Despite volumes of customer centric musings of the past fifteen years authored by well-meaning academics there is significant evidence that industrial service customers are generally not satisfied with their corporate service providers. Average customer defection among U.S. service firms remains in the 20-25% range annually. The revenue losses are staggering for many of these firms and yet many service provider executives still do not believe that there is a problem. Service providers have gone so far to escape reality that they often employ convenient new formulas re-calculating customer defection. They re-define customer retention and separate controllable and uncontrollable losses. None of this will either improve customer satisfaction or improve the financial impact of customer losses. The purpose of this article is to provide an overview of a framework that executives can use to evaluate the current customer readiness of their firms. This framework creates the basis for a sustainable enterprise-wide approach to managing customer equity and avoids the two steps forward, one step backward results of the past.
Before outlining our customer readiness framework we need a common understanding of a few key marketing principles. First, organic growth in a service-based organization is highly dependent on the ability of the service provider to satisfy customer needs or resolve their pain and to enhance the customer's evaluation of the value received from the service. The measure of this satisfaction is generally customer retention in all its forms including loyalty results. Loyalty gains emanate from improved systems that ultimately reduce the variation in all service quality processes. Some of these processes involve hardwired systems and others involve behavior-based systems.
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Second, the terms customer satisfaction, service quality, and value are used interchangeably often causing significant problems for service providers. Simply put, these marketing concepts have very different and relevant meanings. Approaching the organic growth challenge as if these concepts are interchangeable is a fundamental mistake and leads to ineffective solutions despite admirable planning and execution. This is not a semantic argument to be sure. Service improvements are driven by first-level, basic attribute performance. Improving on-time delivery is an example. Actually fixing a broken centrifugal pump correctly the first time is another example of a first-level attribute result. Customer satisfaction gains are driven by improving the overall assessment of the service provider's performance. In other words, satisfaction takes into account the customer's evaluation of basic service quality combined with the customer's overall approval of the total service offering (TSO). TSO includes second level attributes resembling the service organization's behavior patterns and trustworthiness.
Finally, customer value is all about executing on the promise of providing positive consequences for the customer firm. Service cycle time reductions, WIP improvements, and Takt measures have no direct relationship to customer value and often mislead service executives to think that good operational numbers will automatically translate into customer value. In many service situations customer value means that your customer avoids bad consequences or achieves a level of competitive advantage as a result of your performance. Look at it this way. Customer value is all about the customer's perception of the third-level attributes received overtime rather than the service provider's operational performance.
Sustainable improvement in all three levels of service can only be achieved through a comprehensive business strategy covering all five dimensions of organizational infrastructure. The five dimensions of our framework are defined as management planning & control, human resource, technology, service delivery, and service marketing. Extensive research into customer switching behavior finds that there are more than fifty risk factors within these five dimensions that require management attention. While this framework is absent a commercially viable acronym it is nonetheless supported by over 6,000 pages of customer survey research! Service organizations that choose to employ a new complaint handling process, for example, without a purposeful understanding of its relationship to all five dimensions will realize un-sustained gains at best, and outright failure at worst.
Let's look at some of the questions to consider if you were evaluating the customer readiness of just one of the fifty risk factors, your complaint handling process (CHP). Is the CHP designed to handle your target group of customers or is it a one-size fits all program? What is the plan to ensure that all service providers directly and indirectly involved with the CHP are trained in the process? What is the communication plan for customers and service providers detailing the new CHP? Does your information technology support the new CHP? What is management's control process and does it provide a thermostatic-like perspective of how the CHP is executed? How will you know if the CHP actually solves the customer's problem? If all this seems a bit academic understand that 65% or more of customers surveyed after exposure to a complaint handling process are dissatisfied.
This article started with a simple question. How to improve the customer readiness of your service organization? The answer is complex and will require the full attention of your team. Our five-sided framework resembling a house will get you going in the right direction. Get your house in order if you want sustained organic growth.
Customer Readiness From An Enterprise Perspective
Ron has an extensive background in industrial service management leading turnarounds, startups, corporate task forces, and special marketing projects. Ron brings an executive viewpoint to situations requiring a high performance track record in business development, strategic planning, staff development, and national account management.
Ron Ackerman has applied his service industry expertise in a broad scope of industries including oil and gas, marine, transportation services, insurance, software, uniform laundry, and waste/environmental services. Ron's background includes leadership of 100 continuous improvement, best practice, and lean process initiatives. He also held leadership positions as Vice President, Ambar Environmental & Marine; and Division Vice President & General Manager BFI Waste Systems.
Contact Ron at http://StrongPointSQ.com for a free copy of his white paper on Risk Based Selling.
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