Module 7: Adding Value Through Customer Service
1- Introduction
 There are two main roles in a retail organization: ‘directly serving customers, or serving the
people who do, so they can serve customers better
 Service quality has been defined as ‘the ability of the organization to meet and exceed
customer expectations
 The management of consumer services involves:
1. Renewing the service offering.,2- Localizing the point-of-service system. 3-Leveraging
the service contract. 4- Using information power strategically.
2- Customer Service Defined: four ways
1. The reason for the existence of a retail business.
 Retailers exist to provide service to their customers at a profit.
 The profit gained by retailers is achieved by providing their customers with add value to
the product purchased through their several functions such as marketing, supply chain,
breaking bulks,
 The better the service is, the higher the price that retailers can charge its customers
2. The provision of facilities, activities, benefits, environments etc. by a retailer as an
augmentation of the fundamental exchange relationship between merchandise
supplied and money taken.
 There are enormous services that can be provided to various customers of a retailer and
for its different formats such as: Trolley, accepting credit, bag packing, bag carrying,…
 Market segmentation has helped retailers to provide certain service to its customers for
each segment
 Profiling customer behavior also led to the development of category management. For
customers, category management reduces the time taken to make choices, while for
retailers it rationalizes the plethora of products and brands available in the market
3. The perception held by a (potential) patron of the likely provision of facilities,
activities, benefits, environments etc. by a retailer in support of the exchange
relationship and its continuation, or a patron’s experience of this ‘total purchase
package’.
 The expectations of customers will affect the service they receive from a retailer. For
example, a shopper in J Sainsbury plc will expect space, cleanliness, a welcoming, bright
environment, well-trained helpful staff, and shelves well stocked…. They are willing to
pay a bit more but if the service is not up to the standard they will be disappointed.
 A customer’s perception is created by either previous experience of shopping or
information on the retailer from the various marketing communication or shopping with
a competitor.
 Good example would be M&S when refused to accept credit cards, it lost many local
customers plus international ones.
4. The explicit provision by a retailer of:
a) post-purchase facilities for the alteration, customization, after-care etc. of products
sold;
b) A complaints-handling procedure.
 Many people equate good customer service with a no-quibble goods returns policy. This
type of policy encourages customer confidence in making the purchase decision, and will
tend to increase repeat purchases.
 Retailers recognise that customer service does not end when the customers leave the
store. By recognising post-purchase needs and behaviour, retailers encourage the
purchase decision, and profitably extend their relationship with customers.
 By listening to customers, retailers can generate improvements to merchandise mix,
operations and service. Customer complaints, if handled politely and promptly, can also
improve customer relations and generate customer loyalty.
3- Service Characteristics and their Implication for Customer Service
1. Intangibility
Means not being able to feel by touch
The quality of the service the retailer has provided in sourcing, displaying and selling the
product is assessed through perception, observation and communication.
2. Heterogeneity/ Inconsistency
Means in general “composed of parts of different kind”. Services can be experienced in
different ways on different occasions by the same consumer and can be experienced in
different ways by different customers in the same time. Retailers always work on reducing
the amount of heterogeneity by processes and using technology.
3. Perishability
Can be defined as “the opportunity to experience or to provide a service once passed, is
lost for ever”
4. Ownership :
 A customer can own a product but he cannot own a service
 The goods you take home, bags, receipts and guarantee documents (these are named
‘peripheral evidence’ when referring to the service marketing mix), represent the
quality of service experienced.
 Retailers try to reliably provide goods which accurately represent the quality of service
they want to provide for their customers.
 The peripheral evidence of purchase is also used to reinforce brand image. Reliability
of goods and service quality is a key means of developing trust between customer and
retailer.
5. Inseparability:
 Means that the service you experience as a customer is inseparable from the service
being provided by the retailer.
 This is why staff represents such an important cog in the wheel of service provision.
 Shop-floor staff’s attitude and training improve the customer service experience.
4- Improving the Quality of Customer Service
 Customer satisfaction on services provided is affected by both their expectations of the
shopping experience and the actuality of the experience.
