This article first appeared in Effective Executive, ICFAI University Press, July 2006
“It has never been more difficult to win – and keep – business through product and price distinction.”
In today’s globalising economy competition is getting more and fiercer. That means it becomes more difficult for products and services to differentiate themselves from other offerings than ever before. Not only is the number of competitive offerings rising due to globalisation of production, sourcing, logistics and access to information. Many products and services face new competition from substitutes and from completely new offerings or bundles from industry outsiders. Since product differences are closed at an increasing speed and many companies try to win the battle for customers by price reductions, products and services tend to become commodities.
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On the other hand, customer behaviour becomes more hybrid. On one hand, customers are increasingly price sensitive – searching for bargains at marketplaces like ebay or buying their groceries at discount markets. On the other hand they enjoy branded and luxury goods. One and the same person may plan a weekend trip with a no-frills airline and a stay at a five-star-hotel.
In the result, customers have a wider choice of often less distinguishable products and they are much better informed. For many offerings the balance of power shifts towards the customer. Customers are widely aware of their greater power, which raises their expectations on how companies should care for them.
Bringing it all together, it becomes ever more difficult to differentiate a product or service by traditional categories like price, quality, functionality etc.
In this situation the development of a strong relationship between customers and a company could likely prove to be a significant opportunity for competitive advantage. This relationship is not longer based on features like price and quality alone. Today it is more the perceived experience a customer makes in his various interactions with a company (e.g. how fast, easy, efficient and reliable the process is) that can make or break the relationship. Problems during a single transaction can damage a so far favourable customer attitude.
The consequence for companies is that they have to adapt their ways of competing for customers. Traditionally, companies have focused their efforts of customer relationship management on issues like customer satisfaction and targeted marketing activities like event marketing, direct marketing or advertising. Although doubtless necessary and beneficial, these activities are not longer enough. They narrow the relationship between company and customer down to a particular set of contacts in which the company invests its efforts. Most likely this will produce not more than a satisfied customer who is well aware of the companies offerings and has a positive attitude towards them. However, a satisfied customer is not necessarily a loyal one.
If a customer is satisfied that means that a product of service has met his expectations and that he was not dissatisfied by it. Customer satisfaction is doubtlessly very important. It is the precondition for repeat purchases and it prevents the customer from telling others about his disappointing experiences. A loyal customer, however, is more than a customer who frequently purchases from a company.
The difference is the emotional bond which links the customer so closely to the company that he develops a clear preference for these products or brands and is even willing to recommend them to others. Loyal customers truly prefer a product, brand or company over competitive offerings. Thus loyalty goes beyond a rational decision for known quality or superior price-performance-ratio. It is about the customers’ feelings and perceptions about the brand or product.
When the customer makes his buying decision, he evaluates the benefits he perceives from a particular product and compares them with the costs. The value a customer perceives when buying and using a product or service go beyond usability. There is a set of emotional values as well, such as social status, exclusivity, friendliness and responsiveness or the degree to which personal expectations and preferences are met. Similarly, the costs perceived by the customer, normally comprise more than the actual price. They also include costs of usage, the lost opportunity to use an other offering, potential switching costs etc. Hence, the customer establishes an equation between perceived benefits and perceived costs of one product and compares this to similar equations of other products.
Based on this, customer loyalty can be understood as to how customers feel about a product, service or brand and whether their perceived total investments with a it live up to their expectations.
The important point here is the involvement of feelings, emotions and perceptions. In today’s competitive marketplace, these perceptions are becoming much more important for gaining sustainable competitive advantage.
Customer perceptions are influenced by a variety of factors. Besides the actual outcome – i.e. did the product or service deliver the expected function and did it fulfil the customers need – the whole process of consumption and all interactions involved are of crucial importance. In today’s globalised information driven economy this can also comprise issues like
· How other customers or influencing groups perceive the product or brand
· The degree to which the customer feels the actual marketing campaign addresses the most important issues
· Responsiveness and service quality of any affiliates, e.g. distribution partners
Customer perceptions are dynamic. First of all, with the developing relationship between customer and company, his perceptions of the company and its products or services will change.
