Chapter 2

Looking at the Organization

Introduction

The road to excellent customer service starts with your organization and how it functions—its mechanizations, its practices, and its rules and polices—and its inherent ability for flexibility and susceptibility for change. As part of your organizational appraisal into operational affects on customer service is to evaluate the present level of your delivery of customer service. To do this you’ll need the right information, accurate and timely, to formulate a plan for outstanding service—­laying the groundwork so that your plan will be successful. Most importantly, you’ll be better able to sustain that new great service that you’ll be offering.

The purpose of this chapter is to introduce you to some of the tools that presently exist to enable you to develop your plan for excellent customer service, such as the following:

• The company’s mental models and belief systems. Evaluating the company’s systems of belief that help or hinder the company from moving forward with the utmost flexibility.

• Sales and market forecasts that enable the company to sell the right products or services to the right customers or to sell the customer what the sales function wants to sell.

• Product determination that assists management to decide which products to offer, which products to discontinue, and which markets to be in.

• The arc of a successful product, a tool that enables management to determine if each product is in its life cycle and what actions to take to maintain successful growth.

• Being the innovator or the successful follower. The concept of being the early bird that catches the worm or the second mouse that gets the cheese.

• The identification of various business models. Looking at other business models so as to incorporate those model pieces that produce customer-service best practices for your company.

• Strategies for competitive advantage that enable the company to not only match their competitors but to surpass them.

• Branding concepts that allow the company to identify itself and its strengths as well as its product groups and products—to send a positive message to its customers.

• Using the internet for customer service to increase markets and take advantage of the new technologies.

• Developing an effective web site that provides excellent customer service in a non-personal technical environment.

Mental Models and Belief Systems

Many organizations operate on the basis of prevalent mental models or belief systems—usually emanating from past and present top management. These mental models have an overriding effect on the conditions with which operations within the company are carried out. They can help to produce a helpful working environment or atmosphere or a hindering one. In effect, such mental models become performance drivers—those elements within the organization that shape the direction of how employees will perform their functions. Examples of such mental models and belief systems related to the development of excellent customer service include the following:

1. Hard work and doing what you are told are the keys to success—not taking the time to provide customer service.

2. Stay away from the customer—that is management’s turf.

3. The obedient child in the company survives and is promoted, while the rebellious child is let to go or leaves the company, taking his or her innovation and creativity with them.

4. Only managers can make customer-service decisions.

5. Power rises to the top—and stays there. That is where the customer is treated.

6. Employees need to be watched for them to do their jobs—never let them deal directly with a customer.

7. Power and control over employees is necessary to get results. You own the customer.

8. Managers are responsible, employees are basically irresponsible—and the customer knows that.

9. Those at the top of the organization know what they are doing—let them deal directly with the customer.

10. All functions should be organized in the same manner. Customer service is just another function.

11. Higher levels of organization are needed to ensure that lower levels do their jobs.

12. Policing and control over employees is needed to ensure their ­compliance.

13. All employees are interchangeable. Excellent customer service can be delivered by anyone—better at the top than at the bottom.

14. Doing the job right is more important than doing the right job.

15. Organizational position is more important than being right.

16. Top management has the right to set all policies and procedures—especially related to customers.

17. Managers create results with customers—employees just do the job.

18. Organizational hierarchies are needed to ensure that things get done.

19. Employees cannot be trusted on their own, especially dealing with our customers.

20. You cannot run a business without the proper organization structure.

The accurate identification of organizational mental models, belief systems, and performance drivers is extremely important in analyzing the company’s operations and the effective delivery of excellent customer service. If these things are not changed, operational changes will only change the system and not the company results.

For instance, here are some mental model criteria related to customer service.

1. Make sales to the right customers so that it can be collected profitably. Are sales made to quality customers with the right products at the right time?

2. Develop sales forecasts that are realistic in that the forecast results in a present or future real customer order. Do sales relate to an agreed upon sales forecast? Is the company selling the right products to the right customers? Does each sale make a contribution to profits?

3. Are all costs compared with the sale such as product costs (direct material and labor), assignment of product related activity costs (e.g., manufacturing processes, quality control, shipping, and ­receiving), functional costs (e.g., purchasing, accounts payable, billing, and accounts receivable), and customer costs (e.g., marketing, selling, support services, and customer service)?

