c hapter 11 p eople i ssues: m anaging s ervice c onsumers

COPYRIGHT ©2002 Thomson Learning, Inc. Thomson Learning is a trademark used herein under license.

ALL RIGHTS RESERVED.

Chapter 11

PEOPLE ISSUES:

MANAGING SERVICE CONSUMERS



CUSTOMER MANAGEMENT ISSUES

Managing customer participationManaging customer participation Managing customer waitsManaging customer waits Managing uncooperative customersManaging uncooperative customers Introduction to customer relationship Introduction to customer relationship

management (CRM)management (CRM)



MANAGING CUSTOMER PARTICIPATION

Facilitating co-production (transforming Facilitating co-production (transforming customers into partial employees)customers into partial employees) develop customer trustdevelop customer trust promote the benefits of self-servicepromote the benefits of self-service stimulate trialstimulate trial understand customer habitsunderstand customer habits



MANAGING CUSTOMER PARTICIPATION

Facilitating co-production (transforming Facilitating co-production (transforming customers into partial employees)customers into partial employees) pretest new procedurespretest new procedures understand the determinants of consumer understand the determinants of consumer

behaviorbehavior teach customers how to use service innovationsteach customers how to use service innovations monitor and evaluate performancemonitor and evaluate performance



MANAGING CUSTOMER WAITS

The Psychology of Waiting LinesThe Psychology of Waiting Lines Unoccupied time feels longer than occupied Unoccupied time feels longer than occupied

timetime Preprocess waits feel longer than in-process Preprocess waits feel longer than in-process

waitswaits Anxiety makes the wait seem longerAnxiety makes the wait seem longer Uncertain waits are longer than known finite Uncertain waits are longer than known finite

waitswaits



MANAGING CUSTOMER WAITS

The Psychology of Waiting LinesThe Psychology of Waiting Lines Unexplained waits are longer than explained Unexplained waits are longer than explained

waitswaits Unfair waits are longer than equitable waitsUnfair waits are longer than equitable waits The more valuable the service, the longer the The more valuable the service, the longer the

customer will waitcustomer will wait Solo waits are longer than group waitsSolo waits are longer than group waits



MANAGING UNCOOPERATIVE CUSTOMERS

Customers from Hell (Profile #1)Customers from Hell (Profile #1)www.customerssuck.comwww.customerssuck.com

Egocentric EdgarEgocentric Edgar appeal to his egoappeal to his ego demonstrate actiondemonstrate action don’t talk policydon’t talk policy

rephrase: “for you, I can …….(policy)”rephrase: “for you, I can …….(policy)” don’t let his ego destroy yoursdon’t let his ego destroy yours

http://www.customerssuck.com/




Customers from Hell (Profile #2)Customers from Hell (Profile #2) Bad-Mouth BettyBad-Mouth Betty

ignore her languageignore her language force the issue (hang-up)force the issue (hang-up) use selective agreement (with some statements)use selective agreement (with some statements)




Customers from Hell (Profile #3)Customers from Hell (Profile #3) Hysterical HaroldHysterical Harold

let him ventlet him vent take it backstagetake it backstage take responsibility for solving the problemtake responsibility for solving the problem




Customers from Hell (Profile #4)Customers from Hell (Profile #4) Dictatorial DickDictatorial Dick

break up his game (fulfill his request)break up his game (fulfill his request) stick with your gamestick with your game

be consistent with customersbe consistent with customers tell him what you can do for himtell him what you can do for him




Customers from Hell (Profile #5)Customers from Hell (Profile #5) Freeloading FredaFreeloading Freda

give it to hergive it to her don’t let the 1% dictate action for the 99% who don’t let the 1% dictate action for the 99% who

actually have problemsactually have problems



CRM is the process of:CRM is the process of: Identifying,Identifying, Attracting,Attracting, Differentiating, andDifferentiating, and Retaining customersRetaining customers

CRM allows the firm to focus its efforts CRM allows the firm to focus its efforts disproportionately on its most lucrative clientsdisproportionately on its most lucrative clients

CUSTOMER RELATIONSHIP MANAGEMENT



Reasons for CRMReasons for CRM The old rule that 80% of a company’s profits The old rule that 80% of a company’s profits

come from 20% of its customers.come from 20% of its customers. Customers have done it to themselves by opting Customers have done it to themselves by opting

for price, choice, and convenience over high for price, choice, and convenience over high quality service.quality service.

