What's Happened to Customer Service?

Understanding your customers is becoming a complex task for most organisations in the 21st Century; not just because market segments have become a highly complex multi-dimensional matrix of customer types – but because most organisations no longer see customer service as a primary factor in organizational growth – more as a minimalistic requirement in their quest for profit maximization.

 

This approach to customer service has been developing since the 1980’s – when organisations started to take advantage of ‘customer loyalty’ built up since the end of the Second World War. Once an organization has a loyal customer base – it’s easy to see how some high ranking individual with dollar signs in their eyes – could see this group of people as easy prey for making a quick buck – and hence the slide in customer service began.

 

Of course the customers partly encouraged this behavior because, even when they suspected the world might have changed and that they were now being fleeced for their money, they still kept loyal to the brand. Some customers might send letters to the CEO expressing their dissatisfaction – but as long as they received some potentially believable apology, they would quickly forgive and continue their loyalty – because for years prior to this they had received great service and quality, so how could this have changed.

 

Customers just didn’t see the complete change in business and the associated ethics and didn’t realize that the quest for long term sustainable success and growth through dedicated customer care was a business school theory rarely practiced in the ‘new world.’

 

Generationally this had a huge impact on differing customer views to purchasing and the concept of loyalty. The young generation – not used to doing deals on a hand-shake and the concept of customer loyalty – entered the world of consumption like a duck to water, not expecting good customer service and quality products, and just looking for the best deal. They knew how to use ‘new’ technology to find that best deal and simply felt this was how business is done, and how it should be done.

 

The slightly older generations – those now in their 50’s and above – still remember a time when being someone’s customer actually meant something and hence many of these customers still long for those good old days – and in a way, with today’s seemingly constant market volatility – so should today’s organisations.

 

Customers are your business – they define your growth, your profitability and your sustainability – everything else is developed around them. This current short term view to business – brought about in no small measure by greedy shareholders has not helped anybody – and definitely not the average shareholder, looking to make money over the long-term not the short. In fact the only people this new approach to treating customers has helped is the institutional investors who don’t give a damn about anything more than making more money today than they did yesterday – regardless of whose expense that comes at. It’s not that they just don’t care about organisations, they don’t care about their employees or their customers – they just care about making an extra buck – whatever the cost of that buck might be to ‘normal people’ through their long term savings or pension schemes.

 

In this global business environment what today’s organisations need, as well as the countries they service in terms of taxes and employment, is sustainability (it doesn’t even need to be sustainable growth). To have sustainability you do have to have the right product at the right price, and to be innovative in your offerings, in terms of future needs – but what you should also want is a loyal, ‘sustainable’ customer, who will stay with you on your journey and during that journey help attract new customers to your products and brand – offering a win-win for everyone involved in the business process.

 

Michael Porter wrote about competitive advantage in his book of the same name – but few organisations consider competitive advantage any more when it comes to their strategic thinking around customers and customer service. Maybe it’s the fault of their boards or their advisors, but industries with high churn rates, like telecoms, energy and even gym membership – seem to be significantly more focused on short-term profit maximization that long term sustainability – much more than creating that elusive concept loyal customer in the 21st Century.

 

Organisations through their CRM strategies have turned today’s customers into what they are – it’s not the customers fault – they are what business have made them to be.

Are Organisations Looking After Elderly Consumers?

Back in 1984, Charles Schewe mentioned in an  article that “the usefulness of ‘minorities’ as a means of segmenting markets has been a fertile area for market researchers for many years, but that they have largely neglected the elderly, those consumers over the age of 65. Marketers have failed to fully explore or understand the dimensions, character, and potential of this market. Furthermore, marketing activities directed specifically at this ‘older’ market seem to be a missed opportunity of sizeable importance. From a sales and profit potential, the elderly market is well worth the research effort necessary to secure accurate information about how to satisfy them. The elderly constitute a significant and growing market, where women outnumber men 3 to 2 and only 5 per cent of these seniors live inside institutions. Only 10 per cent of them live with children. Household size logically is reduced as is full-time employment. While health is generally poorer, only about 15 per cent require special health or social services. The elderly are not poor. Per capita income in households headed by 65+ persons is but 7 per cent lower than the general population average; and it has been estimated that the elderly need only about 60 to 80 per cent of former income to maintain their standard of living, and are given to ‘dis-save’ rather than to hold on to their assets.”