4. Sell those products as determined by management to the right customers, at the right time, in the right quantities.

5. Actual customer sales should directly correlate with management’s long- and short-term plans.

6. Sales efforts, and corresponding compensation systems, should reinforce the goals of the company.

7. Customer sales should be integrated with other functions of the company such as manufacturing, engineering, accounting, purchasing, and so on.

If you keep your eye only on the operations

you’ll miss the results

Sales and Market Forecast

The starting point in an organizational planning process is the sales and market forecast (both short-term and long-term forecasts). This is the definition of what goods and services the company desires to sell and to whom. However, because the effectiveness of the organizational plan is dependent on the accuracy of such a market or sales forecast, many companies experience planning problems before going any further, a result of their having sales forecasts that are more fiction than reality. So for most companies the first step in effective planning is to work toward more accurate sales forecasts on which to base their plans. A good rule of thumb is that an effective sales forecast should consist of at least 80% real customer orders. This means that the sales function will have to do the one thing they have not done in years—service the customer.

Sell what the customer needs,

not what you want to sell

The organization, together with the sales function, must determine what products or services (or product lines) it wishes to sell in the coming period. This decision is made by analyzing past sales, customer (and non-customer) needs and desires, inventory levels, production and service delivery capabilities, futuristic considerations, competitive factors, and so on. An example of such a product analysis is shown below. Based on the analysis of these three products (or product lines), the company has to determine what it wants to do with these products in the future.

Based on the analysis of these three products (or product lines), management needs to determine what they want to do with these products in the future. For, instance, Product A is a low cost/selling price item with low profit margins. Management might question whether they want to stay in this business for competitive reasons—that is making a low cost alternative available for those customers where low price is a strong consideration—or to get out of this part of the business altogether. The company is not only achieving an unacceptable level of return, but it is also tying up resources (facilities and personnel) to be used more effectively with other products.

Product B is the company’s bread and butter product—that is the company sells these items repetitively at a more than acceptable profit level (37.5%). Sales of these items account for over 70% of the company’s total business and 67% of gross profits. These are the items that the business is geared up for and where the sales function can easily obtain customer commitments. This is the part of the company’s sales forecast that needs to be accurate. With minimal effort by sales personnel this can be achieved—if sales personnel would only talk to the customers.

Product C is the high price top of the line product for those customers who are willing to pay more for a luxurious look or additional options—many times a status rather than price consideration. While the company sells less of these items than Product B, the profits (and usually sales commissions) are greater. Accordingly, there is a tendency for sales personnel to spend more time selling C’s than B’s, which may be counter to the company’s plans—that is to sell more B’s than C’s.

Typically, the company doesn’t know what their real costs (and added costs) are for such top-of-the-line items, and what internal strife this causes in producing and delivering their standard B items. Company management needs to consider their plans for Product C—that is to increase this business segment, de-emphasize it, or maintain it approximately at the current level. Management might also consider making the Product C business segment a separate entity or business division. In whatever case, management must direct the sales function so that their efforts are expended where desired to meet management’s plans for the direction of the business

All businesses are in a

number of businesses

You can have your cake and eat it too,

but it might not be what you ordered

Customer service, that is selling customers what they need, when they need it, is the focus of the entire company not just the sales force.

Little things mean a lot—

the difference between a satisfied customer that builds your business and a badmouther that kills your business.

Competitive selling from within results in

being in the markdown business

hoping to recover lost sales through volume.

The Arc of a Successful Product

When the business finds a product with high demand and a good profit margin (sometimes identified as a cash cow), management must be aware of such a condition to take full competitive advantage in dealing with its customers.

While such a product analysis allows management to take advantage of the marketplace by establishing an unrealistic pricing strategy it is asking for two things to happen:

1. The market settles after all of those customers who demand or need to have the product have saturated the marketplace. Typically within a relatively short period of time, usually within a year, 80% of all customers who demand the product have purchased the product. After such saturation, sales will tend to plateau, and the cost to continue to increase sales at the same price becomes more costly—sometimes resulting in losses in each sale. A reduction in price may increase sales but lose customer loyalty of those customers who purchased the product at its high initial pricing.

