Whatever your job role in the business to business arena, you have customers.
Whether they are external, an end-user, perhaps a large retailer or an internal customer, such as a colleague in the warehouse or in the procurement office, they are all customers. Whether you are a supply chain manager or a customer orders assistant, you are all part of the cycle of service excellence.
Consider a global manufacturer that employs thousands of people, perhaps only five per cent of the employees will ever regularly interact with an external customer, for example, sales or commercial employees. This leaves 95 per cent of the business remote from the external customers. However, everything you do with both internal and external customers impacts on business success as our external customer service is an eventual output of our internal customer service.
Until the 1990s, many organisations thought of customer service as an activity solely concerned with the resolution of customer problems. It was often characterised as customer care. As such, most organisations were both reactive and passive towards customers. Activity was mainly directed towards cost control and, as a function, customer service tended to be both neglected and starved of resources; including human resources.
Now, most successful businesses–and those that have ambitions to remain successful–recognise that excellence in customer service forms an essential element of their strategy. Success in today's highly competitive environment is built on many foundations and organisations that ignore the importance of customer service do so at their peril.
How do you manage your key customers?
Successful businesses categorise customers into different types.
Think about the approach of Johnston and Clark (Robert Johnston and Graham Clark, Service Operations Management: Improving Service Delivery, FT/Prentice-Hall, 2nd edition, 2005, p72.) This categorises customers in the following ways:
�2 External versus internal customers;
�2 Intermediaries versus end-users;
�2 Valuable and not-so-valuable customers.
External vs internal customers
In many sectors, particularly for end-user services such as banks, it is usually clear who the customer actually is.
Johnston suggests that customers are the individuals, or groups of people, external to the organisation, who are receiving and often paying for the service. Another approach is that of Roger Tunks (Fast Track to Quality, McGraw-Hill, 1992.)
He defines the external customer simply as the one outside the company who receives the final product or service. This is acceptable as far as it goes, but perhaps does not discriminate adequately between those who receive the product or service and pay for it, and those who receive the product or service without payment.
Internal customers, by contrast, are individuals, or groups of individuals, who are a part of the same organisation–but from a different unit or function–they are often your colleagues.
Their common feature as internal customers is that they receive a service from others within your organisation, such as the Human Resources or Information Technology functions. In supply chain organisations, apart from retailers, often the majority of employees support the few customer-facing staff therefore having predominantly internal relationships.
In recent years many service improvement programmes for organisations, aimed at enhancing the service experience for external customers, have found it worthwhile to concentrate resources initially on creating a positive, customer-focused culture amongst the internal service providers. This is because there is now widespread recognition for what Johnston calls the internal service rule. Namely, the level of external customer service will never exceed the level of internal customer service.
Intermediaries vs end-users or consumers
In some sectors, the product or service provider does not deal directly with end-users. Instead they work in partnership with B2B customers such as wholesalers, distributors or agents.
Such traditional arrangements have begun to change, however. This is seen in the financial sector, for example, insurance companies have set up their own direct-to-customer operations. They want to reduce the transaction costs for commodity-type services such as car insurance; and also they would like to create direct relationships with their end-user customers.
Direct-to-customer operations are now much more technologically feasible via the Internet and, in some cases, have been developed in response to changing customer expectations. Many manufacturers now find themselves dealing with end consumers through customer care departments established to gather feedback from end-users about their experience of the manufactured products.
Product companies are also following an outsourcing trend. Common intermediaries are the third party logistics service providers who carry out activities like transportation and manufacturing operations on behalf of the product companies. Developing relationships with our customers is made even harder now that third party companies delivering our products may have more real contact with our customers than we do!
Valuable and not-so-valuable customers
Commercial organisations will normally prioritise their service towards customers who can create the most value for the organisation. High-value customers are identified by assessing their lifetime value.
Typically, they spend more and their spending increases over time. They may also be prepared to pay premium prices. Understanding this concept helps some enterprises to treat their customers with respect. It encourages them to invest in customer service while not focusing too much on the profitability from each separate customer transaction; what counts is the customer's lifetime profitability to the business.
Valued customers are those who are positively disposed to the organisation and thus easier to deal with.
Servicing such customers becomes less costly with time. They often function as what Frederick Reichheld (Loyalty Rules, Harvard Business School Press 2001) calls "active promoters"–providing positive, word-of-mouth advertising for the organisation to their colleagues and friends.
Some businesses define their customer service model according to this, identifying each customer as A, B or C with A-rated customers receiving the best customer service from that supplier.
Continued next week
Stephanie Edwards is director, Customer 1st Caribbean Ltd and facilitator at the UWI-ALJGSB. She will be tutor for the online programme, Award for Customer Service Professionals over eight-weeks from June 29-August 24, 2015. See here: http://bit.ly/1EieMqT or call 645-6700 ext 367 or email: openenrolmen t@lokjackgsb.edu.tt