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Sales and Service Strategies

Without a strategy you don’t know who your customers are!

A tightly focused strategy is the key to any company’s performance. Ensure your customers come to you because they hear from others how great you are, (the Active Reference principle). You only earn this enthusiastic word of mouth if you add significant (though intangible) value to their core service.

Most people or customers cannot judge accurately the quality of core service. What they can, and do, appraise is our individual and company behaviour.

What are the three steps to follow?

Great service providers inform customers about what to expect and then exceed their expectations. Not all customers want or deserve high levels of service, but they are entitled to what they have been promised.

  1. You must segment your market carefully and design core products and core services to meet the needs of the customer base. Not all customers who buy the same product or service have the same service needs.

  2. Only the customer knows what s/he wants! You must research the needs of the customer base thoroughly, by paying close attention to what the customer is saying.

  3. Be careful to set the customer’s expectations at the right level.

The Key is to under-promise and over-deliver”. Without a focused service strategy, meeting this challenge becomes impossible.

Markets and Market Segments

To some managers, developing a strategy for customer service may sound like a waste of time. How much strategy do you need to send out a repair person or to adjust an erroneous invoice? Yet even those seemingly simple activities won’t do much for customer satisfaction or corporate profits unless they are part of a considered strategy.

Without a strategy, you don’t know who your customers are, how much they value different aspects of service, how much you must spend to satisfy them, and how high the payoffs are likely to be.

Developing a service strategy is an essential step toward choosing an optimal mix and level of service for different customer sets. Provide too little service, or the wrong kind, and the customer will leave; provide too much, even the right kind, and Sterling Software will eventually go bust or price itself out of the market.

As with classic market segmentation, the goal is to isolate a reasonably homogeneous set of customers that can be served at a profit. While many customers may be happy to buy the same product, they are less likely to feel that their expectations have been met or exceeded if the service they receive is standardised. Service expectations, after all, are highly personal.

Market segmentation focuses on what people and organisations need, while customer service segmentation focuses on what they expect. Marketers tend to use immediate sales to judge whether a segment is valid. Since purchasing decisions look binary - the sale is made or it isn’t - the validity of marketing segments seems easy to assess.

Only after a company has segmented its customers and chosen which ones to serve can it figure out where to substitute low touch for high, thus improving productivity without imperilling customer satisfaction.

How to classify customers

Any company can carve out useful segments, rank their attractiveness, and develop a focused service strategy by examining a few key characteristics of its customers and its business.

  1. How do the typical size of a sale and the likelihood of repeat sales vary among customers?

  2. What are the costs of giving superior service to different types of customers?

Approximating the answers produces a rough segmentation and a working notion of the benefits and costs of different service strategies.

Classification of customers by the value they place on service and by their service expectations often generates a rough idea of the cost of satisfying them. But which customers are the best targets? Answer: those who are the most valuable compared with the likely costs of serving them. While size and frequency of purchase are good indicates of value, there are many others. These include customers whose demand is likely to grow faster than average; influential customers, who will generate powerful word of mouth; and loyal customers. Buyers who are especially demanding, sophisticated, or technologically advanced often go to the top of the list because serving them gives a supplier insight into the needs of more ordinary customers.

Ranking customers by their value is essential for any service operation that must live with swings in aggregate demand and can’t adjust capacity quickly to meet those swings. Ranks or tiers are the key to allocation. When capacity is short, smart suppliers give top-tier customers first claim on service and cut back on service to lower value customers.

Without assigning its customers to tiers, a company which serves numbers of segments has difficulty getting the most out of its service capacity. Stretching and straining to satisfy every segment, it may end up giving low-quality service to all customers, not just to the less desirable ones in lower tiers.

One key to success is to fill the gap between what customers see as good service and what competitors think it is.

After segmenting your market so that you can target your customers, the next step is to find out what they want and expect. This takes research and analysis. The payoffs for good analysis are tangible sales and profits.

It is tempting to forgo analysis because you assume you know what customers expect. But assumptions don’t make effective customer service strategies. Inward-looking companies are guided by industry norms and their own past practices end up with inappropriate strategies, lower market shares and anaemic profits.

Good service has nothing to do with what the customer believes it is; it has to do only with what the customer believes is true. Good service results when the provider meets or exceeds the customer’s expectations.

Do what is expected and the service is good. Exceed by a great amount what is anticipated, and the service will be superior. This is why the providers of good service have to be extremely careful to set the customer’s expectations at the proper level.

Strictly speaking, what customers expect is as diverse as their education, values and experience. The same advertisement that shouts “personal service” to one person tells another that the advertiser has promised more than it possibly can deliver (the filter!).

Service positioning starts with four givens:

  1. The segments targeted.

  2. The expectations of those segments.

  3. The strategy for exceeding those expectations.

  4. The positions of competitors, that is, the images they have created for their companies in customers’ minds.

A winning service position meets two criteria. It uniquely distinguishes a company from the competition, and it leads customers to expect slightly less service than the company can deliver.

The key to successful positioning of customer service is not to create expectations greater than the service your company can deliver. The whole organisation must be together on this. Discipline salespeople who over-promise. Many companies realise that keeping expectations at just the right level - slightly below perceived performance - is a constant challenge.

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