2. Competitors have entered the market and absorbed market share by reducing prices and increasing quality and more reliable delivery and customer support. It is at this point that the business must decide what to do with these products—innovate, expand marketing and sales efforts, or retrench and look for the next cash cow. This is grist for the customer-service process.

The Early Bird Catches the Worm, but the Second Mouse Gets the Cheese

There are many examples of the early bird and the second mouse. Here are a few examples:

As can be seen, some of these companies were able to have a great cash harvest as early birds and others have done quite well as the second mouse. As part of the customer-service process, you need to look at where your products are at this point on their life arc, the position of your competition regarding these products, and whether you want to devote time, effort, and expense in becoming the early bird or to watch your competitors closely and then jump in as a second mouse—or stay out of this arena entirely—allocating your resources elsewhere.

Business Models

Business strategies, which may be dependent upon the type of business the company is in, many times dictates and defines a specific business model upon which the business operates its business activities. For instance, business models of pay first (in whole or partial payment), and then provide the goods or services afterwards; or a business model of “knock your socks off” customer services. Examples of nationally known business models related to strategic thrusts are as follows:

1. Quality differentiation: Maytag appliances and Michelin tires

2. Low cost, minimal frills: WalMart, Target, Kia automobiles, ­Southwest Airlines

3. Discount clothing stores (focus): Ross for Less, TJ Maxx

4. Customer service focus: Old IBM, more recent Dell, Caterpillar farm equipment, office supply catalog/internet companies (Quill, the old Viking)

5. Technological position (preemption): Microsoft operating systems (Windows and Vista), Apple Ipod, RIM Blackberry

6. Owner/employee satisfaction and gratification: Old Ben and Jerry, Tom’s Toothpaste, alternative energy

7. Innovation and creativity: Apple, Cisco Systems, software development and video game companies, and computer animation

8. Synergy: Office Depot and Gateway, AT&T and Cingular, Johnson and Johnson and McNeil Labs (Tylenol), Adobe and Macromedia

9. Stock brokers focus: Charles Schwab, E-Trade as opposed to Merrill Lynch

10. Internet preemption: e-bay, Google, Amazon, Priceline

11. Outsourcing: electronic manufacturing (Solectron, Flextronics), call centers (First Data, Dubai, India)

12. Food service: fast food (McDonalds, Burger King, Taco Bell, Pizza Hut), restaurant chains (Olive Garden, Changs, TGIF, Applebees, Cracker Barrel)

13. Brand recognition and preemption: Starbucks Coffee, Polo and Chaps clothing, Nike athletic gear

14. High end status: Mercedes, BMW, Lexus, Range Rover, JennAir, Sub Zero

It is important to understand the various existing business models so that you can take the best advantage of their strengths and be able to avoid or remediate their weaknesses. And remember it is the second mouse that gets the cheese. It is also a good procedure to analyze the business models of those businesses operating in your local area—as to which models seem to be successful and which are not. Keep in mind that you may be competing with these local businesses but that those national concerns are also your competition and may be more formidable competitors.

It is only a model,

until you get it to work

Reader’s Exercise: Identifying Local Business Models

Identify those local businesses and their business models in the following areas. What makes them unique and different? Why would you use one rather than the others? How can you use these composite models in your own business? How can they provide you with a competitive advantage?

• Restaurants: low end, mid-level, pricey

• Clothing stores: women, men, shoes, general

• Hardware and paint stores

• Professional services: medical, accounting, legal

• Computer stores and services

• Colleges and schools

• Cell phone stores and services

• Book stores

• Toy stores and children’s clothing and articles

• Jewelry stores

• Appliance stores

• Automobile dealerships

• Household services: plumbers, electricians, carpenters

• Gift and card shops

• Hotels, motels, and B & Bs

• Food stores: conveniences stores, supermarkets, natural foods

The strategy must fit

the business’s needs

for it to work

Strategies for Competitive Advantage

As you can imagine, there are many different strategies that an organization can adopt to achieve an advantage over competition. However, many types of strategies share similar characteristics that drive the strategy and provide the competitive advantage. Among these differing strategies to be considered, many would fall into the following two categories.