The more experience the customer accumulates, the more his perceptions will shift from fact-based judgements to a more general meaning the whole relationship gains for him. Over time, he puts a stronger focus on the consequence of the product or service consumption.
Moreover, if the customers’ circumstances change, their needs and preferences often change too. In the external environment, the offerings of competitors, with which a customer compares a product or service will change, thus altering his perception of the best offer around. Another point is that the public opinion towards certain issues can change. This effect can reach from fashion trends to the public expectation of good corporate citizenship. Shells intention to dump its Brent Spar platform into the ocean significantly altered many customers perception of which company was worth buying fuel from.
Research has been don on the impact of market share on the perceived quality of a product. Depending on the nature of the product and the customers’ preferences, increasing market share can have positive or negative effects on how the customer perceives the product.
Positive effects of increasing market share on customer perception
· Increasing market share can send out positive signals by acting as an indicator of superior quality that is recognised by more and more other customers. This effect is particularly strong for premium priced products. Customers normally assume that a product must be of exceptional quality if it can gain such an unexpected market success despite its high price.
· Many brands offer positive emotional benefits of using a product that is popular in the markets.
· The value of a product or service can rise through increasing number of users of the same product, e.g. number of members of an online community, better availability of software for popular computer systems.
Negative effects of increasing market share on customer perception
· For premium and luxury products, customers may translate an increasing market share into a loss of exclusivity and thus perceive it as less valuable.
· The quality of services may suffer if they are consumed by increasing numbers of users. Diseconomies of scales and congestions can be observed with busy airports and many other services so that customers may look out for other providers that promise more timely service and convenience.
The concept of customer perception does not only relate to individual customers in consumer markets. It is also valid in business to business situations. For example, a competitor benchmarking survey of a large industrial supplier revealed that the market leader, although recognised for excellent quality and service and known to be highly innovative, was perceived as arrogant in some regions. If we take into consideration that there are about four other large players with a similar level of quality and innovative ideas, this perceived arrogance could develop into a serious problem. Customers here are well aware the main characteristics of all the offerings available at the market are largely comparable. So they might use the development of a new product generation of their own to switch to a supplier that can serve them not better or worse, but with more responsiveness and understanding.
Companies have done a lot to improve customer satisfaction and customer relationships in the past. As discussed above, this will not be enough any more.
Any serious effort to manage customer perceptions starts with a good measurement system. Companies must be truly willing to look at the whole process of interaction through the customers eyes. For many companies, this requires a more or less extensive shift in mindset, since most departments from development to sales will be involved.
France Telecom has set up a ‘Quality of Perceived Value Lab’ at its R&D department. Aiming at a better understanding of customer perception, this unit’s main objective is in fact to give a better definition of the correlation that exists between technical problems in products an those perceived by users. By anticipation customers’ feelings on product qualities, the laboratory provides perceived quality expertise on new solutions. Thus, France Telecom implements the issue of how customers perceive their products as early as in the product development process.
The backbone of any customer perception management and measurement system, however, is thorough market research and surveys. There are several aspects of measuring customer perceptions.
· First of all the company has to find out how itself and its offerings are perceived by the customers. It is essential to identify what the customer is actually buying and which features are most important to him. Only this way it is possible to align the internal focus and resources to the customers expectation. This information is of greater value if it can be compared to the customers’ perception of competitive offerings. Not only will this reveal relative strengths and weaknesses, it is also a valuable source of ideas for improvement.
· Besides that, surveys should also identify the relative importance of several influencing variables in the eyes of the customer. To know what matters most to the customer helps to set priorities for projects.
· Of course, as with any market research activities, it should be based on a careful customer segmentation. Customer groups that differ by frequency of use, social status, geographical region or other criteria, are likely to have different expectations and preferences. Hence, they will probably perceive an offering in different ways.
