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Customer Service Dimensions
The ultimate or primary objective of any business in to provide
excellent service. Itfollows then that the main purpose of any
logistics system also is to satisfy customers. It
is an activity that might not be well understood if you are a
manager responsible for
production scheduling or inventory control which are activities
that seem to be somedistance from the marketplace.
The objective of supply chain should be to establish a chain of
customers that linkspeople at all levels in the organization
directly or indirectly to the marketplace.
The marketing and logistics interface
The right product at the right place at the right time has
rarely been considered in
mainstream marketing to be very important. However, there are
sign to show that this is
quickly changing. The power of the brand has steadily declined
and customers are willing
to experiment with substitutes even technology differences
between products has beenremoved so that it is harder to maintain
competitive edge through the product itself. The
source of competitive advantage is found firstly in the ability
of the organization todifferentiate in the eyes of the customer,
from its competition and secondly from
operating at lower cost and hence at lower cost and greater
profit. In these situations it is
customer service that can provide the distinctive difference
between the company's offerand that of its competitors. In the now
famous management book 'In search of excellence'
it was identified that excellent companies are those that can
attract customers and
maintain long term relationships with them.
Secondly, it is also recognized that there is a slow but
indubitable movement to
commodity type markets. By this it is meant that increasingly
the power of the brand isdiminished as technologies of competing
products converge, thus making productdifferences difficult to
perceive at least to the average buyer.
What is customer service?
In practice many companies have varying views of customer
service. A major study
conducted recently has suggested that customer service could be
examined under thefollowing 3 headings:
a. Pre-transaction elements
b. Transaction elementsc. Post-transaction elements
Pre-transaction elements of customer service relate to corporate
policies or programs i.e.written statements of service policy,
adequacy of organizational structure and system
flexibility.
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The transaction elements are those customer service variables
directly involved in
performing the physical distribution function e.g. product and
delivery reliability.
The post transaction elements of customer service are generally
supporting of the product
while in use e.g. product warranty, parts and repair service,
procedures for customer
complaints and product replacement.
In any particular product market situation, some of these
elements may be more
important than others and there may be factors other than those
listed above which havesignificance in a specific market.
Customer service and customer retention
It is apparent from issues discussed that organizations that
compete only on the products
features will find themselves at a severe disadvantage to those
companies that augment
the basic product with value-added services. The concept that
should be recognized here
is that the product in the warehouse is very different from the
product in the customershands since the customer looks at the
benefit from the product rather than the product
itself.
For example the core product can be said to be quality, product
features, technology,
durability and augmented product can be delivery and lead time
flexibility, deliveryreliability and consistency, single point of
contact, ease of doing business and after sales
support.
Another important concept that should be clearly recognized is
the lifetime value of acustomer is much greater than the profit
generated from just a single deal with that
customer. A simple formula follows:
Lifetime value = Average transaction value * Yearly frequency of
purchase*
customer life expectancy
More on customer service and customer lifetime value can be
found here.
Service driven logistics systems
The role of logistics can be seen as the development of systems
and the supporting co-
ordination processes to ensure that customer service goals are
met. The main idea of
service driven logistics systems is to meet predefined service
goals. Ideally all logisticsservice systems are defined along the
following lines:
a. Identify customers' service needsb. Define customer service
objectives
c. Design the logistics system
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Identify customers service needs
The approach to service segmentation suggested here follows a
three stage process:
1. Identify the key components of customer service as seen by
customersthemselves.
2. Establish the relative importance of those service components
to customers.
3. Identify 'clusters' of customers according to similarity of
service preferences.
Identifying key components of customer service.
Establishing relative importance of customer service
components
Identify customer service segments
Defining customer service objectives
Setting customer service priorities
As the new competitive context of business continues to change,
brining with it new
complexities and concerns for management generally, it also has
to be recognized that the
impact of these changes on logistics can be considerable. Of the
many issues facingorganizations today perhaps the most challenging
are in the area if logistics.
Setting service standards
We are entering the era of supply chain competition - the
fundamental difference here is
that the company cannot act individually but must act as a
supply chain entity to ensure
competitiveness in the marketplace.'
