Looking at Customer Service by Type of Business
Introduction: Effective Customer Service by Type of Business
There are some customer-service techniques such as effective customer contact-reporting systems that apply to most businesses, while there are other procedures that pertain primarily to the specific type of business such as manufacturing, retailing, or professional services. Recorded below are six customer-service suggestions for selected types of businesses. The list of businesses and techniques is not meant to be all-inclusive nor are the suggestions meant to be the most critical ones. This checklist is only meant to be a starting point to provide some initial guidance to your thinking in dealing with one of these, or another, type of business. As you review the checklist, see if you can add other customer-service practices for the type of business based upon your own experiences.
General: One Size Fits All
There are many types of businesses other than the ones mentioned below. However, each of them has some of the same general concerns in common. A good rule in establishing proper customer-service procedures within the business environment is the application of good business practices which may require educating management and others as to the merits of operating their business in the most effective manner of customer service possible—and that excellent customer service provides greater benefits than their costs.
1. Owners and management establish a disciplined customer-service environment or others to follow, using themselves as role models.
2. Established customer-service procedures communicated to all employees with expectations that they be followed.
3. Effective customer-service reporting system developed and in place that allows management to take immediate action to correct the cause of the present customer-service issue and prevent the same type of incidence from happening in the future.
4. Effective real time customer-service communication system in effect for all off line transactions, including point-of-sale systems, and onlinecomputer systems.
5. Business consistently operated based on communicated basic customer-service business principles and best practice considerations in all areas of the business’s operations.
6. Delegation of authority and commensurate responsibilities to the lowest level possible within the business so that each worker is responsible for controlling their own operations in a self-motivated disciplined manner that releases top management from unnecessary policing and control of all employees.
Know the business you’re in
and establish a competitive advantage
For me, in my continual search for customer-service excellence, I can only say that I know and feel it when it exists—and it pervades the entire organization. One of my colleagues once said to me when I pontificated my “search for excellence” philosophy “that I’m not sure what excellence is but I sure know what crap is.” Now that is a great starting point and before you know it you are on the road to excellence.
Knowing what’s bad
guides you to what’s good
Manufacturing
Manufactures typically need to compete with other manufacturers who may be able to take better advantage of the economies of scale. Thus, the manufacturer must be quicker and more flexible than their competitors to achieve a competitive advantage other than those lucky manufacturing businesses who have a proven niche market.
1. To deliver excellent customer service, inventory levels are kept to a minimum, always pushing toward zero. Raw materials are ordered from vendors to be delivered just-in-time for entry into production. Finished goods are produced for shipment to customers based on entering real customer orders into production to meet customer requested delivery dates. The emphasis then becomes work in process inventory where it is to be kept to a minimum and at least 80 percent related to real customer orders at any one time. A customer order should be in work in process the least time possible, ensuring all customer orders being completed and shipped on time.
2. Finite manufacturing facilities should be used expeditiously taking into account over and under capacity situations, with plans as to what to do. Manufacturing plant and equipment should be kept to the minimum necessary to meet customer demands.
3. Direct manufacturing costs, material, and labor, should be strictly controlled. Material costs should be kept to the lowest level possible through effective vendor negotiations that establish long-term commitments as to price, quality, and timeliness. Material usage should be strictly controlled so that only necessary material needed to produce the product is entered into production—moving towards an absolute one-to-one relationship as to quantity of material per quantity ordered. Other controls over material relate to the reduction or elimination of scrap, rejects, and rework. Labor costs need to be controlled to maximize productivity as to cost per item as well as the reduction or elimination of set-ups and increases in productivity without sacrificing quality. Cost control results in price control and desired profit margins.
4. Control over all non-direct manufacturing activities in an effort at reduction and elimination in costs of such things as receiving, incoming inspection, storeroom operations, quality control, floor supervision, repairs and maintenance, packing, shipping, and material handling.
5. Production control and scheduling system that allows for real time tracking of all customer orders to enable the business to ship at the right time with the desired level of quality.
6. Manufacturing only those products desired by the business customers so that items produced are shipped directly to the customer and not placed into inventory.
Keeping your customers (and vendors)
in business is your business
With the present movement in this country of outsourcing manufacturing to the country with the lowest labor cost theoretically doesn’t absolve the company from the above and other customer-service expectations. However, solely looking at price it serves the company if not the customer. Ignoring the other tenets of excellent customer service such as quality and timeliness should be done at your own peril.
