Why Customer Service Needs To Be More Than Mere Lip Service

Sept. 15, 2009
Offering the same level of customer support without a clear understanding of customer needs or a customer's importance to your business can erode profit margins.

Customer alignment, Customer experience, Customer centricity. Companies describe their focus on the customer in a variety of ways. Analysts talk about customer service as a part of an overall product experience, and research shows that the total experience a customer has with a company is more important than any single interaction. In fact, studies reveal that customers who have experienced top-notch service after a purchase are more satisfied and, therefore, more loyal than customers who never had a product incident that led to a service experience.

Aligning service with customer needs has been a marketing priority for decades. However, in an environment of shrinking technology gap between OEMS, increasing product commoditization, and rising customer expectations; creating superior post-market experience is becoming essential for companies looking for a competitive edge.

The current economic environment magnifies this need. Many companies are realizing the impact superior post-market service experience can have on the bottom line. A recent Harvard Business Review article titled, "Beating the Market with Customer Satisfaction," features a study by University of Michigan that showed the relationship between customer satisfaction and financial success. The authors note that the companies with high customer satisfaction scores have produced higher stock returns, and their stock values and cash flows have been less volatile.

Overcoming the Challenge of Aligning Customers and Service

Creating a superior post-market experience is easier said than done. As Customer Experience Maturity Monitor, a study conducted by Peppers & Rogers Group, SAS and Jubelirer Research points out, most companies feel challenged when it comes to understanding their customers' needs and behaviors.

One of the biggest challenges facing the companies is understanding that "not all customers are equal." Offering the same level of customer support without a clear understanding of customer needs or a customer's importance to your business can erode profit margins.

Second, while most companies put a lot of effort into measuring and monitoring customer-relevant metrics, (i.e. things that customers care about such as equipment availability, asset uptime and service level agreement (SLA) compliance, etc.); the weak link is in a companies' ability to clearly align customer metrics to operational metrics, metrics that indicate their operational performance such as parts-fill rates, first-call resolution, stock-out percentages and cost of service.

Lastly, disjointed processes and an insufficient technology infrastructure further hamper a companies' ability to provide a superior post-market experience. In most service organizations, warranty management, parts planning and field service operations are separate departments under different management and are measured by different metrics. An Aberdeen Group study has also shown that, in general, service organizations are technologically challenged with most companies dedicating less than 10% of the IT budget to post-sales service initiatives.

However, in today's economic climate, investments in technology to improve post-sales service initiatives are a difficult sell, unless there is a clear ROI. There are three steps that companies can take to make their service operations more customer centric while improving profitability.

Segment Customers Meaningfully

Not all of your customers have the same needs when it comes to service. Companies need to segment customers based on equipment availability and asset uptime requirements, and then create a portfolio of appropriately priced service products that align well with the needs of each segment.

A major aircraft engine manufacturer used analytics to price its performance-based service contracts. The company operated by selling asset uptime and equipment availability to its customers, not the actual equipment. The company faced challenges in delivering the high asset uptime customers demanded while maintaining profitability. The company analyzed terabytes of diagnostics data that spanned years of history to accurately determine when a jet engine would need repair and how much the repair would cost. Based on this data, the manufacturer was able to accurately price its service contracts for 10-year periods. The result was a consistent revenue stream in conjunction with sustained profits and SLA compliance.

Map your Customer-relevant Metrics to your Operational Metrics

Too many companies make the mistake of measuring for the sake of measurement. To ensure that you are measuring what matters, document and monitor the links between your customer and operational metrics so that you can clearly demonstrate how operational performance affects customer service. Work to answer questions such as, "What is the impact of improved parts fill rate on asset uptime or SLA compliance?"

One of the world's largest logistics providers wanted to achieve a customer service goal of answering at least 90% of all in-bound calls in its more than 50 call centers in under 20 seconds. In the United States alone, the company's call centers handled about 500,000 calls per day addressing a variety of requests. The company faced challenges in accurately forecasting call types and volumes as well as average handling times per call so that it could appropriately staff its call centers. Using analytics, the company was able to predict their call volumes within a 1-2 percent margin of error, which led to optimized staffing levels, training needs and overall call center budgets. By measuring to and managing its operational metrics of call volume, the company achieved its response goal, resulting in service level compliance and cost control in addition to respect and trust from customers both inside and outside the company.

Align the Service Organization Up and Down the Value Chain

In most services organizations the warranty management group is separate from the parts management division, which in turn is completely separate from the group that manages call centers and field service operations. Often these groups don't report to the same manager and are measured on completely different metrics that don't align. While companies talk about a closed-loop process, there are few who actually have had any success with it. The following example illustrates the benefits companies can gain from aligning disparate groups within the service operations, and connecting service operations up and down the value chain with adjacent functional areas such as design and manufacturing.

A large automotive manufacturer was trying to increase market share in a relatively new market by establishing a strong brand name and a superior customer service reputation. In operational terms, they were seeking high quality service coupled with a quick resolution of customer complaints and issues. One of their biggest challenges in achieving their goal of superior customer service was the time dedicated to warranty claims resolution. By using analytics on warranty claims data, the company was able to reduce issue identification time by 70%, thus reducing the claims resolution time from 174 days to 52 days. By sharing information on issues detected by quality engineers in production, the company was able to fix issues during the production stage, which reduced the number of claims. Warranty costs were reduced by 34% and customer satisfaction sky rocketed.

In the final analysis, companies operating successful customer-centric service organizations measure and monitor performance in light of its impact on customer satisfaction. Simultaneously, successful companies harness the power of their data to predict and optimize performance. The result? Organizational alignment that naturally creates customer satisfaction, higher profits and unbeatable brand loyalty. In times like these, that's a priceless combination.

Ritu Jain is the Industry Marketing Manager, Manufacturing and Supply Chain for SAS, a provider of business analytics software and services. http://www.sas.com

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