the role of service and sales skills

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THE ROLE OF SERVICEAND SALES SKILLSIN CUSTOMER RETENTIONLiterature Reviewprepared by: Joan B. KrawitzLearning Resources DirectorMajor Media Learning ResourcesNorthbrook, Illinois 1993, 1998

This research examined whether specific service and sales skills could improve customerretention rates. A literature review was conducted to examine the following issues: (1)whether customer retention rates could be improved by attempting to resell customers whowished to cancel their accounts or stop services; (2) service quality factors that have beenshown to contribute to customer retention; (3) behaviors and skills that have been linked toservice quality and customer retention; and (4) the relationship of specific sales skills to thesebehaviors.Improving Customer Retention Rates Through Direct InterventionThe significance of customer retention was first quantified by Reichheld and Sasser (1990).They found that profits in service industries, including credit card companies, increased indirect proportion to the length of a customer's relationship. They noted the experience ofMBNA America, citing its "customer defection 'swat' team staffed by some of the company'sbest telemarketers," which achieved a 50% success rate in persuading customers to retaintheir credit cards. At MBNA, a 5% improvement in customer retention increased averagecustomer value by 125%. Reichheld and Sasser (1990) concluded that cutting defections inhalf could more than double the growth rate of the average company.

Everett (1993) noted that a dedicated customer retention unit developed by Patrick J.Swanick at the Society National Bank in Cleveland, achieved a 57% success rate in

persuading callers to remain with the bank. According to Everett (1993), theserepresentatives first probed for causes, then tried to resolve the problem. He added that they
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followed-up on each call with a letter to the customer.

The Link Between Customer Satisfaction and Customer Retention Many authors (Reichheld and Kenny, 1990; Zeithaml, et.al., 1990; Bowen and Lawler, 1990;Schlesinger and Heskett, 1991) have cited the relationship between customer retention and

the quality of service experienced by the customer.Reichheld and Kenny (1990) specified six factors as imperative to improving retention: seniormanagement commitment; a customer-focused culture in which all employees and managersfocused their full attention on customer satisfaction; retention information systems thattracked and analyzed the root causes of defections; empowerment of front line employees totake actions that provided immediate customer satisfaction; continuous training anddevelopment; and incentive systems based on customer retention.

Parasuraman, et. al. (1984) studied quality in four service businesses, including credit cardservices, and developed a model of service quality. They noted that:

"A variety of factors, including resource constraints, managementperceptions of consumer expectations and the firm's service qualityspecifications will affect service quality from the consumer'sviewpoint."

(Parasuraman, et. al., 1984)

Parasuraman, et. al. (1984) identified a set of discrepancies, or gaps, between howexecutives perceive the quality of the service they provide and the tasks associated withdelivering those services to customers. They found that the customer's perception of servicequality depends upon the size and direction of the gap between the service the customerexpects to receive and what he or she perceives to have been received. The magnitude ofthis gap (which can be either positive or negative) was determined by four interrelatedvariables: (1) the difference between actual consumer expectations and managementperceptions of those expectations; (2) between management perception of expectations andthe translation of those perceptions into service quality specifications; (3) between servicequality specifications and service delivery; and (4) between both service quality specificationsand service delivery, and external communications to customers. Parasuraman, et. al. (1984)noted that these gaps "can be a major hurdle in attempting to deliver a service whichconsumers would perceive as being of high quality." Because this study focused on theinteraction between the firm's representatives and its customers, this author found the fourthgap (between both service quality specifications and service delivery, and externalcommunications to customers) to be of particular relevance.Schlesinger and Heskett (1991) suggested that poor service was often built into the systemby designing customer-contact jobs to be "idiot proof." Bitran and Hoech (1990) differentiated

between transaction-oriented, "low contact" services, in which quality can be defined as"conformance to specifications" and "high contact" services, such as customer retention, thatsatisfy higher order human needs. They proposed that "actively understanding and managingthe relationship between server and customer can yield higher service revenues throughincreased repurchase rates."

