Transforming Customer Care

Author: Allan Drew, Coote Harvard LLP

This paper describes the importance of creating superb customer service. It focuses on

• How service fits with business strategy
• Why service is important
• Defining the customer experience
• Customer satisfaction and process driven metrics
• Case teams to improve the provision process
• Cutting costs and improving performance in the repair process

How service fits with business strategy

All businesses require a strategy. Usually the aim of that strategy is to create shareholder value through improving the financial performance of the business. So it can be said that the aim of all business strategies is ultimately to create financial value. However for any sustainable value to be created a number of major strands must be developed. As the Balanced Scorecard demonstrates, shareholder value results from the key areas within the company all pulling in the same direction. Specifically the scorecard highlights four key dimensions

• Financial performance — efficient utilisation of financial resources.
• People performance — making the most of human resources and harnessing intellectual capital.
• Process performance — exploiting processes, data and systems owned by the company for competitive edge.
• Customer performance –ensuring the value inherent in the company’s customer base is realise.

Each of the four scorecard dimensions requires their own strategy to ensure that the business overall strategy is achieved. Within the customer dimension strategies will typically focus on marketing and sales. In 75 percent of the companies we have worked with there is no strategy for customer service. And yet customers of those same companies typically have between three and six times more contact with the service organisation than with marketing and sales. Not surprisingly these companies without a service strategy had no board level manager responsible for customer service.

Does your company have a customer service strategy?
Does your company have a customer service director?

If the answer to these questions is “no” then how do you intend to deliver your business strategy without managing the experience you are delivering to your customers?

Why service is important?

Ultimately delivering good customer service is the only way to retain competitive edge. This is particularly true in the telecommunications industry where increasing commoditisation has made basic services and products increasingly universal. Rapid growth in mobile and IP based technologies has brought significant functionality along with falling prices. Particularly in the business marketplace price is no longer a key differentiator, either for basic services, and increasingly, nor for more complex services either. Ultimately the ability of the operator to offer the customer more flexible and innovative service offerings around the commodity priced products becomes the only real way of differentiating from the competition.

So, good service can help win new business. But perhaps much more importantly good service retains existing customers and lowers churn. According to the Harvard Business Review, US banking customers are 42 percent more likely to stay with a bank when they are offered excellent service. This implies that the expensive setup costs that come with new customers can be recovered and profits made over a longer-term because a customer stays longer with the bank. Indeed, growing the customer base, necessary as it may be, is an expensive business. Again the Harvard Business Review estimated that it was about seven times more expensive to acquire a new customer then to service an existing customer.

Finally, there is more and more evidence to demonstrate that customers are very loyal to organisations which provide them with excellent service. The difference between good service and excellent service may be problematic, but customers recognise excellent service when the see it. And finally, from the Harvard Business Review, loyal customers buy more.

Defining the customer experience

Ultimately the delivery of good (or excellent) service is a matter of perception. In this case it is the customers’ perception which is paramount. This is in contrast to the quantifiable physical performance by which the supplier attempts to define good service. Basically this means that if a customer says they are receiving good (or bad) service then indeed that service is defined as good or bad irrespective of the supplier’s view of performance. Hence the challenge for service management is one of trying to improve customer perception through the delivery of quantifiable physical performance such as cycle time, meeting agreed dates and so on.

Probably the single most important factor in creating a successful linkage between quantified service performance and customer perception is a clear understanding of the required customer experience. Basically the required customer experience is a set of carefully researched requirements that customers expect to be delivered by a service operation.

Here are some examples of what customers might view constitutes good service performance ‘

• Opening hours 8 am to 8 pm.
• Telephone calls answered within 15 seconds
• Changes carried out online.
• Faults repaired same-day.
• Personalised contact arrangements.

Crucially what constitutes a required client experience depends on segmentation. Clearly the required experience will be different for a global corporate customer compared to a residential customer. So, the old, one size fits all approach of the government telco monopoly is no use at all in today’s competitive environment.

Ultimately defining the required customer experience for a particular segment is the job of marketing. Properly researched customer requirements within segments, and indeed clear definition of the segments themselves, are invaluable resources for any operator. Inaccuracies and mistakes in defining the customer experience will often produce expensive wasted effort as operational managers chase service metrics which are of little or no relevance to the customer.

We now have some important, if somewhat tenuous, linkages between customer satisfaction and operational performance metrics. Tenuous, because ultimately even the customer probably cannot define every aspect of a superb customer experience. In particular there are soft issues around superb service which are notoriously difficult to manage for success. For example every time an employee interacts with the customer the tone of voice, the accuracy of the information imparted, the apparent trustworthiness of the employee and so on, all help mould the customer experience.

Customer satisfaction and process driven metrics

Creating a service operation which is capable of delivering superb results and generating customer loyalty has 3 interdependent stages. First you must start with good products. This means that the products must work, be reliable, represent reasonable value for money and so on. However, increasingly customers take good products for granted. On their own they deliver perhaps up to 50 percent customer satisfaction. Increasing that customer satisfaction score means creating a service wrap around that product to achieve on-time delivery, reasonable cycle time, help and support when required and accurate billing. This combination of good product and service typically achieves up to 80 percent customer satisfaction. Getting from good service ’80% satisfaction- to great service ‘ 90-100% satisfaction — means managing the soft people based issues successfully.

