5 Managing the Customer Relationship _Suggested Answers December 2012

8/10/2019 5 Managing the Customer Relationship _Suggested Answers December 2012

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The Association of Business Executives

QCF

Managing the CustomerRelationship

Suggested Answers

Unit Title: Managing the Customer Relationship

Unit Code: 5MCR

QCF Level: 5

Session: December 2012

STRUCTURE OF PAPER: Answer BOTH sections

SECTION A: Answer ALL FIVE questions Q1Q5 8 markseach

Maximum marks for Section A: 40 marks

SECTION B: Answer ANY THREE questionsfromQ6 toQ10 20 markseach

Maximum marks for Section B: 60 marks

TOTAL MARKS AVAILABLE FOR THE PAPER 100 marks


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SECTION A

Candidates must answer ALL FIVE questions in this section.

Each question carries 8 marks.

Section A is worth 40% of the total marks available for the paper.

Question 1

Customer service can be an important source of competitive advantage, especially fororganisations which deal directly with customers, like supermarkets.

Q1

(a)

Draw a diagram to show how each of the elements in Reichhelds Service/ProfitabilityCycle are related to each other.

The diagram should start at the apex with some phrase like Superior customer servicewhich leads to Higher levels of customer loyalty, then in turn to Improved customerretention.What follows is More customer spend, leading to Improved profitability and

Better employee rewards, incentives and benefits,followed by Higher levels ofemployee loyaltyreduced levels of labour turnover followed by Improved staffcontinuity feeding finally into Superior customer service once more.

Maximum Marks for (a) 4 marks

Superior customer service

Higher levels of customerloyalty

Improved customerretention

More customer spendImproved profitability

Better employee rewards,incentives and benefits

Higher levels of employeeloyaltyreduced levels of

labour turnover


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Q1

(b)

Explain why the concept of the lifetime customershould be important to a supermarketbusiness.

1. Supermarket customers may shop at least once a week, so over a lifetime of, say, 50years they may visit any given supermarket, provided they are consistent, at least2,500 times.

2. Again assuming an average spend of 20 per visit, over a lifetime they will spend50,000. This is a very conservative estimate, at least so far as the UK is concerned.3. If the customer is lost and goes elsewhere, that potential spend is also lost.4. The defecting customer may also encourage others to defect, especially family

members, relatives and friends.5. From the supermarkets viewpoint, the profitability of the customer is calculated not

on the profitability from each transaction, but the profitability based on past history,current purchases and prospective business (again, not just from that individualcustomer but also for that customers social network).

Maximum Marks for (b) 4 marks

Total Maximum Marks for Q1 8 marks


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Question 2

Q2 Describe fourways in which Information Technology can help enable organisations todeliver efficient and effective customer service.

To keep detailed records of every customer, including not merely names andaddresses but also purchasing history, personal preferences, past complaints and

restitution agreements, etc.

To establish the whereabouts of products (especially for a company with a largecatalogue such as Argos or Next), thus permitting products to be matched tocustomers very quickly.

To permit despatched items to be tracked so that both customer and company canidentify their location and expected delivery times/dates.

To supply front-line customer service staff with information very quickly so thatcustomer queries can be resolved without the necessity for a second call.

To build up a paper/electronic trail in the case of subsequent disagreements or

complaints. To act as a conduit for communications between the customer and the supplier.

To provide a medium through which special offers can be quickly transmitted tocustomers.

To supply customers with an opportunity for immediate feedback about productquality, service performance and so forth.



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Question 3

It is sometimes said that a customer complaint is a gift.

Q3

(a)

Identify onereason why customer complaints may be regarded as a giftso far as aservice business is concerned.

If a customer complains, there is an opportunity for the organisation to resolve thecomplaint and thus prevent the customer from simply defecting to another supplier.

If dissatisfied customers dont complain but merely transfer their business elsewhere,the organisation never knows what it is doing wrongand so the chance to put it rightis removed.

