Differentiating on customer service? What are the key issues?

Differentiating on customer service is seen by many organisations as a key element of their strategy. Converting a customer service strategy into customer service excellence holds many challenges. Colin Bates, Director of Customer Champions, examines the issues and challenges he sees as being most important and provides some empirical solutions.


Recent research by the Institute of Customer Service identified the following key facts:

  • 41% of business leaders expect the war for customers to intensify during 2012
  • 44% describe customer retention as being critical in their ability to achieve growth
  • 58% describe customer retention as vital to the sustainability of the business itself

Perhaps almost most interesting of all is that nearly three-quarters of them singled out customer service as a key loyalty driver, ranking it above product, brand reputation and effective sales and marketing.

To help cover the issues we have focused on customer service within the Retailing sector, but many of the points covered are highly applicable in other industries.

Industry Perspective

Simon Roberts, COO for Boots agrees with the Institute of Customer Service findings.

“Retailers that can secure more loyal customers are the ones that will win… For us it’s more about customer care than service. Competitive pricing and excellent products is vital – but we add value through the quality of care we provide through our colleagues.”

On the other side of the equation the large majority (83%) of customers identify the quality of service they receive as an important driver of their loyalty. Although it’s not all plain sailing as customers have developed a number of traits that retailers have to consider:

  1. Lower levels of loyalty / greater promiscuity
  2. Increasingly value aware, which should not be interpreted as simply lowest price
  3. Consumers invest more time in background research before purchasing higher value goods. This covers both formal research and the less formal, less structured use of social media – influenced by a wider network of sources
  4. Consumers are more likely to complain, either formally or through more informal channels such as social media
  5. Consumers want to decide for themselves which media to use to communicate with the retailer, so that may be a physical encounter or an electronic one, or a mixture, but the expectation is for a consistent response
  6. Consumers look for retailers to provide an end to end solution, ranging right from supporting their initial pre-purchase research needs through to the delivery of the product at home, possibly the installation and disposal of the old product
  7. With increasing pressure on consumers’ available time there is an increasing reliance on being able to trust their retailer of choice

Customer Service has been positioned by many as the great saviour and will allow retailers to differentiate, but are retailers really delivering against this changing landscape of customer needs?

Starting with the strategy

If Customer Service is to be chosen as the key differentiator, the starting point for any retailer has to be a clear vision of what they want their customers to experience and how they intend to deliver that to the standard required and in a consistent way. That vision is often provided by the business owner in small independent retailers and a senior executive in larger companies. Without this driving force, vision, and ethos any Customer Service strategy is likely to be seen as simply the latest in a long line of management initiatives. After all it is not only the front line staff that directly deliver the customer experience, it is every member of staff who is ultimately responsible for delivering the total customer experience, and so the total organisation needs to understand, support and deliver the customer focused approach.

Converting strategy into reality

Many retailers talk about the importance of Customer Service to their business, but so few actually deliver it. It is the same companies today that are recognised for exceptional customer service that were in this market place at the beginning of the recession. A recent Which? report did identify a few relatively new faces such as Lush and Lakeland for being recognised in delivering above industry standard Customer Service. Although Halfords came at the bottom of the list they were closely followed by a number of major brands, including Tesco. This message appears to have been received by Tesco as in March this year they announced that they would be creating 20,000 new jobs through a significant investment in Customer Service.

Operational impact

So, beyond having a strong strategy or ethos, what other key factors should retailers and other industries consider when looking to deliver an improved customer experience? Does the journey start with the recruitment of the right people? There has been an ongoing debate on whether companies should look to recruit people with inherent customer service skills or whether this can be provided through training.

Taking the Training Approach

Training does clearly have a vital role to play, but how this is delivered varies widely. The small independent companies tend to focus on “on the job training” with the owner leading by example. This clearly isn’t an option for larger companies where much more structured programmes are in place. Debenhams have an approach of training staff in key customer touch-points within the store and providing their employees with certificates for passing training programmes. Waitrose have a combination of distance based learning programmes and practical staff observation, where they provide near instant feedback on how staff can deliver a better customer experience. Bob Buiaroski of Vodafone notes that “Training is vital to ensure our agents can give customers what they want … we’re investing in the right people, processes and skills in order to win and sustain our customers’ trust”.

TGI Friday’s are another company who have seen the value of training their staff. As Commercial Director Darrell Wade put it at the end of 2011:

“The brand was tired, it was a bit old, people did not have pride in what they were trying to do.”

TGI Friday’s invested in changing that customer experience and training staff through a programme called Earn Your Stripes started to provide returns. The company’s satisfaction levels increased from 35% to 58% between 2006 and 2010. They also claim that sales growth for the business was tracking at 7.5% above the market at the end of 2011.