Citing research on customer loyalty conducted by the Forum Corporation, Schlesinger andHeskett (1991) noted that only 14% of customers stopped patronizing service businessbecause they were dissatisfied by the quality of the product, while more than two-thirdsdefected because of what they judged to be indifferent or unhelpful service. This findingsupported the observation of Parasuraman, et. al. (1984) that customers' judgements of highand low service quality depend on "how consumers perceive the actual service performancein the context of what they expected."

Zeithaml, et. al. (1990), built on their earlier research (Parasuraman, et. al., 1984) to identify


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five dimensions of service quality, as perceived by customers: tangibles, reliability,responsiveness, assurance and empathy. These dimensions, which they incorporated intotheir "SERVQUAL" model, are defined in Figure 1.

Parasuraman, et. al. (1984) had positioned consumers' perceptions of service quality along acontinuum ranging from ideal quality to totally unacceptable quality, depending on whether

the customers perceived the service they receive as meeting, falling short of, or exceedingtheir expectations. Among credit card customers, Zeithaml, et. al. (1990), like Schlesinger andHeskett (1991) found that tangibles were of the least importance to customers. The meanimportance of the remaining four criteria, reliability, responsiveness, assurance and empathy,all rated above 9 on a 10 point scale, with reliability receiving the highest individual rating(48.6) as the dimension most important to customers (Zeithaml, et. al., 1990).

Zeithaml, et. al. (1990) studied whether customers' perceptions of quality were influenced bywhether or not they had experienced a recent service problem (Figure 2). They examinedcustomers who had experienced recent service problems and those who had not. They foundthat service problems adversely affect customers' perception of service quality, and thatcustomers who were dissatisfied with the resolution of their problems were twice asdissatisfied as those whose problems were resolved to their satisfaction (Zeithaml, et. al.,1990).Zeithaml, et. al. (1990) concluded that:

"The most important thing a service company can do is be reliablethat is, perform the service dependably and accurately ... do it rightthe first time. When a service problem does crop up, however, all isnot lost unless the company ignores it. In other words, by resolvingthe problem to the customer's satisfaction, -- by performing theservice very right the second time -- the company can significantlyimprove customer retention rates."

Like Zeithaml, et. al. (1990), Heskett, et. al. (1990) found that good service delivery elicits the

best outcome in terms of customer satisfaction. They noted that the next best outcome wasachieved when problems were elicited and resolved, followed in descending order byproblems that were elicited but not satisfactorily resolved and problems that were not elicitedor expressed.Bowen and Lawler (1990) also recommended that service workers be empowered to solveproblems creatively and effectively. Like Zeithaml, et. al. (1990), they emphasized theimportance of keeping frontline personnel informed about organizational performance;providing problem solving skills and other knowledge that helped employees contribute toorganizational performance; and basing rewards on performance. They found thatempowering employees to provide a quick response to customer frustrations "can turn apotentially frustrated or angry customer into a satisfied one" (Bowen and Lawler, 1990). Bitranand Hoech (1990) also noted that defections are seldom the result of ordinary interactions,

but of an organization's failure to handle abnormal situations to the customer's satisfaction.

Behaviors and Skills Linked to Service Quality and Customer RetentionZeithaml, et. al. (1990), Bowen and Lawler (1990), Reichheld and Kenny (1990) andSchlesinger and Heskett (1991) cited the need for customer-contact personnel to "takeresponsibility, think for themselves and respond well to pressure from customers"(Schlesinger and Heskett, 1991).

Schlesinger and Heskett (1991) further emphasized the importance of training and support in"communication, performance management, team building, coaching and empowerment" forfront-line workers and their managers. Both Reichheld and Kenny (1990) and Schlesinger

and Heskett (1991) found that companies that exhibited these policies and attitudesexperienced not only higher customer retention and profits, but also an increase in employee


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loyalty and a reduction in job turnover.

Zeithaml, et.al. (1990) found that a "Service Performance Gap" occurred when employeeswere unable or unwilling to perform the service at the desired level. They found that this gapwas common among the service businesses they studied due to problems related to: roleambiguity; role conflict; employee-job fit, technology-job fit, supervisory control systems;

perceived control; and teamwork.

