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May 08, 2007

New Perspectives

Championship Customer Service

by Professors Larry Chonko and Buddy LaForge


In this month’s Academic Forum, Professors Larry Chonko and Buddy LaForge discuss ways to improve your customer service. Contact Larry and Buddy at professors@directsellingnews.com.

Buddy: In the March 5, 2007, article “Customer Service Champs,” Business Week presented its first-ever ranking of the best customer service companies. I was surprised that this was the first time this had been done, especially with all of the rankings available. In any case, I think the article presented some good ideas that should be of interest to direct selling firms.

Larry: Many direct selling companies do an excellent job in serving their customers.

Buddy: They certainly do. But one of the key points in the article is that the best customer service firms are always trying to improve. Customer service is often the best way for a firm to differentiate itself from its competitors, so customer service competition is an ongoing process. The best customer service firms do not rest on their laurels but are continuously looking for ways to serve their customers better

Larry: I agree. What are the keys to great customer service?

Buddy: Let me start with an example presented at the beginning of the article. An individual was taking a Southwest Airlines flight from St. Louis. The weather was bad, and the plane had several problems and stayed on the runway for more than five hours before taking off.

Larry:That sounds like what happened to many JetBlue flights recently.

Buddy:It is very similar, but the response at Southwest was much different. During the entire time on the runway, the pilot walked the aisles, providing information and answering questions. The flight attendants were attentive to the passengers and provided updated information about connecting flights. Two days after passengers returned home, they received a letter from Southwest acknowledging the situation, apologizing for it and providing two free, round-trip-ticket vouchers.

Larry: Wow! This is so different from how the JetBlue situation was handled. Many of the JetBlue passengers complained about not being informed about what was happening and why. I think the passengers finally got some free ticket vouchers, but this was not enough to overcome how badly the passengers felt they were treated during the ordeal.

Buddy:Interestingly, JetBlue was initially ranked No. 4 in the Business Week customer service rankings, but was removed from the rankings because of how their recent customer problems were handled. I think there are two important take-aways from the JetBlue and Southwest examples.

Larry:One has to be that no matter how good a firm’s customer service has been in the past, how customer problems are handled is extremely important. If JetBlue had handled these problems better, it would have reinforced its customer service image. Now, many of the good things they have done in the past are overshadowed by these recent bad experiences. Southwest, on the other hand, faced a similar problem, but responded proactively and strengthened its customer service image.

Buddy: That is certainly one key point. The other, I think, is based on one of my favorite sayings: “It’s people, stupid!” Notice how the Southwest pilots and flight attendants showed a real concern for the passengers and tried to keep them informed throughout the entire situation. This type of concern for passengers as people goes a long way. The little “people” things don’t cost anything, but have an enormous impact on customers. They are relatively easy to do, but few companies do them. So, if you do them, you will differentiate yourself in a positive way from your competitors.

Larry:That’s so true. What are some other key customer service points?

Buddy: One that I think everybody knows, but few really do, is that the companies that treat their customers the best also treat their employees the best. This includes various types of compensation as well as training and development. One example I found interesting was what Four Seasons Hotels does. Much of their customer service is provided by bellhops, front-desk clerks and housekeepers. These employees have little in common with the high-income guests typically staying at a Four Seasons Hotel. So to ensure that bellhops, front-desk clerks and housekeepers can empathize with guests, each new hire and guest is given a free night’s stay with free dining. These employees then grade the hotel on the services provided.

Larry:That is an interesting approach. This should really help these employees understand what it is like to be a guest at a Four Seasons Hotel.

Buddy:And, after six months of service, employees get three free nights a year, and after 10 years of service, they get 20 free stays!

Larry: At about $400 a night that is a pretty good perk. It should really help keep these employees happy and focused on customers when they’re working. Few firms do this, and few firms provide great customer service consistently.

Buddy: It is a big investment, but it does generate a big return in terms of customer and employee satisfaction and loyalty.

Larry: Speaking of customer satisfaction, are you familiar with the new approach being used by many firms to measure customer satisfaction?

Buddy:Are you talking about the net-promoter score?