· Zeithaml et al suggest to incorporate several behavioural-intentions questions to identify signals that are potentially favourable or unfavourable for the company. Questions for behaviour intentions are potentially of higher validity and richer diagnostic value than the “overall service quality” or “customer satisfaction” variables. Since these questions are directed at potential future actions they can not only indicate of changes in demand and market trends. They also provide early warning signs and help to take to take timely corrective action.
Only if a company knows which features of its products and services or which other points of contact with the customer are considered most important by the customers, it can develop appropriate strategies. Such a strategy will not only help the company to strengthen the emotional bond with the customer through targeted improvements and activities. It may also have the positive side effect that the customers’ whole experience leads him to the conclusion that this company really understands his distinctive needs and really takes him seriously. Hence, the customers perception of the whole company may improve beyond a positive attitude towards a particular product.
Based on thorough research, companies can develop strategies and initiate targeted activities to manage and improve customer perceptions. This article finishes with some examples of how this can be done. It has to be taken into consideration, however, that there is no one right strategy. Since these measures shall provide a distinctive competitive advantage, they should be based on the particular competencies and resources of a company and they should aim at setting the company apart from the other market participants.
· The service experience is closely linked to his perception of the total company and its offerings – be it products or service. A common idea of many authors is that it is not always necessary to deliver the absolutely perfect customer experience. Instead it is important to solve the customers need or problem in a matter that is perceived appropriate. For many retail products, for example, it will be sufficient in most cases to offer an appropriate group of substitute products, but not all particular products. In service situations, customers will – depending on the actual nature of the service – not expect an immediate service delivery. They will however expect a delivery within a time frame that is either market standard or meets the service promise of the actual service provider. As long as the company keeps this promise, the customer will perceive this as satisfying. Byrnes even suggests that you earn more customer loyalty when you do a good job fixing a service problem, than if there had been no problem at all. The point is to meet or excel the customers’ expectations, not to achieve some ideal level of product or service delivery.
· Companies should try to make sure that their customers are fully aware of all the ways their offering can provide value to them. They have to explain the customer how this particular product can deliver more value than those from competitors. This approach means to widen the customer perception and to extend their awareness and appreciation to more features or aspects of the offering. However, this point has to be considered very carefully in order not to produce an diametrical effect.
A customer who uses a large part of the functionality of his mobile phone might be delighted to learn about additional features and functions of the next generation product. Here the perceived value of the new product could be increased by highlighting the utility of the new functions. Another type of customer only uses his mobile phone to make and receive phone calls. He would probably not appreciate this type of communication. His equation of product value and cost will shift to the perception that he should pay an higher price for even more features he does not need and will not use.
This point again highlights the critical importance of market research. In this example, market research would help the company to develop different communication strategies that focus on those product features that are of high priority for particular market segments.
· A commonplace strategy to circumvent the loss of exclusivity associated with high market share is to leverage the brand by introducing new related brands. This is very efficient with fragrances or fashion brands.
· In situations in which customers perceive high market shares lead as a sign of quality, it is advisable to advertise a favourable high share, e.g. “Americas most popular SUV”, “Three out of five people already use â€¦”.
· It is advisable to contact customers who indicate low results for loyalty or perception of the company in the surveys. Direct contact allows to identify the roots of the problem and – if possible – to solve the issue. Besides solving some customer-specific problems and thus improving the perception of some individuals, such follow-ups may reveal some causes for problems that are common to wider parts of the customer base. These are the starting points for some improvements with potentially significant effects.
· Follow-up is the hallmark of any loyalty or customer perception surveys. The effects of any activities should be measured and analysed by follow-up surveys to provide further insights.
Perception is key to customer service excellence
CherylFebruary 19, 2010Customer Satisfaction, Customer Service, Customer Service Experience, Employees, Little Things, Big Differences 2 Comments
It’s easy to fool our senses and perceptions. David Copperfield has done it for years; he made the Statue of Liberty disappear. Was that real? Actually, he had a setup of two towers on the stage which supported an arch to hold the huge curtain that would hide the statue. The cameras were only set up in one spot and focused on the monument through the arch. Once the curtains were closed, the stage slowly and almost imperceptibly turned just enough so when the curtains opened again, it looked like the Statue of Liberty was gone.