Research evidence supports the conclusion that if a service transaction leads to acomplaint which is then resolved, the customers loyalty to the organisation becomesgreater than it would have been had the service transaction been conductedimpeccably from start to finish.

Customer complaints can lead to problem-solving and problem-removal actions whichminimise customer complaints in the future.


Q3

(b)

Outline and briefly justify twoprinciples that should govern an organisations proceduresfor handling customer complaints.

All complaints should be taken seriously.

All complaints should be investigated.

An apology should be offered, irrespective of the genuineness of the complaint, e.g.,Were sorry that youve been upset to the point where youve found it necessary tocomplainthe apology may become more substantive if it subsequently turns out

that the complaint is entirely justified.

Customers should receive substantive responses immediately, or within 24 hours,depending on the mechanism through which the complaint has been articulated. If inthe form of a letter, then a response should be received within 5 working days (plus aholding response within 2 days).

A complaint analysis process should be set up so that systemic complaints can leadto preventive actions.

There should be a no blame culture regarding customer complaints otherwisecomplaints will be suppressed.




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Question 4

It has been suggested that there are unique aspectsassociated with implementing customerservice values in the public sector.

Q4

(a)

Outline tworeasons for agreeingwith this suggestion.

Most public sector agencies are monopoly suppliers, so customers have no choicesand cannot defect even if they want to do so.

Many customers of public sector agencies do not want to be customers andtherefore approach all their service transactions with apathy, indifference or evenhostility (e.g., the prison service, or local authority departments which may have toconfront unsatisfactory parenting).

Front-line customer service employees in the public sector are often not chosen fortheir interpersonal capabilities, and may easily come to believe that their job is ruleenforcement rather than customer satisfaction.

It may even be, for large proportions of the public sector, that a customer serviceethos has yet to be identified, let alone established.


Q4

(b)

Outline tworeasons for disagreeingwith this suggestion.

Most of the customers for public-sector agencies are also citizens, whose taxes helppay for these agencies, so they have a right to expect that they will be supplied with acourteous, efficient service style.

Even if these customers are not citizens, they are certainly human beings and sohave a right to civilised treatment.

There are some public-sector agencies that are now subject to competition, or couldbecome exposed to competition in the foreseeable future, and so customers are in

effect being provided with opportunities for choice. An example in the UK is theNational Health Service.

Governments may apply pressure to these public-sector agencies to encourage themto become more customer-focused, e.g., through targeted performance-managementschemes.

There are increasing numbers of mechanisms through which public-sectorcustomers can articulate their dissatisfaction (through newspapers, emails, Internetwebsites, their political representatives, and so forth), and agencies dont want thenegative publicity resulting from even inaccurate and unjustified complaints.

Better customer service actually motivates the employees of the public-sector agencyand makes them feel authentically proud about the work they do.




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Question 5

Customer service is a type of organisational activity which often places employees in boundary-spanningroles.

Q5

(a)

Explain the meaning of the term boundary-spanning , and support your explanation withan example of boundary spanningfor employees in customer-service roles.

Boundary-spanning refers to roles in which the job-holder depends on building co-operative relationships with others inside the organisation in order to perform effectively,and/or roles where the job-holder regularly interacts with customers (by phone, face-to-face, or in other ways) and therefore has no direct control over what he or she achieves.Examples: anyone in a front-line customer-facing role, and anyone who is required towork with colleagues in other departments, e.g., between Customer Service andMarketing, or Customer Service and Sales, or Customer Service and Finance.In a slightly different context, boundary-spanning is concerned with thedetection ofinformation

To detect information and bring it into the organisation, e.g., trends in customerpreferences and aspirations, or major issues for customer complaints; and

To send information into the environment, e.g., communicate important messages tocustomers about the organisations service values and priorities. Some of thiscommunication will be unconscious and unintentional.