Retailing
There are many different types of retail establishments from the small newsstand to the large clothing store. However, each of them shares some attributes in common such as the buying and reselling of merchandise. If the merchandise purchased (i.e., the buying function many times controlled by the owners) sells quickly at the desired price, the retail operation will probably be successful. However, if the merchandise doesn’t sell, not only is there a buying control problem but also an inventory problem as to what to do with the unsellable merchandise.
1. Utilizing limited store capacity most effectively so that every item placed for sale turns over within an expected standard period of time. Avoid getting into the markdown business—sell your merchandise at desired prices.
2. Operating the retail establishment in a pleasant manner so that customers are attracted to enter the store and become regular customers. It is easier to build your business by selling more to regular customers than trying to persuade new customers to buy.
3. Building the business based on selling more product to quality customers rather than continually trying to attract new customers. Control customer service and develop customer loyalty.
4. Building effective controls over the behavior and performance of in-store employees so that each one provides consistent and desired customer service. As such employees working in retail tend to be lower paid than other businesses and may be more transient—this is a particular trouble spot. Make each employee a part of the business.
5. Implementing effective point-of-sale systems that ensure that all sales are recorded (especially cash sales) and that each register terminal is effectively settled on a daily or shift basis—and that the customer receives a review and a thank you for the sales transaction.
6. As inventory shrinkage is a major loss item for most retailers, develop effective security checks (electronic and otherwise) on both the front door and the back door. It is not only questionable customers that may borrow merchandise (with no intention to return it) but also employees who believe such a benefit is coming to them. Keep inventory to a minimum, especially in the back room.
Make the customers shopping trip
become a buying experience
create the wow! for your cutomers
We all know why we frequently go to certain stores and avoid others. While we may believe that this is an individual subjective matter, there is a pattern that develops amongst the store’s customer base. The smart retailer pays attention to his or her customers and tries to tap into what the desired customer base really wants. I want to have a real shopping experience and not a shopping horror story.
Services
Some businesses sell a product; others provide a service such as plumbing, electrical, roofing, auto repairs, home improvements and the like. It is usually more difficult to fully satisfy a customer as to a service rendered than with a product purchased. As some one other than the seller normally produces the product, there is a third party to blame should the customer be dissatisfied. However, with the providing of a service, the business and its employees (including the owners) are directly responsible should the customer not be completely satisfied.
1. As these businesses are providing a type of personal service each individual providing such services must be controlled as to behavior, providing of service, efficiency, and customer rapport.
2. Establishment of basic business principles as to how to treat the customer. The customer should see positive consistency regardless of the individual providing the service.
3. Effective pricing methodologies that ensure not losing the sale due to excessive pricing. As many of these services are subjective there is a tendency to charge for each activity as well as an override for materials. Where possible it is best to give the customer a fixed price that includes all of your costs.
4. Controlling the add-on. Many service type businesses may quote a fixed price and then attempt to change it based on an add-on situation that could have been seen on the front end. Building contractors many times depend on the add-ons to produce a profit on the job.
5. Reducing or eliminating the non-service charges from the billing process. These include activities such as obtaining the materials, travel time, breaks, going to get a part they should have had with them, and attempting to recover the cost of the estimate (even when advertised as free). These should be included in the hourly rates and as part of an estimate or fixed price.
6. Establishing standards for each service activity upon which the customer is billed. The customer should not be penalized for the work efficiency differences between your service employees.
If your business is service
then service is what you deliver
One must hold a provider of services to the same bar of excellence as any other business. This means that there are certain expectations as to the quality of service delivery and the timeliness of providing that service and effective customer friendly pricing policies—as well as follow-up service. I know longer want to chase a servicer for not showing up or showing up late or providing shoddy service or lack of clean up or questioning unexpected items on the bill. If the servicer really wants to stay in business they have to accept their customer-service responsibilities.
Professional Practices
There are many businesses that provide a product to the customer, which is paid for at the time of sale or billed for later collection. However, there are other businesses that provide a professional service such as lawyers, insurance agencies, travel agencies, title and mortgage companies, and CPA firms. These businesses typically provide the service with a subsequent bill based on the services provided. Some of these businesses base their billings on the time expended while others base their billings on the service rendered.
1. Since these businesses are providing a personal professional service, the most critical factor is the personnel providing such services. Each individual must be controlled to ensure a consistent quality of providing such services. Remember each employee represents the business to the public.
2. Controlling client billings so that they represent the related services provided. The business may focus on the bill; the client focuses on the service.
3. As the service delivery is only as good as the individual providing the service, the control over such service delivery must be monitored to ensure the proper level of service is being delivered.