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Is perception much different when marketers and advertisers want us to believe in their products? I can’t help but notice the Maybelline mascara commercials promising lashes so lush and long that I can hardly wait to drive over to CVS and pick up the latest product. Is it realistic? There’s no possible way mascara can make eyelashes that long and perfect; my objectivity and verifiable actual experience will prove that at a later time, but the perception and a significant perceived improvement to me is what makes the experience real.
Delivering superior customer service is also a perception. A customer’s perception of an issue is often different than the actual circumstance. Let’s take the example of waiting in a Verizon store for the next available agent. I walk in and there are three people before me, three representatives attending to customers and two other employees not engaged with customers. I am impatient because I have to leave in 30 minutes to pick my kids up from school and my impatience grows especially when I perceive the two other employees should be aware that I need some customer service yet they have made no overtures to help anyone.
Excellent customer service, regardless of what the facts may be have to be especially sensitive to the customer’s viewpoint and perception of the issue. That’s where careful listening comes into play and suggesting solutions based on those very perceptions can make a profound impact. Insensitivity and indifference is a prelude to customer anger and the loss of the customer because they don’t really care who takes care of them since each representative is synonymous with the company. This is where standards of KPI or Key Performance Indicators come into play. Through training, monitoring, coaching, practice and new policies, employees understand that customers are driven by what they think about a business or service, and we want them to see positive perceptions.
As for my experience at the Verizon store, I did approach one of the two representatives and asked them if someone could help me and explained my circumstances. The manager came over to me, listened to my problem with my cell phone and my time restraints; asked me if I wanted to leave the phone and come back after I picked up my children, and during that time my phone would be either repaired or replaced. I must admit he had the right attitude, and I was satisfied that someone had worked to help me.
Tuesday, January 26, 2010
Managing Customer’s Perception
Customer’s perception is one of the most important factors which decide the future of the business. The business might propagate heaven in terms of their service offerings but what the customers think of it is more important.
Company’s employees play a major role in deciding its fate as the case is generally and they can play an effective role in changing their customer’s perception on how they think. Simple things like behavior with guests, warm gestures and courtesies go a long way in enhancing a customer’s experience of dealing with a business.
Doing things in the correct manner and refraining from over delivering are the keys of maintaining a positive perception. Giving a patient hearing and making genuine efforts to resolve customers queries are the main stay of changing customer’s perception even in cases where the guests have a complaint pertaining to any aspect of service that they have been dissatisfied with. Honoring one’s commitment and delivering what is promised is also one of the important factors which goes a long way in establishing the credentials of a business in their customers mind. Simply bragging about exceptional experience and not delivering optimum results breaks a customer’s faith in the business and gives it a reputation which it can never ever get rid off.
Therefore; the crux is to do simple things in a simple way and earn customers faith and respect rather than over publicizing and under delivering.
Posted by saurabhsaini at 5:06 AM 0 comments
Labels: customers perception, managing customers perception
Wednesday, October 21, 2009
Effective compaint management tips
After a hiatus of more than three months I am back to what I do best, share my thoughts with you on topics pertaining to various aspects of customer services. In this edition would share with you some of the most common tools with the help of which one should handle customer complaints in order to ensure that the customer walks away satisfied and remains loyal with the organization; continuing to do business.
Before we start; the first or the basic principal of going about handling an irate customer is the ability to be a good listener. My personal experiences tell me that more than 60% of the guest dissatisfaction situations can be tackled simply by being a good and compassionate listener.
Always be aware that in case a customer is walking up and sharing his dissatisfaction about a particular aspect of your service; he is giving you a second chance to retain him. This is true; as in 90% of cases dissatisfied customers would simply walk away without letting the company know and would simply stop doing business with the organization. Therefore; with the cut throat competition and current market dynamics it becomes all the more important for you to retain the existing lot of customers.