Q5

(b)

Identify twopossible impacts of boundary-spanning on the motivation and performanceof employees in customer-service roles.

Role conflictclashes of priorities between the expectations of customers and theexpectations of others inside the organisation.

Role ambiguityuncertainty over priorities. Uncertainties about the actual criteria against which personal performance is to be

judged (which may differ from the theoretical criteria appearing in the performancemanagement literature).

Confusion about decision-making values and preferences, especially concerning theextent to which complaints are to be resolved through restitution and service recoverydecisions establishing precedents.

Personal stress levels rising to uncomfortable levels.

Motivation and personal commitment/engagement attitudes declining and leading todisillusionment and frustration, attitudes that ultimately reveal themselves tocustomers (intentionally or otherwise).

Raised levels of staff turnoverproducing poor service standards as experienced

staff are replaced.




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SECTION B

Candidates must answer ANY THREE questions from this section.

Each question carries 20 marks.

Section B is worth 60% of the total marks available for the paper.

Question 6

At a business reception you meet one of the senior executives from a low-cost airline. As soon asyou tell him that you work in customer service, he responds, Customer service? We dont pay anyattention to it. Our customers are only interested in price, and our prices are cheaper thaneverybody elses. In the final analysis, thats all that matters.

Q6

(a)

Outline and explain the dangers and problems associated with any company whichdelivers poor customer service.

Dissatisfied customers may simply take their business elsewhere. Dissatisfied customers may publicise their dissatisfaction, e.g. through websites like

TripAdvisor.

Dissatisfied customers may influence othersfriends, relatives, work colleagueswho may in turn influence yet more people. As a result the organisation loses manymore customers, or fails to attract some people who might have become customersunder differing circumstances.

Poor service experiences mean that the organisation has to devote resources tohandling complaints, supplying restitution, etc.and these resources involve costs.

If there are other organisations in the same marketplace, with superior reputations for

service, then customers may defect to these alternative suppliers.

So far as the assumed costs of superior service are concerned, many dimensions ofcustomer service dont cost any more if well managed: it is a fallacy to believe thatworld-class service costs more.

If a company supplies poor service, it is losing an opportunity to enhance its marginsby developing a reputation for good customerservice.

Maximum Marks for (a)10

marks


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Q6

(b)

Examine the claim that a company may compete successfully by concentrating solely onprice and ignoring customer service altogether. Use examples to support your argument.

Arguments in support of the view that it is dangerous to ignore customer service

Customer expectations are accelerating continuously, so customers who at one timemight have been prepared to ignore service considerations may now be reluctant to

do so.

Once customers have experienced good service, perhaps from low-cost providers,they may come to expect it from all low-cost providers.

Good service does not cost more than poor service, especially as good servicedoes not require the creation of a complaints function.

Dissatisfied customers may publicise their grievances and thus damage thereputationand the business prospectsof the poor-service provider.

Arguments suggesting that in some circumstances customer service can be ignored

If the demand for the providers products/services is so huge that the provider can

afford to act arrogantly in the marketplace (at least whilst the demand continuesthefact that it will inevitably be satiated is an additional source of danger).

Relevant examples

Maximum Marks for (b)10

marks

Total Maximum Marks for Q620

marks


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Question 7

Assess the importance of eachof the following so far as the achievement of service excellence isconcerned:

Q7

(i)

Setting an aspirational standard through promoting service leadership from the top of theorganisation.

Typically, organisational change and organisational culture are determined from thetop down.

Role-modelling from the top is crucial to the widespread acceptance of the belief,throughout the organisation, that the focus on service excellence is being takenseriously.

Those at the top need to demonstrate service excellence themselves in the way theybehave towards external customers and also their internal customers.

Maximum Marks for (i) 6 marks

Q7

(ii)

Creating an organisation-wide culture which reinforces service excellence.

Service excellence can only be attained if the organisation promotes attitudes andbehaviours focused on service excellence inside the businessbetween colleagues,between functions and between departments.

