a fair solution, and (3) resolve the problem quickly.

experienced and describe situations in which the retailer made a good recovery and a poor recovery.

A. Listening to the Customer •

Customers can become very emotional over their real or imaginary problems with a retailer. Often this emotional reaction can be reduced by simply giving customers a chance to get their complaints off their chests.

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Store employees should allow customers to air their complaints without interruption.

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Customers want a sympathetic response to their complaints.

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Employees also need to listen carefully to determine what the customer perceives to be a fair solution.

B. Providing a Fair Solution

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Ask students why is it important for an employee to listen carefully to the complaint. Why is the best policy always to give the complaining customer what he or she wants? Do customers always know what they want?

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Favorable impressions arise when customers feel they have been dealt with fairly. When evaluating the resolution of their problems, customers compare how they were treated in relation to others with similar problems or how they were treated in similar situations by other retail service providers.

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Customers’ evaluations of complaints’ resolutions are based on distributive fairness and procedural fairness. See PPT 19-26

1. Distributive Fairness •

Ask Students: What is distributive and procedural Distributive fairness is the customer’s fairness? Which one is more important? Why? perceptions of the benefits received compared to their costs (inconvenience or loss). Customers want to get what they paid for.

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Customers typically prefer tangible rather than intangible resolutions to their complaints.

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Customers may want to “let off steam,” but they also want to feel the retailer was responsive to their complaint. If providing a tangible restitution is not possible, the next best alternative is to let customers see that their complaints will have an effect in the future. 2. Procedural Fairness

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Procedural fairness is the perceived fairness of the process used to resolve complaints.

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Customers consider three questions when evaluating procedural fairness: (1) Did the store employee collect information about the situation? (2) Was this information used to resolve the complaint? and, (3) Did the customer have some influence over the outcome?

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Discontent with the procedures used to handle a complaint can overshadow the benefits of a positive outcome.

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Customers typically feel they are dealt with fairly when store employees follow company guidelines. C. Resolving Problems Quickly

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Customer satisfaction is affected by the time it takes to get an issue resolved.

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Retailers can minimize the time to resolve complaints by reducing the number of people the customer must contact, providing clear instructions, and speaking in the customer's language. 1. Reducing the Number of Contacts

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As a general rule, store employees who deal with customers should be made as selfsufficient as possible to handle problems.

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Customers are more satisfied when the first person they contact can resolve a problem. 2. Giving Clear Instructions

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Customers should be told clearly and precisely what they need to do to resolve a problem. 3. Speaking the Customer’s Language

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Customers can become very annoyed when store employees use company jargon to describe a situation. To communicate clearly, store employees should use terms familiar to the customer.

IX. Summary

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Ask Students: What can retailers do to resolve complaints quickly? Is it always best to resolve complaints as quickly as possible?

ANSWERS TO DISCUSSION QUESTIONS AND PROBLEMS 1.

For each of these services, give an example of a retailer for which providing the service is critical to its success, then give an example of a retailer for which providing the service is not critical: (a) personal shoppers, (b) home delivery, (c) money-back guarantees, and (d) credit a) Personal shoppers are critical to the success of clothing department and specialty stores in that they can help customers find merchandise that might be otherwise hidden in the many isles and racks. On the other hand, personal shoppers are not needed in discount clothes stores, where people like to hunt through the racks themselves for their special deal. b) Home delivery is important in most online retailers. In this growing industry differentiation is needed. If a store can delivery quickly and carefully, this will definitely add to their success. However, delivery is not as important in strictly bricks and mortar stores selling smaller goods, like clothing, jewelry, books, etc. Customers can just walk in and pick up the goods themselves, with no need for delivery. c) Money-back guarantees are important are important in most retail industries to build customer loyalty. Gift retailers should focus on promoting money back guarantees, because it is possible the receivers of the goods will be returning them if disliked. A money-back guarantee is always a good idea with any retailer. d) Credit is critical in stores with high priced goods, like jewelry, or cars. Customers want to be able to buy on credit in order to pay for the goods over a period of time. However, store credit is not critical in retail stores that sell inexpensive goods, where the customer can most likely pay cash.