Reward Programmes

Training then needs to be followed up with continuous reinforcement of the importance of delivering an excellent customer experience. Reward and recognition programmes linked to the customer experience can vary greatly. John Lewis Partnership are frequently held up as a leading example of linking Customer Service to reward, but not everyone is in the position of being able to make their employees partners in the business.

One of the strongest statements in this area was when Carphone Warehouse made a significant change by moving away from rewarding their outlet staff on sales achieved and moving to customer satisfaction levels as the key determinant for bonus payment. This made a clear statement of putting the customer at the heart of their business rather than sales – with a strong belief that one leads to the other. In terms of recognition, Ryman conduct a regular mystery shopping programme and those stores achieving a 100% score receive a box of chocolates and a certificate to acknowledge their achievement.

Customer service throughout their journey

Delivering Customer Service is a continuous experience that really doesn’t have a start and end point. Those organisations who don’t see this tend to think of Customer Service being something that is delivered when the customer is in direct contact with them – by then it’s too late, they have already made significant decisions that haven’t been influenced by the company. The most effective way to think about Customer Service is to identify how the supplier can help the customer throughout their entire purchasing journey. Whether that is the initial pre-purchase research phase, just browsing in-store, at the point of purchase, or post-purchase and installation. The customer views their experience with that supplier as a continuous one even though the people and the channels they come into contact will vary.

As an effective tool Customer Journey Mapping identifies the key customer touch-points with the retailer and then identifies the experience that you want your customer to have. customer feedback, whether through surveys, mystery shopping, complaints, contact centre data, or social media, tell us how that experience feels in reality to the customer.

Switching channels in the journey

Customers increasingly mix and match how they have contact with companies. The experience may start online, move to bricks and mortar, switch back to online, and even blur the channels together. Retailers such as Marks & Spencer have recently announced how their use of technology in store is looking to enhance their customers’ journey and experience. They recognise that there is now clearly a blurring of channels that customers choose to use to both conduct research and make a purchase.

They are currently trialling a range of in-store technologies as it aims to link its stores’ base with other sales channels to drive better engagement with customers across an increasingly multi-channel business. The ‘Style Online’ initiative has been introduced as a pilot to “bring the best of M&S to your local store” and is focused on widening the fashion range and showcasing its sub-brands including Autograph and Limited. Style Online is an “integrated store proposition” that comprises physical samples of 60-70% of the ranges that are not available in-store along with interactive touch screen devices that show footage of catwalk shows enabling customers to put items together to create outfits, and lets them place orders for these goods.

Customers’ desire to mix and match channels throughout their purchasing journey means they are increasingly turning to the use of smart technology whilst in store. This trend has been recognised by Debenhams and Carphone Warehouse who have both recently announced the availability of free Wi-Fi in their stores. In Debenhams the service will enable shoppers to check for sizes and availability in-store and to arrange for a garment to be home delivered if unavailable. Customers will also be able to view store layouts and access a range of discount vouchers.

Greatest challenges of delivering Customer Service

If Customer Service does provide the opportunity for a significant differentiator in retailing, what will the challenges of the future look like? Our own research with retailers has highlighted that the key issues facing retailers in delivering Customer Service are many and varied but can be summarised as:

With customers having what seems like an ever increasing array of channels to contact the retailer through, how can that retailer ensure consistency of service? Not only is it likely to be different employees the customer interacts with, but it is also likely to be different systems, and in some cases different companies. For example when products are delivered to the consumer’s home this is often through a third party. How much control has the retailer got over the Customer Service experience at this point of the journey? Yet this could well be the final experience, and therefore most lasting memory the consumer has of that retailer.

For national organisations the combination of a relatively high turnover of staff and their geographical spread means that it is very difficult to ensure consumers have a similar experience no matter which outlet they visit, let alone which channel they chose to use.

There needs to be recognition across the whole of the business that everyone is responsible for the customers’ experience, and it’s not just down to the person physically serving the customer. There has to be a customer focused team behind them fully backing them up.

With more and more purchasing taking place remotely, we may eventually get to the situation where the first direct contact that the retailer has with their customer is when there is a complaint. This will surely have the effect of magnifying that experience and stretching many retailers’ complaints procedures.

The result

So can providing an improved level of Customer Service or customer experience help retailers survive and prosper? According to the Institute of Customer Service the most recent UK Customer Satisfaction Index shows that retailers with better Customer Service post strong sales results. Boots claim that every 5% increase in customer satisfaction delivers them a 1.5% increase in sales.

Take the next step

If you would like to discuss how to implement customer service as a key differentiator, please get in touch.

Further reading

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