It is important to realise that these stages must be carried out in sequence. There is no point having well motivated, customer centric people if the product does not work properly. The only result will be that ultimately both your customers and your people will leave. Often we find it is the middle ground (getting from 50% to 70% satisfaction) which most companies find difficult. Companies often have good products which work well and they have well motivated service people who want to do a good job for customers. But the service delivery processes do not perform well enough to enable product performance and customer caring attitudes to create customer value. For this reason the remainder of this paper concentrates on principles and techniques to manage and improve service delivery processes.

A rational approach to this middle ground of service management means basically examining and defining the processes which deliver service. Typically in a telco environment there are a number of top-level service processes

• Order fulfillment.
• Repair
• Billing.
• Complaints/query handling

Each of these processes will have an inherent cycle time and failure rate. Cycle time will be determined by summation of the individual activities within the process, coupled with work queue sizes at the input of each activity. For sensible service management we can identify two important quantities ‘

• Minimum cycle time — the time taken to progress an order through all the process activities with no waiting time between activity hand offs.
  
• Typical cycle time — the minimum cycle time plus all the waiting time for an order to come to the front of each activity queue.

It is often the case that typical cycle times are five to ten times greater than minimum cycle times. Service performance can be transformed simply by reducing work queues in front of each activity. However, for any process the minimum cycle time cannot easily be bettered. So if the customer experience calls for a delivery performance which is better than the minimum cycle time, careful analysis coupled with process re-engineering will be required.

Process failure is a more complex issue then cycle time mainly because failure can be defined in at least three ways ‘

• Failure seen by the customer — each stage of the process was completed but the customer agreed date was missed. Often this arises when appointment dates are agreed with the customer which are inside the typical cycle time.
• Failure seen by the customer and the telco — the process could not be completed by the agreed date because of a physical failure such as shortage of line plant or exchange equipment.
• Failure seen by the telco only — each stage of the process was completed and the customer’s agreed date was met. However corrective action had to be taken to achieve the agreed date and extra cost was incurred. This might mean for example an emergency cable diversion in order to provide the service on the agreed date.

To achieve high levels of service delivery and hence customer satisfaction, service management will attempt to convert all potential process failure into the third category, that is failure seen by the telco only. This ‘cost of success’ is an important metric to keep under review and should be constantly targeted for reduction.

Typical management information systems do not give information on any of the above process performance metrics. Invariably some form of manual charting technique is necessary to understand these aspects of process performance. These charting exercises need not be terribly expensive and time-consuming. The author has had considerable success by identifying 100 orders at the beginning of the order fulfillment process and then tracking the progress of each order through to completion. Often this tracking can be done retrospectively from the order progress history and a pretty accurate picture built up of where failures are occurring. Additionally by applying activity based costing tools a good estimate of the cost of success can be achieved.

Case teams to improve order fulfillment

At some stage it is almost inevitable that service management will wish to re-engineer the order fulfillment process to reduce cycle time and failure. There are many ways of achieving such improvements but case teams are a simple and cost-effective solution to many process problems where systems capability is limited. Basically most processes have a number of sequential activities each of which is carried out by a different organisational group. Hand offs between these activities, and work queues in front of each activity, seriously compromise process performance. A case team is a small group of people who have been equipped with all the skills necessary to complete an order. The team has access to all the systems and data required to manage an order from start to completion. The team will complete all stages of the order, often in parallel rather than serially as with the previously methods. Hand offs for an exchange line order are typically reduced from 10 to 15 down to 2 or 3. Typical cycle times are reduced from several days down to less than an hour. Failures fell dramatically since many fewer individuals were involved with the order. The team morale improved significantly, there were higher levels of job satisfaction, customers were treated better and customer satisfaction moved upwards.

Improving front-end clears for the repair process

The repair process is a necessary cost of failure within any service operation. Any re-engineering initiative which reduces the cost of running an effective repair process makes a useful contribution to business performance. Basically the most important initiative management can undertake is to prevent faults. However, with increasingly complex equipment, many reports to a repair service turn out to be feature or software related rather than faulty equipment. The challenge is then to resolve these reports as quickly and cheaply as possible. Many organisations are still passing these reports through to engineering units which usually send a field engineer to visit the customer to resolve the issue.

This has 2 main problems-

• It is very expensive
• The customer has waited several hours at least to have the problem resolved

A successful approach is to train the person logging the report from the customer to handle simple faults and resolve them while the customer is still on-line. Structured questioning techniques and expert system support play key roles in helping non-technical fault reception staff to clear the fault report before it enters the expensive and time consuming engineering processes. The author has led projects which increased the percentage of reports cleared at reception from 35% to 60% and saved engineering visits valued at ??10m each year. Customer satisfaction also rose significantly since many customer problems were resolved more or less immediately.

Summary

The drive to greater customer satisfaction is a commercial imperative. Greater customer satisfaction generates loyalty, reduces churn and makes the customer base more profitable. Customer value is created leading to increased shareholder value. Superb customer service maximises customer value and consists of 3 key elements all of which must be present-

• Fit for purpose products
• Service delivery processes which deliver the customer experience
• Motivated employees committed to customer care

Many organisations find the middle ground of managing service delivery the most difficult and this is the area where customer value is easily destroyed. However, clear understanding of process characteristics and application of some simple tools and techniques can enable service management to make big strides in re-engineering processes to deliver the required customer experience.