Differentiation Strategy

Differentiation strategy is when the product or service to be provided is differentiated from the competition by various factors which increase the value to the customer/client, such as enhanced performance, quality, prestige, features, service, reliability, or convenience. Differentiation strategy is often, but not always, associated with higher price. The desire is to make price a less critical factor to the customer.

Low Cost Strategy

Low cost strategy achieves a sustainable cost advantage in some important element of the product or service. Low cost leadership position can be attained through high volume (high market share, perhaps), favorable access to lower cost raw materials or labor markets, or state-of-the-art manufacturing procedures. Low cost strategy need not always be associated with charging lower prices, as lower product or service costs could also result in increases in profits, marketing, advertising/promotion, or product development investment.

Although most competitive strategies usually involve differentiation and/or low cost strategy, there are many other kinds of strategies that could be exploited. Examples include specific organizational competencies such as creativity and innovation, global perspectives, entrepreneurial spirit, research capability, sophisticated systems, automation and IT computer systems, and so on. Within this framework the following three strategies, which are not easily categorized as either differentiation or low cost strategies, could be considered in formulating customer-service competitive advantage strategies.

Focus Strategy

This strategy involves organizations that focus on either a relatively small customer base or a restricted part of their product or service line. For example, a retailer selling to tall men or small women, or a CPA offering personal financial planning services to highly compensated individuals would be employing a focus strategy. The particular focus is usually the driving force in the customer-service planning effort, though differentiation and/or low cost may also be part of the strategy.

Preemption Strategy

A preemptive strategic move is the first implementation of a strategy into a business or service area that, because it was first, produces a distinct competitive advantage. Normally, for such a preemptive move to create an advantage competitors should be inhibited or precluded from matching or countering the move. Some examples might be tying up the major distributors in a new market area before the competition can make a move, becoming the sole source for a particular product such as a new computer software package, or being the only legal firm in town that is a member of a professional practice management association (assuming such membership provides a distinct advantage). Being able to pull off such a preemptive move will put your competitors at a substantial disadvantage.

Synergy Strategy

The benefits of synergy (where the total is greater than the sum of its parts) can occur when an organization has an advantage due to its connection with another organizational entity within or outside the firm. The two entities may share sales and marketing efforts, research and development capabilities, office and support staff and facilities, warehousing, and so on. With the element of synergy, the two or more entities may be able to offer the potential customer/client the products or services that are desired, which neither might be able to do alone. For example, a more traditional consulting firm might link together with a computer software development firm to provide clients with full computer systems development services. The combination could create a synergy that would not exist if each worked separately.

Developing Customer-Service Strategies

In developing specific customer-service strategies for an organization, unique characteristics and trends relevant to the business must be identified. This normally requires some front-end analysis to be able to determine exactly what strategies would likely be most effective. Some factors to consider include the following:

• Market orientation—the organization’s awareness of its external environment, including customers, competitors, and the marketplace. The goal here is to develop customer sensitive strategies that utilize the organization’s market strengths.

• Proactivity—attempting to influence events in the environment as opposed to merely reacting to forces as they occur. Examples would be lobbying for changes to a law that would significantly affect the organization, or trying to exploit a situation that at first glance appears to have totally negative implications (e.g. providing environmental clean-up, toxic waste disposal, or waste management services).

• Information systems—identifying existing information systems and their ability to provide accurate and timely data for an effective customer-service planning process. This includes determining what information is required, how to provide it, processing and analysis requirements, and so on. Another factor to consider is the ability to provide online data so that strategic changes can be made more responsively.

• Entrepreneurial style—entrepreneurial style emphasizes the organization’s need to be more responsive to opportunities and not let unwieldy management systems bog down the decision-making process.

• Multiple strategies—use of multiple strategies rather than a single strategy with related financial projections may help the development of the most effective overall strategy. The focus, however, should be on the strategy development and not on the financial projections.

• Implementation capability—while proper customer-service strategy development is extremely important, it provides no more than a theoretical set of alternatives unless they can be implemented. For the process to work, the strategy must first fit the organization’s needs and opportunities and then must be capable of being implemented effectively.