 

Nearly twenty years later in 2003 research by Yany Gregoire highlights that little has been done to address the ‘elderly consumer’ both from a strategic, service and product focused perspective. In fact if you read academic articles on this subject most still site references going back to the 80’ and early 90’s because so little seems to have been done since then.

 

Part of the problem is that you have to be ‘elderly’ to understand this segments needs and concerns; and if not elderly you have to have been performing the role of a carer to even start to understand all the dynamics that are going on. The problem is that you have young minds trying to imagine their older counterpart and in my experience, as a carer, missing their needs, expectations and hence the opportunities by a mile.

 

It’s worth remembering that the over 65 age group is a significant market size now, and is just going to grow in size in the future becoming a ‘powerful’ market force to those that can learn to understand their needs and communicate with them effectively. The steps behind the theory are no different to any other target-market segment, you must understand their expectations and create the products and/or services meet them.

 

Another part of the problem I’ve noticed is that many ‘front-office’ staff simply don’t have the patience to deal with this ‘target-market’ – so as they show their frustration, their customer either walks away or hangs-up the phone and the potential sale is lost. Worse still this customer segment will not forget and will not engage with that firm again – contrary to what many seem to think, this age group are very ruthless when they receive poor service (whether real or perceived) and yet can be extremely loyal to the company or individual that gives them the service they need.

 

Two key facts are that, firstly this is already a huge lucrative market segment that is only going to get bigger – so it’s worth making some effort to listen to their needs and attract their custom; and the second fact is that, if you’re lucky, you’ll be that age one-day so treating people like you’d like to be treated is an old axiom worth remembering.

 

Organisations are missing out on real opportunities within this ever growing target-market and hence are leaving the door open for sme’s and entrepreneurs with the right vision and patience, to carve out a nice little niche for themselves – which if developed correctly will give them a loyal and growing customer base, and a sustainable business going forward.  

 

References

 

Charles D. Schewe. (1984). Buying and Consuming Behavior of the Elderly. Findings From Behavioral Research. Advances in Consumer Research. Vol. 11, p.558-562.

 

Yany Gregoire (2003). The Impact of Aging on Consumer Responses: What Do We Know? Advances in Consumer Research. Vol. 30, p.19-26.

What Drives Your Competitive Landscape?

One of the key questions in competitive dynamics research is ‘how’ firms facing the same industry environment act and react differently with each other. What has been overlooked, however, is ‘why’ firms facing the same industry environment act and react differently. Identity domain theory begins to provide an answer: what is ‘objectively’ the same may not be the same to managers of all firms competing in the industry, since certain competitive arenas are more important than others, above and beyond purely economic considerations, (p.50).

 

Scott Livengood and Rhonda Reger highlight how, “within the competitive dynamics research stream, ‘the awareness-motivation-capabilities (AMC)’ perspective has been championed to explain the antecedents to competitor actions and reactions. Specifically, awareness, motivation, and capabilities have been posited to be three key drivers of inter-firm rivalry. And as Chen argued, as far back as 1996 competitive action is predicated on three conditions: the extent of awareness, the level of motivation, and, finally, the capability to respond,” (p.49).

 

Researchers taking a cognitive approach to strategic interactions have focused on management’s scanning and interpretation of the external environment to form conceptions of competitive interactions or competitive space, rather than on the actions and reactions themselves, (p.50).

 

Yet what continues to surprise me is how little organisations often actually know about their competition, even in respect of simple things like their products, their pricing, their target markets, their competitive advantage and many other key features that an organisation should want to know about those organisations competing in their markets.

 

Competition is healthy in the global business world as it gives customers choices and ensures that organisations are continually striving to improve their product and service offerings, or at least they should be.

 

Global monopolies do exist, but in many instances come with reasonably tarnished reputations of poor customer service, excessive pricing and very little product development. While these monopolies may feel secure, they should be aware, if not already, that many of their customers would leave in an instance if a competitor entered their market even, initially, if it meant paying more.

 

In the normal business world, competing organisations can be a threat, but only if you allow them to be. The advantage of competitive organisations is that they can help point you in the right direction and become a benchmark to assess and measure your own performance.