 The main difference between service quality and customer satisfaction is that the former
relates to managing the quality of the service and the latter to customers’ expectation and
experience of the quality of service delivery.
 Therefore, improving customer service means delivering service quality improvements
which are customer defined. The SERVQUAL model can be used as a basis for considering
how to do this.
SERVQUAL – A Model for Improving Service Quality
 In this model, the service gap (gap 5) – that is, the difference between the level of service
quality which customers expect and the level they experience – is the result of four main
criteria:
1. gap between what customers expect and what managers think they expect – the
knowledge gap;
2. gap between what managers think customers expect and the standards of service they
specify – the standards gap;
3. gap between standards of service set by managers and standards of service delivered: the
delivery gap;
4. Gap between standards of service delivered and those communicated to the customer
(which create the customer’s initial expectations of the level of service which they will
experience) – the communication gap. The size of the service gap – between perceived
 According to this model, retailers can improve their service quality, and hence improve the
level of customer satisfaction, by closing or reducing the four gaps.
 This theory has been criticized, not least because it:
1. oversimplifies the relationship between customer and service provider;
2. Does not allow for the relationship between customer and service provider, which is an
integral part of the service experience.
Closing the Knowledge Gab
 The problem will frequently lie in the changing expectations of customers. These are
affected by a range of factors, including:
1. The customers’ experience of the retailer over time which can be overcome by the
periodical improvement of services
2. Their perception of the level of product and service quality offered by the retailer relative
to those of competing organizations.
 Managers can learn more about customers’ expectations and perception of service levels
through market research, including analysis of customer service data.
 They can spend time on a daily basis in direct contact with customers and shop-floor staff.
 They also need to act rapidly to implement improvements suggested as the result of
research and communication.
Closing the Standards Gab
 To close the standards gap, there has to be
1. A commitment from the senior management team towards service quality.
2. Reward system for service quality achievement will enhance commitment
3. The usage of technology to standardize the processes
Closing the Delivery Gab
 The gap between standards set and those delivered arises for a variety of reasons – for
example, unrealistic standards, lack of clarity in standards, poor communication of
standards and their purpose, weak staff motivation, poor supervision, lack of human,
financial or material resources.
 To close the gap we need to handle the reasons that caused the low delivery problem such
as:
– Involvement of staff in setting the standards
– Communicating the standards well
– Training program
– Encouragement program
– Motivating the staff
– regular and spot measurement of performance
– making sure staff have the technology, materials and equipment to do the job
– Putting in place good internal communications and internal customer service to support
customer-facing staff.
Closing the Communication Gap
 The information communicated to customers should accurately reflect the quality service to
be offered.
 The reason why the communication gap exists in many organizations is because promotion
is undertaken by a marketing department or agency. Therefore, the staff drawing up
promotional materials and messages are doing so in isolation from the realities of the shopfloor.
 Ways of reducing the internal communication gap
1. Shop-floor staff to be involved in the creation, content or approval of promotional
materials.
2. Involve marketing staff in operational duties.
3. improved internal communication through internal marketing, cross-functional teams or
shared training programs
4. focusing the content of promotional programs on key aspects of the retail offering
5- Managing Customer Service
Strategic Options: Standardization and Customization Strategies
 While standardized methods and machinery can improve the efficiency and effectiveness of
the service experience, customers want to feel special, and hence customization of service
to the needs of the individual is seen as the route to building and maintaining a secure
customer base.
Customized Service
 If standardization is the cornerstone of retail excellence, then customization is the key to
retail differentiation.
 In addition, the range of extra services available in some stores allows a degree of
customization to be available to self-service shoppers – for example, dropping off the
laundry in the grocery store, having a meal, buying petrol, child care, bag packing and so
on.
 The range of customization is expanding and hence there is a need for market research and
usage of information technology
Customer Service Strategies: Key Aspects of Managing a Consumer Organisation (Four
Keys)
1. Renewing the service offering:
 Retailers should be responsive to the customers’ and market changing demands through
service extension and enhancements.