Priceline.com, Geico and a host of othersPriceline.com, Geico and a host of others Some believe service doesn’t really matter, it’s a Some believe service doesn’t really matter, it’s a

commoditycommodity




Reasons for CRMReasons for CRM Labor costs have risen yet competitive Labor costs have risen yet competitive

pressures have kept prices low. pressures have kept prices low. The end result is that gross margins have been The end result is that gross margins have been

reduced to 5 to 10 percent in many industriesreduced to 5 to 10 percent in many industries. . Markets are increasingly fragmented and Markets are increasingly fragmented and

promotional costs are on the rise.promotional costs are on the rise. Bass Hotels & Resorts reduced mailing costs by Bass Hotels & Resorts reduced mailing costs by

50%, meanwhile response rates have increased by 50%, meanwhile response rates have increased by 20%.20%.




CRM OUTCOMESCRM OUTCOMES CodingCoding RoutingRouting TargetingTargeting SharingSharing




Coding:Coding: Customers are graded based on how profitable Customers are graded based on how profitable

their business is. Service staff are instructed to their business is. Service staff are instructed to handle customers differently based on their handle customers differently based on their category code.category code.




CODING OUTCOME

A New York customer travels to New Jersey to A New York customer travels to New Jersey to buy a table from an Ikea store.buy a table from an Ikea store.

After returning home, he discovers that the table is After returning home, he discovers that the table is missing necessary brackets and screws. missing necessary brackets and screws.

The store refuses to mail him the missing parts and The store refuses to mail him the missing parts and insists that he must return to the store. insists that he must return to the store.

The customer does not own a car. In The customer does not own a car. In comparison… comparison…



A “platinum” customer of Starwood Hotels & A “platinum” customer of Starwood Hotels & Resorts Worldwide wants to propose to his Resorts Worldwide wants to propose to his girlfriend in India. girlfriend in India.

Starwood arranges entry into the Taj Mahal after Starwood arranges entry into the Taj Mahal after hours so that he can propose in private. hours so that he can propose in private.

Starwood also provided a horse-driven carriage, Starwood also provided a horse-driven carriage, flowers, a special meal, and upgraded suite and a flowers, a special meal, and upgraded suite and a reception led by the hotel’s general manager.reception led by the hotel’s general manager.

CODING OUTCOME



Sears, Roebuck & Co’s most profitable credit card Sears, Roebuck & Co’s most profitable credit card customers get to choose a preferred two-hour time customers get to choose a preferred two-hour time window for repair appointments. window for repair appointments.

Regular customers are given a four-hour time Regular customers are given a four-hour time window window

CODING OUTCOME



RoutingRouting Call centers route incoming calls based on the Call centers route incoming calls based on the

customer’s code. Customers in profitable code customer’s code. Customers in profitable code categories get to speak to live customer service categories get to speak to live customer service representatives. Less profitable customers are representatives. Less profitable customers are inventoried in automated telephone queues.inventoried in automated telephone queues.

ROUTING



Call this particular electric utility company and depending Call this particular electric utility company and depending on your status, you may have to stay on the line for quite on your status, you may have to stay on the line for quite awhile. awhile.

The top 350 business clients are served by six people. The top 350 business clients are served by six people. The next tier, consisting of the next 700 most profitable The next tier, consisting of the next 700 most profitable

customers, are handled by six more people. customers, are handled by six more people. The next 30,000 customers are served by two customer The next 30,000 customers are served by two customer

service representatives. service representatives. The final group, consisting of 300,000 customers, are The final group, consisting of 300,000 customers, are

routed to an automated telephone system.routed to an automated telephone system.

ROUTING OUTCOME



Charles Schwab Corp’s top-rated “Signature” Charles Schwab Corp’s top-rated “Signature” clients, clients, consisting of customers who maintain $100,000 consisting of customers who maintain $100,000

in assets or trade at least 12 times a year in assets or trade at least 12 times a year never wait more than 15 seconds to have their never wait more than 15 seconds to have their

calls personally answered by a customer service calls personally answered by a customer service representative. representative.

Regular customers can wait up to 10 minutes or Regular customers can wait up to 10 minutes or more. more.

ROUTING OUTCOME



TargetingTargeting Profitable customers have fees waived and are Profitable customers have fees waived and are

targeted for special promotions. Less profitable targeted for special promotions. Less profitable customers may never hear of the special deals.customers may never hear of the special deals.

