Strategic Service Management

By Giacomo Squintani, Marketing Manager EMEA, Servigistics

Earlier this week, The Economist reported on how staff-motivation schemes may be feeling the impact of the recession. You may be experiencing it yourself: as corners are cut, those elements that are not seen as directly linking to revenue, and which take up time that could be devoted to primary activities, are most endangered. Of course, the line between perception and reality is blurred: as The Economist reports, “Towers Perrin, a consulting firm, found that between 2002 and 2006 companies with excellent records in motivating staff generated an average annual return over the period that was 9.3 percentage points higher than that of the companies in the S&P 500 stockmarket index”. Their message is clear: dismiss the value of motivation at your peril.

This article in last October’s Harvard Business Review did a pretty good job of pinpointing four key areas to focus on for motivating employees. However, in times of trouble, our focus shifts towards corporate stability, rather than individual benefits. We can go back to basics, and Maslow’s Hierarchy of Needs: we pursue Self-Actualisation and Esteem only when Safety is taken care of. When this is no longer a given, our perspective changes – and, with it, our behaviour. The best healthcare and pension plans in the land are worth nothing without a job underpinning them.

If this blog entry could guarantee you safeguarding your job, it probably wouldn’t be publicly accessible – and I would retire on selling the formula. But this is anything but The Age of Guarantees. Furthermore, how you go about re-engaging your staff (and yourself?) within your organisation depends on specifics that a generic entry cannot address. You should be aware, however, of changing behavioural patterns around you.

But I will make one point I believe is relevant to us all. As you look to cut costs, close that deal, refocus… don’t lose sight of the importance of customer service.

Companies that excel in customer service foster an atmosphere that improves both internal and external relationships. Furthermore, remember:

·         Winning a new customer costs as much as five times as much as retaining an existing one – and that’s before you’ve built up any loyalty or knowledge;

·         Customers who become advocates are an amazing marketing tool; unhappy customers are a potential barrier to growth;

·         Dealing with happy customers motivates staff. Solving issues for appreciating customers gives a great buzz. But dealing with unhappy customers, not being able to help them… that leads to high turnover rates. And high agency fees…

·         If your products and service are at the premium end of the scale, this is the time to be engaging with customers – to ensure you are not threatened by low-cost alternatives

This is not just about niceties. Even in a recession, excellent customer service makes sound financial, commercial sense – throughout your value chain. It’s only normal for you to lose sight of this, at times. But, if you let your competitors make the mistake on a long-term basis and you keep your eyes on the prize, you will come out of these time a stronger player for it.

      “Opportunity is missed by most people because it is dressed in overalls and looks like work.”

-          Thomas Alva Edison

Well, it’s almost official, we’re in a recession.  So now what?  A solid strategy is to make sure you don’t lose the customers you already have.  A major opportunity in this market is a strategy around service.  Good service can win lost customers back and keep the ones you have satisfied.  Here are some tips on what you can do to make service pay in a recession. 

First, you need for your customers to be satisfied after each and every service event.   A current trend is to apply the practices of Total Quality Management (TQM) to service.  So to summarize what this means for service:  understand the customers’ expectations, identify the risks in trying to meet them, put processes in place to mitigate them, incent staff, and create a feedback loop.   Simple, huh? 

The first point, understanding expectations, isn’t as easy as it sounds.  This fact is why company spend hours negotiating Service Level Agreements (SLAs).   Now these are very popular in the IT world but are used more and more in other industries.  The problem is many customers have iron clad SLAs are still unhappy with their service.  Why?  Expectations.  Meeting expectations isn’t enough. 

Think about it, when you were in grammar school, were you happy with an “S”?  All that said was you were “Satisfactory, met expectations.”   In other words you did what was expected, what you were obligated to do.    Big deal, I’m sure there are a dozen of your competitors that are willing to do a satisfactory job as well. 

So how do you exceed expectations?  By focusing on the second step, risk mitigation.   You better have everything in place to execute and execute well.  That means having a high performance service supply chain.  Everything should be monitored and managed: repair, planning, sourcing, pricing, and logistics.  Stock outs, for example, should be a major exception rather than a “fact of life.” 

The final step of a feedback loop is often underutilized.   Notes when closing a case really doesn’t cut it.  Root cause analysis of what caused the problem is key.  Can you prevent this issue for impact other customers?  Can you lessen the impact to other customers?  Unless you are really analyzing data, capturing the field knowledge, completing the feedback loop with all the data, then finally making this information available to the front lines, you are operating in the dark. 

Another missed opportunity is repair.  In a down economy, people hold on to their equipment longer, this means more repairs.   For repairs, the demand patterns are less predictable and more speculative, the sources of supply are varied (new, repaired, and refurbished), the life cycle extends beyond manufacturing lifecycles [in some cases like A&D by decades], repairs can take multiple paths, the levels of part substitution  are huge, and multiple levels of inventory require optimization.   All of this makes repairs a complicated but critical piece of the chain. 

So that’s just a small window into some of the tactics you can use to build into you service strategy.  Many people forget that service can be your most powerful profit lever, especially in hard times.  Any the only way to pull that lever is with quality service and quality service is hard work.