MarketLoop #4, April 1997

Meeting Consumers' Rising Service Expectations

One of Through the Loop's areas of expertise is understanding how marketers are adapting to meet the evolving and more demanding requirements of consumers. This results from both marketers finding new ways of working, e.g. through technology to meet these requirements but also from the fact that the nature of consumers' demands is changing. It is clearly no longer sufficient to provide an "adequate" product or service but extending the offer beyond this can often lead to a sustainable competitive advantage.

The retail environment in the UK is changing rapidly in many ways. The battleground for the major retailers is continually shifting, offering new challenges and opportunities. One of the current areas of activity is the provision of improved customer service. Supermarkets and superstores, in particular, have been widely seen to have a poor level of service, especially when compared with smaller, more customer-friendly outlets. In some retail sectors, such as telephone banking and fast food, there have been developments in the service arena which have helped to raise consumers' expectations. These include home delivery, tailoring of the offer to individual consumers and opening hours. Such initiatives are leading the way in customer service. Consumers now expect service to be quick, courteous and tailored to their individual requirements. They can shop when they want to, bank when they want to and receive the appropriate offer, not the lowest common denominator. It is in this area where many retailers are now attempting to develop a positive differentiation away from their competitors. However, it is relatively easier for many retail initiatives to be quickly copied and so the objective must be to find a clearer differentiation.

While it has been traditionally difficult to quantify the impact of customer service on business success, recent research by the Henley Centre has shown that poor customer service does have a detrimental effect on company profit. This research indicates that the most common reason for losing customers is being out-of-stock of the right product. Other factors which are seen to be constituents of poor customer service include uncaring staff, lack of product information and a poor telephone manner. Furthermore, a survey by the UK trade magazine Retail Week at the end of 1996 showed that customer loyalty/service scored the highest rating (60%) amongst key company issues.

Accessibility 1990s Style

While the 1980s represented the superstore decade with retailers looking to build new out-of-town stores, the 1990s have seen the major retailers developing different store formats and opening hours for different shopping occasions or consumer types. There are a number of reasons for this:

• superstore saturation and planning difficulties

• time famine leads to consumers wanting to shop when they want to

• changing patterns of work

• polarisation of chore and pleasure shopping

• competition in traditional and non-traditional sectors

• technology drivers

The result is that the grocery multiples are adopting a much closer focus on the customer. In the UK, 24-hour shopping is offered through on-line or telephone ordering with delivery periods chosen by the consumer. While store opening until 10pm or midnight is now commonplace, we are also seeing the first 24-hour store opening for the major multiples. Sunday shopping is now commonplace and is very popular with consumers. All of these initiatives are clearly customer-focused allowing them to choose when they want to shop. Shopping times are no longer dictated by work hours or store hours but chosen by the consumer.

Extra Service Drives Added Value

In many ways, the concept of service has undergone a complete revolution. If efficiently implemented, the so-called loyalty schemes that are now so abundant will enable marketers to better understand their consumers and so target their marketing more specifically. This is, in many ways, a return to the days when a shopkeeper would know customers personally and would be able to make offers according to their shopping habits. The difference now is that database marketing allows this to be undertaken on a much larger scale. These loyalty schemes should be seen as far more than simply rewarding consumers for using a brand or for shopping in a specific store.

Elements of the customer interface should happen instinctively and are not an extra feature. For example, greeting the customer should be friendly, professional and genuine. "Good morning, how are you?" or "have a nice day" should be a natural turn of phrase, not the next line in the corporate manual. There is a basic level of service that is expected by the consumer.

While many companies are clearly taking a renewed interest in customer service, it is the extra layer of customer service that can provide an advantage over competitors. Customer service as an added benefit can be at the heart of a company's strategy. It forms one of the pillars of its image. Nordstrom, Marks & Spencer and Virgin Atlantic are good examples of this. In a retail environment, this can be translated into initiatives such as carrying shopping, packing bags, special advisory services or providing a crèche for children. Here again we can expect to see a 360° revolution with personal service adopted by more companies. This adds a "warmer" feeling to the shopping environment and displaces any "cold" associations of personalised selling.

The importance of staff training as a component of service provision cannot be over-emphasised. For example, Marks & Spencer announced that it was recruiting thousands of extra staff purely for customer service. This is critical for the company that has developed a reputation for a high level of service. The new recruitment will enable Marks & Spencer to maintain and enhance this reputation. Safeway in the UK has recruited 1,100 additional part-time workers as part of its "Queue Busting" scheme. The company promises to "take the hassle out of shopping."

An interesting approach is taken by Microsoft. The company faces a dilemma of having to provide service for millions of users who range from home users with one or two software packages to very large corporate accounts where users and purchasers are not the same person. Microsoft's response to this problem is to provide a multi-level service. This enables users to picks from a menu of service and support possibilities to suit their requirements and budget. All users receive a level of free support and assistance through built-in help, operating manuals and free telephone support. Additional to this are on-line support areas on the Web, magazines, Microsoft Advantage club and solutions providers for larger corporate customers. This provides a broad spectrum of service and support, enabling the best support at the lowest cost. The cost of the "free" support is charged back to the product groups and therefore encourages them to develop easier to use software.

Summary

Customer service is set to become the area in which companies will seek to differentiate and substantiate their offer. It is an essential feature of corporate identity and, as such, is crucial at a time when consumers have become more aware of corporate issues. Like all assets, they should be maintained and cultivated. Long-term customers are more valuable to a company than those who continually switch allegiance during promotional periods.

Therefore, it is vital that marketers understand the dynamics of this area of the marketing mix. Through the Loop has included the service element in some of its Best Practice work. This has shown how companies integrate the service elements and how they have adapted to the changing nature of customer service. What is clear is that those companies that embrace this element are best placed to enhance their relationships with customers, now, and most importantly, in the future.