It would be destructive if any part of the organisation were to be excluded from aservice excellence culture because it would then be in a position to undermine thewhole organisations cultural direction.

An organisation-wide culture sends unified messages to the outside worldto theorganisations suppliers, stakeholders, paying customers and so forth.

Maximum Marks for (ii) 6 marks


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Q7

(iii)

Designing and implementing HRM strategies to support service excellence.

Because ultimately any reputation for service excellence is dependent on theorganisations people, then the organisations HRM policies and practices have to becentral to the achievement of customer-centricity.

With recruitment and selection, the organisation must appoint people with supportiveand appropriate attitudes.

With induction, training, learning and development, the cultural messages aboutservice excellence must be conveyed unequivocally at all times. Generous training inservice skills, customer management and complaint-handling should be provided.

With reward and recognition, performance management and appraisal processesmust concentrate on service-related progress, achievement and successwhetherthrough teams and individuals.

Maximum Marks for (iii) 8 marks

Total Maximum Marks for Q7 20marks


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Question 8

Johnson and Gustafsson suggest that the effectiveness of the organisation/customer relationshipshould be measured through the lens of the customer.

Q8

(a)

Explain what is meant by the phrase the lens of the customer.

The lens of the customer phrase essentially means that the adequacy andacceptability of the organisations treatment for its customers can only be evaluatedby customers themselves and not through any reliance on the organisations internalprocedures.

Thus the efficacy of a complaints management process is dependent on whethercustomers believe it to be efficacious and not whether the organisation judges itsresponse times to be adequate.

Customer satisfaction means that customers define the service process assatisfactory.


Q8

(b)

One of the methods for securing customer feedback is through focus groups. Explainwhat is meant by a focus group and identify threeconditions which have to be met if afocus group is to create information that is useful for the organisation.

Definition of a focus groupA focus group is a collection of (normally up to 20) people who have been broughttogether in order to supply spontaneous views, opinions and reactions about somepredefined topic or issue; the group is largely leaderless, though it has a facilitatorwhose task is simply to ensure that all group members have the opportunity to contributeand all judgments are respected.

Conditions which have to be met if a focus group is to be worthwhile The group has to be composed of people with differing perspectives

The facilitator has to avoid become too directive and his/her interventions should belargely aimed at clarification plus the encouragement of otherwise relatively silentgroup members

Any attempt at domination by one person or by a minority should be activelyprevented

The group members need to be interested in the topic/issue/product/service, either asusers, or as consumers or as potential users/consumers

The physical arrangements for the focus group should be conducive to totalparticipation by everyone

Careful consideration needs to be given to the questions for discussion, to make surethey are neutral, impartial and open in character.


marks

Q8

(c)

Another method for seeking customer feedback is to provide customers with a ready-stamped postcard on which they can register their purchase and supply comments aboutthe product and the service they have received throughout the purchase process.Outline oneadvantage and onedisadvantage of this method as a source of customerfeedback.

Possible advantages

Such a method doesnt require the customer to incur any cost, and so increases the


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likelihood of responses being received.

The feedback obtained is received continuously and does not depend on periodic,one-off surveys.

The method of communication permits customers to give vent to their feelings,especially if negativeotherwise they may simply defect and go elsewhere for their

future purchases. In other words, a customer complaint may be received and(depending on the response) may be resolved.

Possible disadvantages

It may encourage customers to respond even if they dont have any strong viewswhich they need to communicate.

Their responses may be more negative than is actually justified by their opinions.

Because of the intermittent and discontinuous nature of the feedback received, it canbe more difficult to build up a systematic picture about the product or service.

Maximum Marks for (c) 6 marks


marks


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Question 9

A friend has gained experience in customer-service roles for a business-to-consumer (B2C)company but realises that in order to advance her career she will need some direct knowledge ofe-service and also the special features of customer service in a business-to-business (B2B)setting. She has sought your advice.