Zeithaml, et. al. (1990) defined role ambiguity as a situation in which employees were: (1)uncertain about what their managers or supervisors expected from them and how to satisfythose expectations; (2) lacked the training or skills to provide the service needed for customersatisfaction; and (3) did not know how their performance would be evaluated and rewarded.

To achieve role clarity, Zeithaml, et. al. (1990) suggested the use of four tools:communication, feedback, confidence and competence. They emphasized that employeesneed accurate information about their roles; specific and frequent communication frommanagers about what they were expected to do; and complete and current information aboutproducts, services and customer expectations.

Zeithaml, et. al. (1990) concluded that training and feedback in two areas, technicalknowledge and interpersonal skills (which were related to their "SERVQUAL" dimensions ofresponsiveness, assurance and empathy), could increase employees' confidence andcompetence, and provide greater clarity regarding their roles. Bitran and Hoech (1990) alsonoted the importance of providing feedback to employees on their interactive skills.

Bitran and Hoech (1990) suggested that high-contact, high-communication service providersrequire skills in: diagnosing problems; gathering, checking and disseminating information;resolving conflicts; disseminating cost information; and managing waits. The first three ofthese tasks are shared by customer retention representatives. (See Figure 3.) Relationship of Sales Skills to Behaviors Linked to Customer Satisfaction andRetentionWilliams, Spiro and Fine (1990) noted that very few researchers have explored the customer-salesperson interaction from a communication perspective. They proposed a model thatfocused on communication as the primary element of this interaction. They found that,although many authors stressed the importance of "verbal and non-verbal code (Marks, 1981;Jackson et. al. 1988) such as message order, patterns of argument, use of evidence, visualcontact, etc. in personal selling, most of the research had concentrated on non-salesinteractions. The customer retention function required that sales skills be combined withservice skills associated with quality and customer loyalty. This researcher identified areas inwhich these two skill sets overlapped, to determine which (if any) behaviors on the part of therepresentatives might alter a customer's decision to take some or all of their business to

another supplier.

Rackham, et. al. (1971) studied whether some individuals interact more successfully thanothers because they are more skilled -- "they either do certain things that others do not, orthey do them better." While admitting that personality and aptitude factors account for somedifferences, they found that interpersonal skills, which they classified as "interactivebehaviours," could be influenced more readily. (The spelling of the term reflects the Britishorigin of Rackham and his associates.) They defined an interactive behaviour as "one whichinvolves two or more people in such a way that the behaviour of one person may influencethe behaviour of others." This definition also describes the desired individuals who areexpected to influence the behavior of customers in favor of retaining their accounts. Rackham, et. al. (1971) developed a method of data collection and analysis for measuring

interactive behaviors. Trained observers have used this method for training needs analysis,process consultation, course design and on-the-job feedback. The behavior analysis breaks


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an individual's contribution to a discussion into discrete bits of observable behavior. Rackhamet. al. (1971) found that successful individuals tended to use a quantifiably higher proportionof certain behaviors in specific interactive situations than did their less successfulcounterparts.

The methods developed by Rackham, et. al. (1971) were used by Motorola Training and

Education Center in studies of the interactive behaviors used in interpersonal discussions,sales negotiations, presentations and meetings. Working with members of Rackham'sorganization, Huthwaite, Inc., researchers trained in these methods (including this author)correlated the behaviors demonstrated by individual performers with the outcomes of theirinteractions. In each type of interaction, the researchers found that the most successfulperformers used significantly more of some behaviors and significantly less of others than dideither average or below average performers.

These behaviors varied, depending on the type of interaction. However, successfulperformers in two-way interactions consistently demonstrated a substantially higher use ofthree behaviors: seeking information, supporting the ideas or feelings expressed by others,and testing understanding. Conversely, the less successful performers provided a higherproportion of information (facts, reasons and opinions) than those whose two-way interactionswere more successful.

