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Are we being served?

The decline of customer service

Customer service is defined as an organisation's ability to supply their customers' wants and needs.

Companies must recognise that every aspect of their business has an impact on customer service - not just those aspects that involve face-to-face customer contact.

It appears, however, that some businesses are increasingly disinterested in providing customers with a service, even if they operate in the "service" sector. Consumers seem to be accepting this loss in some circumstances, so what implications are there for the future of servicing customers?

Look up for an example

The airline industry offers a good example of from the shift in customer service attitudes. Traditionally, airline travel was expensive, but you enjoyed a fairly comfortable check-in, in-flight "waiter" service with a cooked meal, and generally a stylish journey.

Today, the modern low-cost airline model has radically changed the concept of customer service for nearly all airlines. Budget airlines such as RyanAir and EasyJet transformed the business, cutting a great deal of non-essential items from the business model: no food, no seat allocation, and paying for putting luggage in the hold. The "traditional" airlines have had to follow suit in many cases, just to remain competitive.

What's the excuse?

The main reason consumers have accepted such a loss of service is price. The low-cost model has increased competition and made air travel more affordable.

What does this business model offer?

This new order in the airline industry provides customers with a far wider choice of destinations. We can now travel by air for some of the lowest prices ever.

It's also opened the door to more new business opportunities, to fill the existing, although smaller, niche market for high-service air travel. Private jet hire has increased over the last year or two, bypassing many of the security hold-ups and offering company executives a highly customised level of service.

Other companies have launched, offering business-class only services (e.g. Eos, SilverJet). This offers the airline an economy of scale in the provision of the service, rather than offering different service levels within the same aircraft.

The choice for your business

We are not all the size and scope of airlines, and you may be asking how this article relates to your business? What my illustration provides is a clear example of how customer service impacts pricing models, how customer expectations can be changed, and how customer service can differentiate your business.

You need to have a clear strategy on what part customer service plays in your business. The choices are clear:

Competitive advantage

The leading management writer, Michael Porter, identified three generic business strategies (Porter's Generic Strategies), which apply well to this situation. He stated that a company can gain competitive advantage by adopting one of three strategic directions.

Porter's Generic Strategies

Porter's Generic Strategies

A company can strive to be the cost leader, reducing their costs as an advantage, and often passing these onto customers. He argues that there can, however, only be one cost leader in a marketplace.

The next option is differentiation. Be different, in this case, by offering a superior service. Make it difficult for the low-cost operators to compare themselves with you – you may be charging a higher price, but if the add-ons are of value, price insensitive customers will flock to you.

The focus strategy can be applied to either cost or differentiation. You focus on a niche market, for example the business-class only travellers, where the market may be smaller, but you can offer them a superior product or service at an appropriate price; or you can focus on delivering a cost advantage that your niche group values.

The place you do not want to be is stuck in the middle – undifferentiated and higher cost than the cost leaders.

About the author

Thom Poole is a Chartered Marketer with the Chartered Institute of Marketing, and a member of the Marketing Society. A marketer with over 19 years experience in online marketing and web strategy, Thom is strategic marketing consultant for Jack Marketing Solutions, working with SMEs. He also teaches people web design from beginners to professionals, as well as CRM, eCommerce, etc. A regular speaker on the CRM and e-marketing event circuit, Thom has also written a book on ethical e-marketing, called "Play It By Trust". The book is available at the publishers as a hardback or download.

Article first appeared in the Daily Telegraph Business Club, February 2008

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