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Nordstrom and McDonald's are noted for their high-quality customer service, but their approaches to providing this quality service are different. Describe this difference. Why have the retailers elected to use these different approaches? In the chapter, we discuss to approaches for providing high quality customer service— standardization and customization. McDonald uses the standardization approach. Its service providers follow a set of rules and procedures when providing service. By strict enforcement of these procedures, inconsistencies in the service are minimized. Through standardization, customers receive the same food and service at McDonald’s restaurants across the globe. The food may not be exactly what customers want, but it is consistent. On the hand, Nordstrom uses a customization approach. It encourages service providers to tailor the service to meet each customer’s personal needs. This approach can result in customer’s receiving superior service. But the service might be more inconsistent because the service delivery depends on the judgment and capabilities of the service providers. The individual retailers use customer service to build customer loyalty and develop a sustainable competitive advantage. Good customer service keeps customers returning and generates positive word-of-mouth communications, which attracts new customers and a larger market share.

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Is customer service more important for store-based retailers or electronic retailers? Why?

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Customer service is the set of activities and programs undertaken by retailers to make the shopping experience more rewarding for their customers. The quality of customer service is very important for both store-based retailers and electronic retailers. For a store-based retailer, good service keeps customers returning to their store and generates positive word of mouth communication, which attracts new customers. The quality of customer service is particularly important for electronic retailers. Using shopping bots, customers can easily compare the prices for branded merchandise from different electronic retailers. The branded items sold by these retailers are identical. Thus the only way electronic retail can differentiate their offering and increase their profit margin is through the additional services they provide their customers.

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Providing customer service can be very expensive for retailers. When are the costs for providing high-quality services justified? What types of retailers find it financially advantageous to provide high-quality customer service? What retailers can't justify providing high-quality service? While student answers will vary, some examples are: 1) ATM machines, 2) bridal/gift registry, 3) coat/package checks, 4) community events/tourist information listings, 5) diaper changing/nursing facilities, 6) emergency paging, 7) employment opportunity information, 8) FAX machines, 9) first aid, 10) gift wrapping, 11) restaurant reservations, 12) lost and found, 13) postage centers, 14) restrooms, 15) shopping bags, 16) strollers and wheelchairs, 17) child care.

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Assume you're the department manager for menswear in a local department store that emphasizes empowering its managers. A customer returns a dress shirt that's no longer in the package in which it was sold. The customer has no receipt, says that when he opened the package he found that the shirt was torn, and wants cash for the price at which the shirt is being sold now. The shirt was on sale last week when the customer claims to have bought it. What would you do? I would first inspect the merchandise to determine if the shirt was torn. If indeed the shirt was torn when the customer opened the package, it is unlikely that he would have worn it. If the shirt appeared to be worn, I would assume that the customer was attempting to be deceitful; but I would still convey the goodwill of the store by offering the customer the opportunity to exchange the merchandise or accept a store credit at the sale price. If however, the customer was someone who I knew to be a loyal repeat customer, I would simply accept the return and give him what he was asking for. If the customer is unfamiliar to me or is known for making questionable returns, I would stick to the offer described above or not accept the return at all if he was unwilling to accept my offer.

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Citibank found that chat rooms were not an important service for customers of its electronic banking offering. However, the Wedding Channel, an electronic retailer targeting couples about to get married, found that chat rooms are an important service for attracting customers. Why did these retailers have different experiences with the use of chat rooms? The retailers have different experiences with the use of chat rooms because of the merchandise they are offering. Citibank, an online credit card company, caters to individual customers and their accounts. There is no need for the customers to chat about how much credit they are getting.

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All questions can be handled with their customer service department. The chat room did not add any value to Citibank because it did not attract any new customers. On the other hand, Wedding Channel, an electronic retailer targeting couples about to get married found the chat rooms to be useful. Customers want to write in and chat with other people in their same situations or those who able to provide expert advice about weddings. Given the complexity and costs as well as the fact that for most people, weddings are a very memorable life event, customers would be anxious to get as much information about organizing their weddings and ensuring that nothing would go wrong. Chat rooms thus provide the personal counseling that is need by visitors to the site. Moreover, visitors can seek answers to even very specific questions.