4. The greatest amount of cost attributable to providing the client service is the cost of employee compensation. Procedures must be exercised to maximize the level of service delivered by each employee—and the client must be satisfied.
5. Do the services rendered provide more value to the client than the amount of the bill? Implement procedures to ensure that the client receives and perceives such value. A satisfied client will request additional work to be done as well as refer your firm to others. Build your business with satisfied clients.
6. Treat each client and the specific engagement as a profit center. Control the amount of your billings to fit the situation and control costs to ensure a desired profit margin. Make sure that your employees’ time recordings are accurate as to including all time, not recording some time (for them to look good), or recording time not spent. You need accurate data to bill your clients properly—the end point of customer service.
As a professional practice
always act professionally
What more can be said? If the professionals can’t provide quality service then I believe we are really in trouble. Calling yourself a professional does not give you a free pass to take advantage of your clients. The same customer service principles apply to a professional practice as they do to any other business.
Boutique Shop
While some small businesses believe that the best way to compete with the big buys is through competitive pricing, there are other small business philosophies that have also proved successful. One of these approaches is the boutique where it is not price but service and uniqueness that appeal to a customer base that is willing to pay more for such individual service and attention.
1. These are specialty shops such as jewelry, lingerie, women’s clothing and accessories, leather, linens, and household accessories. As a speciality shop, the first step in customer service is to define your business and the customers you seek and then to monitor that you are attracting such customers.
2. As a boutique shop, there is expectancy that the merchandise is unique and different and probably more costly than a large chain store. Typically, such stores attract a higher-end clientele than a so-called national brand-type store. Procedures must be established to service such customers from the time they enter the store until they hopefully leave with their purchases.
3. A retail boutique shop requires a different level of personnel than an ordinary retail store. Proper customer service must be exercised over all personnel so that they deliver the level of service required to satisfy such a customer base.
4. As the items being sold in a boutique shop tend to have a larger ticket price than other stores, non-threatening customer service practices must be in place to ensure that only purchased items leave the store and that discipline exists over store inventory.
5. For such special customers, the environment in the store must be properly established to be commensurate with the pricey merchandise. For instance, a spouse or partner corner while waiting, artistically arranged display cases and merchandise, over-attentive sales personnel, attractive presentation and wrapping, and easy exit upon paying.
6. Proper attention over all merchandise. As the items tend to be pricier, there must be more care taken as to what is purchased and placed in the store. While turnover may be expected to be longer than a less expensive store, there still must be controls as to how long merchandise should sit in the store waiting a buyer. Use your regular customers and reach out to them to help move slow moving merchandise—avoid getting into the markdown business.
If a boutique,
be unique
The small retail boutique type business must make up in somewhat higher prices with greater customer service. It is the small boutique that is reliant on building an ongoing customer base of repetitive sales and quality customer referrals. Boutique owners and employees must provide special treatment for each present and potential customer to create that wow feeling that encourage the customer to visit your store frequently. And each customer is looked at for the present sale but what the customer represents for long-term future sales.
Restaurant/Food Service
A restaurant food-service type business is dependent on attracting sufficient customers to maximize their capacity for serving based on the type of meal—that is breakfast, lunch, dinner, or snack. Customer-service practices need to be established to ensure efficient use of the finite capacity of the facility, abilities of the serving staff, and building of a loyal repetitive customer base.
1. Control your customer base. Develop methods to attract an on-going customer base so that you are less dependent on one-time or transient customers.
2. Establish controls as to your customer-service operating procedures such as seating customers, table set-up, nibbles while waiting to order (coffee, water, bread, etc.), efficient bus and wait staff, order taking, kitchen operations, table clearing, and bill paying.
3. Control the customer and traffic flow. Establish procedures as to expected table turnover for each type of meal—breakfast, lunch, and dinner—and monitor results. Remember the greater the turnover the greater your profits and tips for your wait personnel.
4. As most restaurants pay their bus and wait personnel very little, expecting customer tips to be the major portion of their compensation, there needs to be proper customer-service expectations over these personnel so that they are working for the business and not for themselves.
5. One of the major costs for a restaurant is the food cost. There must be proper portion control for each meal served so that food costs are balanced with the customer’s perception of value. A satiated customer will return others will not. In addition, the food itself must be controlled as it is not only perishable but also susceptible to inventory shrinkage (usually by employees).
6. Effective balance over payments that bear some relationship to the meals served. The payment process should be speedy and efficient to ensure getting the customer out when they are ready. There are too many businesses that work hard on getting the customer into the business but not so hard on getting the customer out.