To thine own self be true,

but know thy competitors

The correct customer service strategy

with the correct implementation

creates the correct solution

Potential Areas for Competitive Advantage

1. Reputation for quality

2. Customer service/product support

3. Name recognition/high market profile

4. Good management

5. Low cost production capability

6. Strong financial resources

7. Customer orientation

8. Breadth of product line

9. Technical superiority

10. Solid base of satisfied customers

11. Segmentation focus

12. Product characteristics

13. Continuing product innovation

14. Market share

15. Distribution systems

16. Low cost/high value

17. Understanding/knowledge of the business

18. Pioneer in the industry

19. Operations adaptable to customer needs

20. Effective sales force

21. Flexibility/entrepreneurial culture

22. Marketing skills

23. Strong market image

24. Engineering/research and development capability

25. Good human relations—staff and customers

Analyze, analyze, analyze,

plan, plan, plan,

and then execute

Branding Concepts

Brand Recognition for Your Business

The subject of branding has never been more important for companies today. Increasing competition from other providers of similar products and services combined with ongoing changes and trends in the business environment have resulted in the need for company branding. By successfully branding its products or services, a company can make itself unique and distinct from the competition in ways that matter to customers.

Large companies have actively conducted branding campaigns for a number of years. But branding is not just for big firms. Branding techniques can be applied to any size business—no matter how large or small. Every business possess intangible assets such as its name, logo, slogan, perceived quality, current client base, potential client awareness, and relationships with other professional service providers. These assets form the basis for the company’s branding.

Definition of a Brand

A brand is a combination of several functional and emotional characteristics that defines a certain image and, in turn, drives a level of awareness and usage. The following are the elements of a brand:

• Product or service name

• Symbol or logo

• Company recognition

• Attributes, expectations and perceptions

• Statement about the company

• Product or service itself

• Promise or commitment of some benefit

Definition of Branding

The concept of branding involves the creation and management of brands:

1. Creating an overall image or attitude

2. Managing specific impressions among target groups

3. Strengthening a brand

4. Repositioning the brand

5. Re-staging or rejuvenating

6. Expanding or extending

Brand Positioning

Brand positioning provides clear guidance for implementing a communications program.

• Perception of brand by target audience

• Competition—strategic advantage and comparison

• Demonstrated advantage

• Reason target audience comes to your brand

Positioning Approaches

There are four basic approaches to positioning a brand:

1. The biggest

2. The best

3. Price considerations

4. Niche advantage

Communication Objectives

Branding efforts should use communications strategies to meet objectives:

• Positively change external audience perceptions about the company

• Build awareness about new products or services

• Develop credibility—a reason to believe the promise of a company brand

• Develop the relationship among the customer, the company, and the products and services provided

Branding Strategy

Positioning approaches and communications objectives lead to branding strategy.

• Target individual audience needs thereby creating desire for products or services

○ Deliver business or industry specific messages

○ Develop content that delivers customer value to overcome barriers

○ Continually demonstrate the breadth and depth of your company’s services

○ Use multiple distribution channels for effective message mix

Using the Internet for Customer Service

As we have moved into the electronic age, more businesses are using the internet as an effective tool to increase their sales and provide more efficient customer service. The key to providing internet-based customer service is the development of a company web site that tells your story electronically—reaching your present customers and potential customers quickly and effectively. Some tips for creating a real customer-service web site are presented below.

Developing a Web Site

Some Myths

1. Developing a good web site only takes a few hours—of anyone’s time.

2. It is easy and inexpensive to set up your web site.

3. Once implemented, you can expect hits (and orders) from your web site almost immediately.

4. It is easy to generate business and sales from your web site.

5. You do not need a web consultant—anyone can do it.

6. Don’t worry about advertising and marketing—with a good web site your customers will find you easily.

Purposes of a Web Site

• Build the company’s image.

• Provide better customer support.

• Make technical information more easily available to your customers.

• Help the company develop a prospective client list.

• Conduct customer (present and prospective) surveys.

• Offer products and take orders (and make money).

Provide online services: for example, customer statistics data, order processing, company and product training programs, financial data, and customer reporting.