Farber and Wycoff (1992) interviewed top sales performers at more than 50 companies.These individuals emphasized the importance of establishing and maintaining rapport withcustomers. The Motorola research identified this skill with two interactive behaviors:"Supporting" and "Testing Understanding." Supporting was defined as acknowledging orexpressing empathy toward the feelings, ideas or positions of the other party. Masser andLeeds (1984) also stressed the importance of this behavior in telephone sales.

Testing (or Checking) Understanding was defined as paraphrasing or restating what the otherparty had said or the implications of those statements. Masser and Leeds (1984) alsorecommended this behavior, which they categorized as hearing, interpreting and evaluating,

to distill an accurate interpretation of the customer's meaning in telephone sales. TheMotorola research linked both Supporting and Checking Understanding to "active listening,"which was prominent among Bitran and Hoech's (1990) list of the process skills required ofservice providers.

Many authors (Reichheld and Sasser, 1990; Rackham, 1988; Farber and Wycoff, 1992;Masser and Leeds, 1984; Bitran and Hoech, 1990; Boyan and Enright, 1992) have linked theability to ask probing questions with success in sales. Reichheld and Sasser (1990) stressedthe value of "defection analysis" to determine and correct the root cause of defections,mentioning the value of skillful probing (questioning) in identifying the reasons why customerscancel, and using that information as an "early warning signal" for improvement.

Bitran and Hoech's (1990) task categories of diagnosing problems and gathering informationimplied the need for questioning skills among high-communication service providers. The factthat questioning skills are identified with success in each of the roles played by individualsseeking to retain customers (retention, sales and service), indicated that such skills mightalso be linked to their success.Farber and Wycoff (1992) advocated asking questions to develop a "natural flow, which inturn will lead to a natural solution." Masser and Leeds (1984) emphasized the importance of"qualifying skill," which they defined as: (1) spontaneously creating probing "subset" questionsand truly responding to the customer's situation; (2) the ability to use listening skills to ensurethat customer's comments are understood and interpreted correctly; and (3) smooth andlogical connection of steps in the conversational process.

In studying the "interactive behaviours" of sales people, Rackham (1988) found that acategory of behavior, which he classified as "Benefits," was significantly higher in calls that


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resulted in orders. He defined a Benefit as a statement that explains how the sales person'scompany or product can meet an explicit need that the customer has expressed. He alsoidentified a related behavior as being correlated to success in smaller sales. This secondbehavior, which Rackham (1988) referred to as "Advantages," shows how a product orservice can be used or can help a customer.

The difference between Advantages and Benefits was that a Benefit must meet an explicitneed expressed by the customer. At a study conducted at Motorola Canada, Rackham (1988)found that sales people who used Benefits rather than Advantages increased their dollarvolume of sales by 27 percent.

Rackham's (1988) research also revealed that a common category of sales behavior knownas "Features" (presenting facts or characteristics of a product or service) were unpersuasive.This finding may be related to the Motorola research which found that the more facts, reasonsand opinions an individual provides in a two-way interaction, the less likely that individual wasto obtain a successful outcome.

Many authors (Boyan and Enright, 1992; Shafiroff and Shook, 1990; Masser and Leeds,

1984) have described a complex process of overcoming objections and closing as the mostimportant part of the sales interaction. Rackham (1988) found that individuals who receivedvery high numbers of objections used a higher than average number of Advantages in theircalls.

Conversely, skilled people received up to ten times fewer objections per selling hour, bypreventing rather than handling objections, by questions to develop explicit needs, and thenoffering Benefits, rather than Features or Advantages. He also found that the more closingbehaviors a salesperson used, the less likely he or she was to complete the sale.

Farber and Wycoff's (1992) interviews with top sales performers at more than 50 companiesalso revealed that overcoming objections and closing were perceived as less significant thanother behaviors. Like Rackham (1988), Farber and Wycoff (1992) stressed the importance of

matching the solution to the customer's needs.

Conclusions:The literature revealed significant relationships between: customer retention and quality ofservice as perceived by customers; the use of interactive communication skills by customercontact personnel and the perception of service quality by customers; and skills identified withsuccess in sales and service tasks related to the customer retention function.

the role of service and sales skills

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