It’s not just a meal,
it’s a dining experience
When I dine at any eating establishment, I look for three factors in my dining experience—ambiance, service, and value for the price. If any of these three factors are out of balance than my dining experience suffers. For instance, I find noisy storefront restaurants create an uncomfortable ambience for me. It is difficult to concentrate on the service and the food when you are unwillingly stuck in the adjoining tables, conversation, and noise making. Likewise, inadequate service can spoil my dinging experience. If I have to continually find the waitperson to service my table then I decide that I can do it better myself if allowed. Value for the price is another matter. I like big tasty portions at reasonable prices, others like a little taster at large prices. Each of us needs to honestly value what we received for the price. It is all of these factors together that make for that excellent dining experience.
Accounts Receivable Business
There are many businesses that primarily sell their products and services on a cash or credit card basis at the point of sale. However, there are still those businesses that maintain the business tradition of selling on credit—that is submitting a bill, setting-up an account receivable, and then waiting to collect their payment. These businesses could include manufacturers, food brokers, and linen and uniform suppliers.
1. As it is desirable to get out of the accounts receivable business, procedures should be established to determine whether the business is moving in that direction. A specific control might be establishing a dollar limit, such as $500, where the sale must be paid for in cash or by credit card, thus eliminating the cost of billing and collections for such small purchases.
2. As most businesses have a limited number of customers that make up a large proportion of their sales (usually 20 percent of total customers result in 80 percent of total sales), an acceptable customer- service practice would be to negotiate prices that would include paying the bill at the time of delivery or receipt—hopefully through an electronic fund transfer method.
3. Establishment of effective credit controls so that the business doesn’t sell more to its customers than prudent business principles dictate that the customer can pay comfortably. Remember a sale is not cash and a real profit unless it can be collected profitably.
4. When a new customer demonstrates his or her willingness to buy additional products or services and shows an ability to pay in a timely manner, the business must exercise its respective credit policies to enable the customer to purchase more while monitoring the credit limits placed on each customer.
5. For those customers where the business must bill, set up a receivable, and collect the business needs to operate the billing on a timely basis (at the time of delivery or prior) to ensure that the customer receives the bill prior to or at the time of receipt of the products or services. For professional services, payments should be received in advance on a retainer system for repetitive services or at the time the service is provided leaving billing only on an exception basis.
6. Once the bill is entered as an account receivable it must be strictly monitored to ensure timely payment within the businesses stated credit terms. If a discount is offered for early payment (i.e., 2 percent, ten days) make the after discount amount result in the desired sale price, resulting in a penalty for those that don’t pay on time. Effective collection procedures must be instituted so that outstanding amounts are timely collected, credit policies strictly enforced, and delinquent customers are not sold additional products or services.
If accounts receivable are necessary,
eliminate what is unneccessary
The bill is a sore point to many of us. While we expect to get a bill when we contract for products and service, it can be a pleasant tweeking or an unpleasant jab in the eye. The bill should correspond with the purchase contract—implicit or implied. The fact that it is economical to put prices at the counter display and not on the product itself, it is paramount to customer service that the price charged equals the price at the display. The customer need not be burdened to become a mentalist to remember all of your prices and specials and discounts. And it is not a bad practice to provide the customer with an appropriate gift at the time of billing—now that’s a pleasant billing surprise.
Make the bill
a pleasant surprise
Inventory Business
Although it has been mentioned previously that the business should do what it can to reduce or eliminate inventory, that is get out of the inventory business, there are some businesses where inventory is their business. Such businesses might include lumber yards, hardware stores, wholesalers and distributors, and supply houses.
1. Establish procedures that monitor which inventory items sell repetitively and to what extent based on customer demand so that inventory items and levels on-hand reflect such customer demand.
2. Determine which products should be kept on hand (i.e., reasonably priced, highly repetitive items), which ones should be supplied on a timely basis by other vendors (i.e., easily accessible items where the cost of carrying the item does not justify maintaining it on-site), and which products should be ordered for the customer as needed (i.e., large ticket items not normally ordered).
3. Monitor all inventory on hand to ensure correct recording and storing of incoming items (with reconcilement of updated balance), proper maintenance of items on-hand (i.e., cyclical inventory counts reconciled to computer records), and accurate storeroom issues settled to some form of customer sale.
4. Maintain ongoing sales records and customer demands that integrate with the inventory control system to determine amounts to maintain on-hand so that on-hand inventory is kept to a minimum while still meeting all customer demands.
5. Control physical inventory so that no item moves into or out of inventory without the proper recording of a receipt from a vendor delivery and bill or an inventory issue supported by a customer bill. Establish effective controls that segregate the functions of inventory receipts and issues from the reconciliation of inventory records.