Q9

(a)

Explain what might be different about customer service in a business-to-businesscompany, compared with a typical business-to-consumer organisation.

In a B2B context, purchasing decisions are more likely to be made on entirely rational(as opposed to emotional) criteria.

Purchasing decisions in a B2B enterprise are more likely to be made by a group thanby an individual.

The key power-holder in the purchasing group may never actually meet the supplier.

Price can be a very important determinant in the decision processbut the B2Borganisation may be more interested in the total cost-of-ownership rather than in theinitial cost-of-acquisition.

For a B2B organisation, considerations of tax and payment terms can be highlycrucial.

B2B purchases may be strongly influenced by global factors (e.g., the need to supportan emerging or developing economy, or the need to avoid close relationships with asuspect regime) and by political affiliations.

The validity of these observations can always be challenged (for example, B2Bpurchases can often be dictated by emotional factors, like the affinity between theorganisations representatives and the suppliers representatives).

Maximum Marks for (a)10

marks


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Q9

(b)

Explain what might be different about customer service in an Internet business whencompared with a typical business-to-consumer organisation.

The conventional B2C operator will normally have face-to-face interaction withcustomers, whereas the Internet business wont.

Service transactions in the B2C business will be conducted principally through face-

to-face interaction and the telephone, whereas the Internet businessrelationshipswith customers are more likely to be conducted via email.

Customers for the Internet operator need to be more technologically adept in order tofunction efficientlywhereas customers for a conventional retailer need no specialskills.

The customers for an Internet operator may easily switch their loyaltyfrom onesupplier to another (they can do so merely through one click from their mouse), so thelikelihood of genuine customer loyalty in the Internet sphere is much lower.[Anexception to this argument is Amazon, which works hard to create proactive customerrelationships with its customers and make their tasks as easy as possible, e.g.,

through one-click purchases.]


marks


marks


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Question 10

My problem,says the Customer Service Manager for a large insurance company, is that so farweve concentrated completely on creating excellent levels of customer service with our payingcustomers, but weve not done enoughto motivate our people to supply excellent service ins ide the company.

Q10

(a)

Identify and explain two reasons why the provision of excellent service for anorganisations external customers might depend on the existence of similar serviceattitudes and behaviours insidethe business.

Service to the external customer may depend not merely on the attitude of the singlefront-line service person, but on active co-operation between differing functions withinthe business, so if that co-operation is lacking then the service delivery to the externalcustomer will suffer.

Some parts of the business may not be required at all to interact with externalcustomers, or even have anything to do with external customers, so it would be tooeasy for them to become self-absorbed, thus neglectful about customer priorities.

If the organisation has a consistent level of service-centredness, it presents asuperior image to the outside world so far as its teamwork and employee engagementare concerned.

It can be dangerous for the organisation if there are internal departments, functions oreven individual employees who are not service-focused, because these departments,functions or employees may come into contact with the publicand thus damage thereputation of the organisation irreparably. For example: delivery drivers (includingthose employed by outsourced subcontractors) or repair engineers.


Q10

(b)

Identify and explain tworeasons why customer service managers and team leaders arecrucial to the establishment and maintenance of high levels of service performance anddelivery insidean organisation.

Managers and team leaders set the tone for their staff

It is the key role for managers and team leaders to motivate and enthuse their peoplethrough their leadership and support



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Q10

(c)

Explain and justify fourmethods which customer service managers and team leaderscan use in order to achieve high levels of commitment and engagement amongcustomer-facing staff.

Role-modelling

Management through encouragement and the use of positive feedback

Positive leadership

Hands-on involvement in service activities and processes

Promotion of a continuous-improvement culture

Encouragement for involvement in decision-making, also discretionary behaviour byfront-line staff

Maximum Marks for (c) 8 marks


20

marks

Documents

5 Managing the Customer Relationship _Suggested Answers December 2012