TARGETING



Centura Bank Inc. of Raleigh, N.C ranks its two million Centura Bank Inc. of Raleigh, N.C ranks its two million customers on a profitability scale from 1 to 5. customers on a profitability scale from 1 to 5.

The most profitable customers are called several times a The most profitable customers are called several times a year for what the bank calls “friendly chats,” and the CEO year for what the bank calls “friendly chats,” and the CEO calls once a year to wish these same customers a “Happy calls once a year to wish these same customers a “Happy Holiday!” Holiday!”

The retention rate of the most profitable group has The retention rate of the most profitable group has increased by 50%. increased by 50%.

In comparison, the most unprofitable group has decreased In comparison, the most unprofitable group has decreased from 27% to 21%.from 27% to 21%.

TARGETING OUTCOME



First Bank in Baltimore, Maryland provides First Bank in Baltimore, Maryland provides its most profitable customers a Web option its most profitable customers a Web option that its regular customers never see. that its regular customers never see.

The option allows its preferred customer to The option allows its preferred customer to click a special icon that connects customers click a special icon that connects customers with live service agents for phone with live service agents for phone conversations.conversations.

TARGETING OUTCOME



First Union codes its credit card customers First Union codes its credit card customers with colored squares that flash on customer with colored squares that flash on customer service representatives’ screens. service representatives’ screens.

““Green squaresGreen squares” means the customer is ” means the customer is profitable and should be granted fee waivers profitable and should be granted fee waivers and given the “white-glove” treatment.and given the “white-glove” treatment.

TARGETING OUTCOME



SharingSharing The sharing of customer information to other The sharing of customer information to other

parts of the organization, and the selling of parts of the organization, and the selling of information to other companies. Although the information to other companies. Although the customer may be new to the organization, their customer may be new to the organization, their purchase history and buying potential are well-purchase history and buying potential are well-known to insidersknown to insiders..

SHARING



A United Airline’s passenger was shocked when a A United Airline’s passenger was shocked when a ticketing agent told him: “Wow, somebody doesn’t like ticketing agent told him: “Wow, somebody doesn’t like you.” you.”

The passenger was involved in an argument with another The passenger was involved in an argument with another United employee several months earlier.United employee several months earlier.

The argument became part of the passenger’s permanent The argument became part of the passenger’s permanent record that follows him wherever he flies with United. record that follows him wherever he flies with United.

The passenger, who is Premier Executive account holder The passenger, who is Premier Executive account holder feels that the airline has been less than accommodating feels that the airline has been less than accommodating following the incident.following the incident.

SHARING OUTCOME



Continental Airlines has introduced a Customer Continental Airlines has introduced a Customer Information System where every one of Information System where every one of Continental’s 43,000 gate, reservation and service Continental’s 43,000 gate, reservation and service employees will have access to the history and employees will have access to the history and value of each customer. value of each customer.

The system suggests specific service recovery The system suggests specific service recovery remedies and perks such as coupons for delays and remedies and perks such as coupons for delays and automatic upgrades. automatic upgrades.

The system provides more consistent staff The system provides more consistent staff behavior and service delivery. behavior and service delivery.

SHARING OUTCOME



Customers do not like hearing that they are not Customers do not like hearing that they are not treated equallytreated equally

in service operations where service discrimination is in service operations where service discrimination is common, customer satisfaction is taking a common, customer satisfaction is taking a “nosedive” and customer complaints are on the rise. “nosedive” and customer complaints are on the rise.

Privacy issues are also a problem Privacy issues are also a problem Vice-President of Continental Airlines proudly Vice-President of Continental Airlines proudly

boasts…”We even know if they [the customers] put boasts…”We even know if they [the customers] put their eyeshades on and go to sleep.” their eyeshades on and go to sleep.”

LIMITATIONS OF CRM



What someone spends today is not a good What someone spends today is not a good predictor of what their behavior will be tomorrow. predictor of what their behavior will be tomorrow.

Life situations and spending habits do change over Life situations and spending habits do change over time. time.

Customers can be more than 377% more profitable Customers can be more than 377% more profitable after they are retained 4-5 years.after they are retained 4-5 years.

Is service discrimination a form of Is service discrimination a form of red-liningred-lining—— the practice of identifying and avoiding unprofitable the practice of identifying and avoiding unprofitable

types of neighborhoods or types of people. types of neighborhoods or types of people.

LIMITATIONS OF CRM

c hapter 11 p eople i ssues: m anaging s ervice c onsumers

Documents