 Proactive marketing research and altering the service in response is key in renewing the
service offering.
 Encouraging customers to express their problems can be the basis for enhancing and
differentiating their services.
 Another way that can help retailers is the periodical review of procedures and upgrading
service provision.
2. localizing the point-of-service system;
 According to the principles of service management theory, if customers are intercepted at
the time and place when a service is needed they will purchase the service. Hence, a
convenience store will attract customers when it is located near the customer, open at the
time the customer wants to shop and premium prices can be charged.
 Retailing is polarizing into destination and proximity formats.
 Destination is based on a merchandise mix, merchandise selection, and associated
quality and service levels which will attract customers from a distance
 Proximity is based on customer interception through locating where potential
customers naturally congregate
 To localize the point-of-service through Internet and mobile channels, retailers still have
to streamline logistics, delivery and returns services.
3. leveraging the service contract;
 This means establishing the basis for retention of customers, and raising barriers against
customers switching to competing service deliverers
 Managers have to focus on barriers to switching, such as extra point values, double
points and bonuses. Other barriers include promotional activities – advertising and sales
promotions – and partnerships with, or acquisition of, competing retail organizations.
 Loyalty card schemes reward all members equally according to the amount spent. While
this can increase customer spend, it is expensive to administer, and retailers also need to
focus on finding and retaining those customers who spend the most
 True loyalty exists when a customer remains loyal to the retail organization over a period
of time, despite price and other incentives to change. This type of loyalty costs time,
effort and expenditure.
4. Using information power strategically
 Retailers should encourage a listening culture using a variety of listening systems.
Observing the customer’s point of view is essential, and there are a variety of ways of
doing this, from market research to focus groups, comment forms and complaints
procedures.
 Superquinn, for example, has a rule that managers should do their household shopping
there once a month to see the shops through the eyes of the customer, and there should
also be encouragement of shop-floor staff to feed back information from customers
6-Implementing Good Customer Service in Retailing
 Implementation of good customer service requires management to view staff as internal
customers (and vice versa), and to give them the resources to meet customers’ needs
effectively and competitively.
 Managing in a retail organization includes:
 developing hard factors: the formal structure, processes and procedures which constitute
the business,
 Managing the ‘soft’ factors – the informal style of doing business.
 The ‘hard’ and ‘soft’ factors include the following:
 The soft factors are ‘people related’ rather than ‘process related’, and because customers’
perception of good service is so closely related to their interaction with the workforce, it is
especially important that retail managers recognize and manage the ‘fit’ of the informal
culture of the organization with the formal strategy and structure.
 Good communication, training and involvement of staff in the development of plans and
policies will tend to reduce conflict.
 Implementing the formal strategies, policies, processes and procedures requires managers
to:
 Communicate with staff : tell them your objectives and policies;
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 Train staff – make sure they know what the processes
 Give staff the support they need to succeed.
 Give them the right equipment and other resources to succeed.
 Give them adequate time to complete the set work.
A formal planning cycle for customer service should be established.
The organizational structure for customer service has to be set up.
Standards for key customer service tasks have to be developed and implemented through
communication with the staff concerned.
Training of staff in customer service processes and procedures should be arranged.
Staff have to be clear regarding how and when their performance will be measured and
controlled.
A system of reward will help to embed the required levels of customer service
Feedback on performance should be used in the development of new objectives
 The
management input to good customer service includes:
1. Adding value – encouraging staff to add value to everything they do, and leading by
example.
2. Giving ownership – assigning responsibilities and ownership for offering customers
excellent service to the relevant staff so that progress can be easily monitored by all.
3. Increasing staff creativity by encouraging them to take initiative and by allowing
mistakes in the pursuit of real progress and improvement.
4. Encouraging teamwork, because it improves communication and harnesses the abilities
and knowledge of staff to create synergy.
5. Investing in people – in addition to dedicated customer service training, all staff,
including managers, will benefit in terms of confidence and capability from constructive
appraisal and self-development opportunities.
6. Communicating – good formal and informal communication routes generate better
relationships among staff.