Larry:Yes. Many companies, such as General Electric, Intuit, American Express and Enterprise Rent-A-Car, are using it very successfully. They find high net-promoter scores to be closely correlated with customer loyalty, and changes in these scores can be used to identify problems, especially with customer service.

The basic approach is to ask customers, “How likely are you to recommend us to a friend?” This is often done on a 10-point scale. Customers scoring 9 or 10 are promoters and those scoring 6 or lower are detractors. Scores of 7 or 8 are considered passive and not included in any calculations. The detractors are subtracted from the promoters to calculate the net-promoter score. Obviously, the higher the score the better. But changes in the score over time can be used to identify problem areas.

Larry: This is a relatively simple approach, but tracking net-promoter scores over time can provide useful information. If the scores are high and staying high, then customers are satisfied and future business expectations are good. However, current business could be good, but if the net-promoter scores are decreasing, there could be some customer service problems that might hurt business in the future.

Buddy: I know that General Electric uses net-promoter scores in all of their businesses and ties manager bonuses to the scores. GE Capital Solutions was doing well, but noticed that their net-promoter scores were going down. Management looked into the situation and found a major problem in loan processing that was making customers very dissatisfied. Changes were made to speed up the processing process. These improved services were well received by customers and net-promoter scores and business increased in the future.

Larry: I think direct selling companies could use net-promoter scores for their customers and independent distributors. This would help them keep a pulse on future recruiting and customer purchases.

Buddy: I agree. Talking to promoters and detractors can also generate useful information. We don’t have much space left, so let me share some examples of what the best customer service companies are doing. Good customer service must start at the top with executives trying to integrate people, management, technology, and processes to meet and exceed customer expectations. For example, the Vice Chairman of Cabela’s Inc. reads all of the comment cards from retail customers and hand delivers them to each department with the issues that need to be addressed circled. Managers at Enterprise Rent-A-Car cannot get promoted until their Enterprise Service Quality Index scores are above average for the company. Top executives at Raymond James Financial regularly attend the firm’s “Service 1st” events, which include luncheons and service-oriented motivational talks.

Larry:These are all excellent examples. If customer service is really important to a company, top management must “walk the talk” and continuously reinforce the customer service message.

Buddy: That is so important. Some companies are using technology to improve customer service. UPS is using global positioning system technology to send drivers to customers more quickly and will introduce a service that allows customers to reroute a package in transit to another address. At Nordstrom, salespeople have electronic access to the retailer’s entire inventory. They can help customers find desired products either in the store or online. Apple has created stores where customers make appointments online and then get in-person help at the Genius Bar.

Larry:Technology can be valuable, but only if used appropriately. Companies need to use technology to support the customer service strategy, not to replace it.

Buddy: I agree. Technology is great, but people often make the biggest difference. Wegman’s uses technology to handle much of the back office operations so associates can help customers on the floor. When disasters, such as tornados, occur, Amica Insurance keeps track of customers who have contacted them about claims. It then calls other customers in the area to make sure they are OK. Washington Mutual has a “concierge” at the front of the bank to assist customers as soon as they enter the bank.

Larry:These are all great examples and illustrate why these companies were selected as customer service champs. I hope our direct selling readers get some good ideas from these examples.

Buddy: I do, too. But, as we discussed earlier, many direct selling companies provide excellent customer service. Let me conclude with a comment about customer service that Doris Christopher from The Pampered Chef wrote for our principles of marketing textbook: “Selling a product is only the first step in building a relationship with customers. Many times when customers take home a product they are unsure how to use it. At The Pampered Chef we make sure this does not happen. At our kitchen shows, the customer has the opportunity to try the product before he or she buys it. We also ensure that once the customers get the product home, they know how it will meet their needs in the kitchen. With each product we provide easy-to-read instructions detailing how to properly care for and use it, along with recipes that utilize the product. Our Kitchen Consultants also offer ongoing customer service and support after the sale.”

Raymond (Buddy) LaForge is the Brown-Forman Professor of Marketing at the University of Louisville. Larry Chonko is the Holloway Professor of Marketing at Baylor University. E-mail your questions and comments to professors@directsellingnews.com.