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Gaps analysis provides a systematic method of examining a customer service program's effectiveness. Top management has told an information systems manager that customers are complaining about the long wait to pay for merchandise at the checkout station. How can the systems manager use gaps analysis to analyze this problem and suggest approaches for reducing this time? GAP One exists when there is a difference between customer expectations and management’s perceptions of customer expectations. In this case the manager needs to do marketing research to determine what amount of time customers are willing to wait in line to pay for merchandise. If the manager finds out that customers are willing to wait in line for five minutes and management thinks that they are willing to wait in line for ten minutes, then a GAP One situation exists. GAP Two exists when there is a difference between management’s perceptions of customer expectations and the specified service. If long waits in line are perceived by management not to be important to customers and the store does not implement measures to maintain short waiting times in line, then a GAP Two situation exists. GAP Three exists when there is a difference between the specified service and the delivered service. In this case, if management thinks that customers are willing to wait for ten minutes, but in reality they usually have to wait for fifteen minutes, then a GAP Three situation exists. GAP Four exists when there is a difference between the delivered service and the retailer’s communication about service. In this case, if Kmart advertises that there is no waiting in line at their stores, but in reality when customers come to the stores there is a long wait, and then there is a GAP Four situation.

8.

How could an effective customer service strategy cut a retailer's costs? Ninety-one percent of customers dissatisfied with a firm’s offering may never buy from the firm again. In addition, these dissatisfied customers will tell nine other people, on average, about their unsatisfactory experience. The Customer Service Institute estimates that it costs five times more to acquire a new customer than to generate repeat business from present customers.

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9.

Employees play a critical role in customer perceptions of quality service. If you were hiring salespeople, what characteristics would you look for to assess their ability to provide good customer service? Employees should have a neat appearance. Customer will be more receptive to a salesperson that looks “together,” as opposed to someone who does not. Moreover, employees should appear trustworthy, knowledgeable about the product, and friendly to the customer. Recognition of regular customers, notes sent to customers, answering questions, returning calls, showing interest, and providing individual attention are key characteristics that continue to make customers return.

10.

Consider a recent retail service experience, such as a haircut, doctor’s appointment, dinner in a restaurant, bank transaction or product repair (not an exhaustive list), and answer the questions below: a) Describe an excellent service delivery experience. b) What made this quality experience possible? c) Describe a service delivery experience in which you did not receive the performance that you expected. d) What were the problems encountered and how could they have been resolved? Students’ answers will likely vary quite a bit here to provide a rich basis for discussion of excellent and poor retail service experiences. Students’ answers should consider some of the cues used by customer to evaluate retail service: 1) Tangibles: appearance of store; display of merchandise; appearance of salespeople; 2) Understanding and knowing customer: providing individual attention; recognizing regular customers; 3) Security: feeling safe in parking lot; communications and transactions; treated confidently; 4) Credibility: reputation for honoring commitments; trustworthiness of salespeople; guarantees and warranties provided; return policy; 5) Information provided to customers: explanation of service and its cost; notes sent to customers informing them of sales; assurances that a problem will be resolved; 6) Courtesy: friendliness of employees; respect shown to customers; interest shown in customers; 7) Access: short waiting time to complete sales transaction; convenient operating hours; convenient location; manager available to discuss problems; 8) Competence: knowledge and skillful employees; customer questions answered; 9) Responsiveness: returning a customer’s call; giving prompt service; 10) Reliability: accuracy in billing; performing service at a designated time; accuracy in completing sales transaction.

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Students should identify the steps a retail employee should take to handle customer complaints. There are several steps that salespersons can take to handle a customer complaint successfully: 1) Listen carefully, sympathetically, and without interruption. 2) Express regret for an inconvenience suffered. 3) Reassure the customer that the firm wants to do what is fair. 4) Talk issues about which there is agreement. 5) Inquire, investigate, and examine to get the facts. 6) Try to get agreement on responsibility for the problem. 7) Take action as quickly as possible. 8) Educate the customer to avoid future problems. 9) Follow through to make sure that the agreed upon action has been taken.

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