Reasons for a Web Site

1. Company capability information only—easy and inexpensive (with off-the-shelf or free internet software).

2. Consider whether to maintain a static or flexible web site.

3. Transactional web site—lengthy process (e.g., up to six months) and costly.

4. Creating transactions such as order processing and online ­
training.

5. Full e-commerce—more complicated with need to consider taking orders, track inventory, fulfill orders, bill and collect from customers, and so on—and keeping it up.

What to Put on Your Web Site

• About the company—who you are and what makes you unique.

• Personnel capabilities—who each one is and what they can do and have done.

• Services and products—what and how you provide your services, and products available for sale (or for free).

• How to contact—the company, departments, and individuals.

• The company’s qualifications—what you do, what you’ve done, and who you have provided products or services for.

• How to order—if the site contains items for sale or on request.

• Linkages to other related web sites.

• Other items: animation, quotes, quips, anecdotes, departments, and columns.

• Guest book to record visitors to your site for follow-up marketing.

• Linkages within your web site such as home page, departmental pages, back, forward, and links to move freely from one page or section to another.

Other Concerns to Consider

1. Accuracy and updation of information.

2. Integrating your web site with back end systems such as inventory and shipping systems.

3. Customer and systems support needs—software and support staff.

4. Need for outsiders such as web technical personnel and marketing/public relations firms.

5. Advertising and promotion—to get customers to your web site.

6. Selecting an appropriate domain name (a URL)—one which is obvious or draws attention.

7. Banner ads—where to place elsewhere and whether your company sells them for their web site.

8. Analytical tools to learn about your customers and prospects (those who visit your site).

9. Targeted e-mail marketing programs—to spread the word about your web site, products, and services to your customers.

10. Off line advertising—promoting your web site.

11. Web site linkages—from other sites (e.g., customer referrals, professional associations, and other related organizations) to yours, and from yours to others (e.g., information, forms, and referrals).

12. Update items: such as services and products, departments and columns, product tips, anecdotes, and changes in personnel.

13. Support items: such as software, personnel, and hardware.

14. Search engines: which ones to be on and how to keep current.

Conclusion

Most businesses start out with an operational strategy based on the belief systems of the owners or top management. Most of these belief systems have emanated and grown as the company stays in business. Some of them have worked well; others have only created hindrances to growth. These belief systems erode every aspect of the business and have a tendency to take over efficiency and effectiveness of operations. Most critical are the belief systems related to customer service—making it easy for the customer or quite difficult to maneuver the rigidity of the company.

The starting point for most company planning is the sales and market forecast. In many cases, such a forecast is a fiction perpetrated by the sales function—selling what they want to sell rather than what’s best for the company. So one of the first steps in providing excellent customer service is to determine which products to sell, to what extent, to which customers, and at what price. Such product determination identifies the company’s markets and the manner in which to service such markets.

The lucky company may come up with a unique got to have product or service. However, to reap the maximum benefits of such good luck, management must understand the arc of such a successful product and when to further innovate, change their marketing strategy, retrench from the marketplace, or exercise pricing adjustments. The company may continually look for the golden product goose or let another company do the innovating cost and become a secondary follower or copycat. It is also good practice to understand various business models to determine how to integrate such models or pieces into their own effective operations.

Once on solid footing the company must develop their own strategies for competitive advantage. It is not merely an exercise to catch up to the competition or merely become less inefficient than the competitors but to surpass them especially in the arena of excellent customer service. This is not a one-time or annual exercise but an ongoing continual process in a program for continuous improvements that makes your company an effective learning organization.

One of the effective tools of customer service is to develop a brand for the company and its products. Such a brand might be “we sell quality.” This is certainly an admirable message to get out to your customers. However, be vigilant that you can actually follow through and deliver what the brand implies.

As technology keeps changing at a faster pace, you need to readjust your customer-service thinking and modernize it to take full advantage of the new technological age. No longer can you sell door-to-door and wait for sales to materialize while your sales people wait at the fax machine or the computer monitor. You need to get on the technology bandwagon and proactively reach your customers using the current state-of-the-art technologies for doing business and serving your customers. The internet isn’t going away so you need to learn how to effectively use it while maintaining your excellence in the delivery of customer service.

Change your belief system,

pull yourself out of the mud,

and get on the road to excellent

customer service