 

In seeking best practice solutions to their competitive environment organisations need to take the appropriate steps to;

 

·       Identify their direct competition;

·       Identify their indirect competition;

·       Identify areas of superior and inferior performance, in line with customer value propositions;

·       Identify why customers prefer to buy from their competition (by asking them);

·       Identify the barriers to entry and be alert for new entrants;

·       Benchmark themselves against their competition;

·       Develop proactive and dynamic competitive strategies as part of the strategic process.

 

Once an organisation has assessed their competitive environment and have a formal internal system for reviewing the competitive landscape, they should also review and discuss how their management team responds to this competitor information and whether they are making optimal strategic decisions that allow them to ‘shape’ their competitive landscape or simply responding in a reactive manner to changes in their competitive environment.

 

A new look at competition in light of the cognitions of managers and the powerful forces involved with creating and defending a firm’s identity domain can help us understand why managers behave the way they do when making strategic decisions to guide the firm, (Livengood, R.S. and Reger, R.K., 2010, p.59).

 

References

 

Brownbill, N. (2012). Be the Best in Business. Amazon.

 

Chen, M. J. (1996). Competitor analysis and interfirm rivalry: Toward a theoretical integration. Academy of Management Review, Vol. 21, p.100-134.

 

Livengood, R. S., and Reger, R. K. (2010). That’s Our Turf! Identity Domains and Competitive Dynamics. Academy of Management Review, Vol. 35 Issue 1, p.48-66.

Getting Real Value from Customer Value Propositions

A 2004 survey by Strativity concluded that 50% of salespeople don’t actually know what features and benefits actually justify the prices of the products and/or services they sell, (D’Aveni, 2007).

The Customer Value Proposition (CVP) allows organisations and their sales people to complete a detailed review of the products and/or services they offer and compare these to their competition. Of course, in order to complete a CVP you must first ensure that you have a detailed understanding of your customer’s requirements and expectations.

A CVP compares your product and/or service offering with the next best alternatives and looks at four distinctive areas;

1. Positive points of difference – which lists the features that are superior to the next best alternatives;
2. Points of parity – which lists features that are comparable with the next best alternatives;
3. Negative points of difference – which lists the features that are inferior to the next best alternatives; and
4. Points of contention – which lists the features where you disagree with your customer about the benefits of these particular features. Where in some cases you may consider them superior to the next best alternatives and your customer disagrees, or just as important where you may consider them inferior to your competition and the customer disagrees.

Developed correctly the CVP gives an organisation a clear picture of how their products and/or services compare to those of their competition. As with all business tools CVP’s are created in a dynamic environment - where you must look beyond the next best competitive alternative and assess all current and potential product offerings that directly impact your market. It’s better to analyse your product and service offerings against all competitors just to make sure that you are not over simplifying the analysis.

When considering benefits it’s important to consider both the tangible and intangible benefits and correctly interpret the customer’s perception of these intangible benefits, including what they are prepared to pay for them. Also, don’t assume what is ‘good’ for the customer today will be ‘good’ for the customer tomorrow.

CVP’s are used to show an existing or potential customer how your product and service offerings are better than the other alternatives and how your product is best for their needs.

Imagine the full potential, both internally and externally, of developing and understanding your CVP’s and how these can be transformed into a very powerful presentation for your existing and potential customers? You will not only show that your organisation understands your customers needs but also how your product and/or service will exceed their requirements. Also you convey, through the depth of knowledge and research, that you are fully aware of the current market and all the alternative offerings.

Finally, remember that “each value proposition must be;
1. Distinctive – must be superior to those of the competition;
2. Measurable – all value propositions should be based on tangible points of difference that can be quantified in monetary terms; and
3. Sustainable – the company must be able to execute their value proposition for a significant period of time. (Anderson, Narus, and van Rossum, 2006, p.98)”

Customer Value Propositions exist in a dynamic world and must be reviewed and developed on a regular basis, so that they continue to add value to your organisation and your customers.

References

Anderson, J.C., Narus, J.A. and van Rossum, W. (2006). Customer value propositions in business markets. Harvard Business Review, March, p.91-99.

D’Aveni, R.A. (2007). Mapping your competitive position. Harvard Business Review, November, p. 110-120.