Customer Service Dimensions PDF

The Customer Service Dimensions Chapte r 2 By Martin Christopher  Mission of Logistics Management Proving the means whereby customer services requirements are met. Everybody in the supply chain/organization has a stake in customer service no matter close...

The Customer Service Dimensions Chapte r 2 By Martin Christopher  Mission of Logistics Management Proving the means whereby customer services requirements are met. Everybody in the supply chain/organization has a stake in customer service no matter close or distance away from the marketplace The Marketing and Logistics Interface The Four P’s – Product, Price, Promotion and Place ‘Place’ – “the right product, in the right place at the right time” “Place” was rarely considered part of mainstream marketing This view is changing as “customer service” become main differentiator  Why Customer Service is the main Differentiator A. Continual Development of customer expectation - Unless one is particularly expert it is difficult to use product features as the basis for choice B. Inexorable transition towards ‘commodity’ type market a) The Power of the brand declining b) Technology is available to all c) Differentiation through product differences Imagine you’re looking to buy a new smartphone. Here are some features you might see listed: Processor Speed: 3.0 GHz RAM: 8 GB Camera: 108 MP Battery Life: 24 hours If you’re not an expert in technology, you might find it hard to understand how these specifications will affect your daily use. You may not know how much faster 3.0 GHz is compared to 2.5 GHz or what difference 8 GB of RAM makes in real life. Instead, you might consider: 1.Brand Reputation: You’ve heard good things about Brand A because your friends have had positive experiences with it. 2.User Reviews: You read reviews online where people say that the camera takes great photos and the battery lasts a long time. 3.Price: You compare prices and see that Brand A is competitively priced.  What is Customer Service Customer service is to provide ‘time and place utility’ or ‘Availability’ Customer service is determined by the interaction of all the factors that effect the process of making products and services available to the buyer. Lalonde and Zinszer’s study on customer services: – Pre-transaction elements – Transaction elements – Post-transaction elements  Typical Customer Services Pre- Transaction Post- transaction transaction Stock availability Order fill rate First call fix rate Target delivery On-time delivery Customer dates complaints Back-orders by age Response Returns/claims times to Shipment delays queries Invoice errors Product substitutions Service parts availability  Customer Service vs. cost Reduction Product development, promotional activities and price competition are not sufficient for competitive advantage Cost reduction is worthy goal as long as it is not achieved at the expense of value creation Low cost strategies may lead to efficient logistics but not to effective logistics  Customer Service and Customer Retention Theodore Levitt “ People don’t buy the products, they buy benefits” Since core product becoming commodity, the service surround creates the retention of customer Companies compete only on the product’s features will find themselves at a severe disadvantage The idea is to create such a level of satisfaction that customer do not feel to consider alternative and be retained ⮚ Retained customers are more profitable than new customers. ⮚ Costs less to sell ⮚ Give more business Creating Service Driven Logistics System A system that is designed to meet defined service goals. It would be wrong to reengineer logistics system purely to achieve internal requirement such as cost reduction Identify customer service needs Define customer service objectives Design the logistics  Identifying Customer Service Needs Two customer will never be exactly the same in term of their service requirements However customer fall into groups or ‘segment’ which are characterized by a broad similarity of service needs Company measures of performance may not reflect the thing customer value i.e. ‘stock availability’ , ‘On-time deliver’ Market research is needed to understand customer segmentation based on service requirements The approaches to Customer service segmentation 1. Identify the key components of customer service as seen by customers themselves. 2. Establish the relative importance of those service components to customers. 3. Identify ‘clusters’ of customers according to similarity of service preferences  1. Identifying the Key Components of Customer service Common mistake – “We Know what our customer want” Steps: Research to identify customer needs – Identify who ideally makes the purchase decision They are the samples for survey Answer can be supplied by sales forces – Conduct Pilot Survey. In order to know- Required services in the language of customer Importance of customer service vs. other three “P”s Relative importance of the required services according to customers  2. Establishing the Relative Importance of Customer Service Components Survey of the representative samples in order to know the ranking of the service components – Numbers and differences of choice for components make individual rankings incomparable due to huge permutation – 1 to 10 points ranking allows customer to rank all components at high level 3. Identifying Customer Service segments Identifying any similarity of choice of importance of service components by a group “Cluster Analysis” – is a computer based method for looking across a set of data and seeking to ‘match’ respondents across as many dimensions as possible  Defining Customer Service Objectives In developing a market driven logistic strategy the aim is to achieve ‘service excellence’ in a consistent and cost-effective manner The perfect order is achieved only when each of the service needs are met to the customer satisfaction Example: “On time, in full and error (OTIF) (Documentation error, label damaged etc.) free” Two types of decisions (target): – How much service to provide – To whom to provide  The ‘Pareto’ or 80/20 rule “80% of the profits of the business come from 20% of the customers”  Managing Product Service Level using 80/20 rule Quadrant 1: Seek cost reduction – Reexamine product and logistics costs to see if there is any scope for enhancing profit Quadrant 2: Provide high availability – Hold them close to customer in sufficient quantities (high availability Quadrant 3: Review – Regular review for deletion from the range unless strategically important Quadrant 4: J.I.T. Typical Customer Services requires Standards to Set Order cycle time Delivery reliability – the elapsed time from – proportion of total orders are delivered on time customer order to Documentation quality delivery (customers’ – the error rate (on viewpoint) invoices, delivery notes and other Stock availability docs) and ‘user friendly’ – the % of demand for a Claims procedure given line item that can – complaints and claiming ease, quickness, and ‘service be met from available recovery’ inventory. Order completeness Order-size constraints – proportion of orders delivered – Do we have issues to cope complete, with the range of customer i.e. no back orders or part demands ? shipments Ordering convenience Technical support – Are we accessible and – standards for call-out time and first-time fix rate on repairs easy to do business with? Order status information (customers’ viewpoint) – ‘hotlines’ for answering The End