6. Conduct storeroom operations so that direct responsibility over all storeroom operations is clearly assigned, which eliminates the possibility of others being involved with receipts and issues of inventory—this includes business management and other related employees.
If in the inventory business,
inventory controls the business
Inventory and its storage can be a costly practice. The company needs inventory on hand to service their customers but any excess costs the company. So the company must develop effective systems to ensure that inventory is there when needed. When dealing with a retailer, whether bricks and mortar or somewhere in cyberspace, the items that you are purchasing need to be available. Excuses and rain checks are going to cut it. If you don’t have the item, the customer will go elsewhere—possibly for less money and better service. For the lack of the item, the customer is lost.
Cash Business
As previously mentioned, it is desirable for many businesses to be in the cash business. Dealing strictly with direct payments in cash allows the business to reduce the cash conversion time period from sale to collection to zero—a desirable business practice for any business. However, dealing directly with cash presents numerous problems as uncontrolled cash can be easily subject to employee misappropriation and theft. Examples of cash businesses include Laundromats, vending machines, amusement arcades, casinos, pay telephones (although a dying breed), and parking meters.
1. Control cash payments with a back-up system such as a recording meter, cash register record, printed, and/or electronic record that can be reconciled to the counting of cash. Cash transactions can be a major issue to customer complaints and issue resolution.
2. Segregate the functions of cash pick-up, cash counting, and settlement procedures. Ensure that an independent party from the cash operation reconciles the cash to the back-up record.
3. Ensure that any employee who handles cash is properly bonded, trustworthy, and responsible. In many businesses, management don’t trust anyone other than themselves with the actual cash, creating an operational bottleneck at times that could bring operations to a standstill—and infuriate waiting customers.
4. Establish procedures for each cash terminal that produces a range of expected business volume that can be compared to actual receipts. Also control the incidences of over and under cash conditions by outlet that may indicate some control flaw at the site or with the reconciliation and settlement procedures.
5. Impress upon management the value of recording all cash receipts rather than diverting cash directly into their pockets. Besides the ethical and legal issues, such cash diversion results in inaccurate recording of sales that makes it difficult to accurately provide advice and direction for the business.
6. As all businesses are in the cash conversion business and it is desirable to receive cash at the time of providing the product, the business should factor cash conversion into their cost and pricing strategies. Cost and pricing procedures should assist the business in accurately determining correct prices to stay competitive.
Cash is king, but don’t allow it to play games with your business. Yes it might be good entrepreneurial spirit to pocket that cash, but it is liable to come back and bite you in an undesirable place when you need that cash to pay your bills or expand your business. Cash is always a temptation, but excellent customer service dictates that you treat cash no differently than a check or credit card payment. The business needs to establish controls over cash and the customer needs to feel that they are dealing with an upright business.
Be in the cash business,
but watch the cash
Conclusion
Business management must consider the customer-service function as an integral part of the business’s planning process. Management must define the businesses it is in, its basic business principles, and the products/services to be sold to which customers at which times. It is within this overall planning framework that customer service is integrated with management’s expectations. Such customer-service plans must incorporate the maximum level of real customer orders (e.g., 80% of total forecast), so that the business can exert its efforts on servicing these customers so that these customers continue to buy your products or services and effectively refer your company to other quality customers.
In addition, each customer and sales order must be looked at as a profit center. That is, the total sales amount must provide a contribution to positive cash flow and net profits. To accomplish this, the business must exercise adequate control over product, functional, and customer costs. Not only does each dollar of cost savings produce an additional dollar to the bottom line, but it also allows management greater freedom in making pricing decisions. While the cost control emphasis, if any, in most businesses is on controlling product costs, functional costs (e.g., sales order processing, accounts receivable, and collections), customer costs (e.g., customer service, installation, and after sale support), and net profit contribution must also be considered in evaluating company efforts.
Although in many situations sales prices may have to be set based on outside influences such as market pressures and competition, management must strive for the greatest flexibility in price setting based on maximizing the differential between real assigned costs and selling price. Accordingly, the customer-service function must be analyzed as an integrated part of operations and as a contributing profit center. No longer can the company’s personnel operate on its own (as if each individual is in business for itself) without clear direction from management and integration with all operating areas of the business. It is within this context that management analyzes the customer-service function as an effective contributor to positive cash flow and net profits. It is no longer acceptable to make sales that cannot be produced, delivered, or collected in a timely fashion that may produce a sales commission but do not produce desired satisfied customers.
If things are going well,
you must have overlooked something