There are a few simple to do and not to do steps which should be practiced when dealing with an irate customer and trying to retrieve the situation. The most important aspect is to never tell or try to prove to a customer that he is telling a lie and creating a false situation. Nobody likes to be called a liar and such an interaction becomes embarrassing and in some cases an ego issue for the complaining guest. Make sure that the action of the dealing person does not project as if he is not interested in dealing with the situation, always project a focused and problem solving image.
One should never match aggression with aggression. An irate customer is bound to lose his temper in certain situations; the same should not be replicated by the person dealing with the situation. Being appreciative of the fact that a mistake has happened and accepting and apologizing for it will diffuse the situation immediately. After all every one realizes that we humans are not perfect and mistakes are bound to happen. Always show to the customer that you are trying to understand his point of view by being on his side of the table and are trying to resolve the matter with his support and understanding. Another way of dealing with this type of situation will be to ask the customer to be in your shoes and suggest as to what he thinks should be done to rectify the error.
Always always ensure that you are very polite and soft with the customers and maintain proper eye contact with them during the entire conversation. Always take their contact numbers so that you can touch base with them later on in order to develop a better relationship with them. The more personalized you try and make the relationship the more loyal the customer tends to get as they feel that they are wanted and cared for in a particular place. After all who would like to frequent a place where they are treated like unwanted entities and are not accorded any value?
Posted by saurabhsaini at 8:33 PM 0 comments
Labels: complaint management, irate customers
Monday, June 1, 2009
How to ensure effective customer service standards
Another insight into the excerpts from the eBook which I am in the process of writing on the most common customer services mistakes that the organizations make while serving its customers.
Often there are concerns shown on the fact that an organization is losing the loyalty of its valued customers and the deteriorating customer service standards are impacting the growth of the organizations bottom line. There is a need felt to upgrade the standards and often steps are initiated with a hope to resolve the internal problems and correct the situation. More often than not, the steps which are initiated tend to complicate the matter even further rather than contributing in correcting the situation. The question is what are the most common mistakes that the companies need to aware off not committing?
# 1) Increase in the number of employees to improve the customer service standards
This is the most common mistake that is committed by organizations. The people at the top believe that by increasing their work force they will be able to provide its customers better customer services standards. In actual terms, increasing the number of employees does not impact the situation even a wee bit until and unless the work force is provided with adequate training and skill up gradation opportunities. Maintaining an effective training and skill up gradation program will ensure that the employees are up to date with the latest industry trends, have requisite knowledge base to know about the various ways to know what their customers needs are and serve them accordingly in order to provide exceptional service and raise the customer service standards of the organization.
Further efficient training programs also ensure complete employee participation and the employees feel wanted and cared for in an organization. It is like providing effective and efficient tools to the employees which will help them in going about their routine jobs on a day to day basis.
# 2) Increase the salary of the employees to improve the customer service standards
Most of the organizations think that by increasing the salary of the employees they will be able to motivate them to raise the customer service standards. This might not be true as just increasing the employee’s salary will not ensure that they will be able to raise their customer service standards. How the company treats its employee in their work life is rather more important in ensuring their on job behavior and the way that they conduct themselves with their customers. Providing effective training opportunities which can help them in enhancing their careers with the organization or making them part of some or the other important facet of the organizations planning or strategizing function or any other avenue wherein they can contribute towards the growth of the company apart from their routine work will ensure that they take up more responsibility and ownership of the process that they are directly involved in or hired for. They will be self motivated to perform better and this will ensure that they are able to raise the customer service standards of the organization as perceived by the guests who deal with that particular organization.
Posted by saurabhsaini at 7:46 AM 0 comments
Thursday, May 21, 2009
Essential tips on improving customer service standards
In a challenging business environment, business’s often face threat of losing their customer base to competition. There is a constant need to provide the customers with an experience which makes them come back to the business again and again.
Organizations often face a dilemma when faced with the situation; as most of the people do not have a clue of what areas to focus and what changes to make in order to provide an enhanced and improved customer service experience to their guests. Well to be true there are a few basic troubleshooting steps which need initiated in order to correct the situation and provide an enhanced customer service experience.
The processes or the way that organization functions, not just in the front end, while dealing with the customer, but the entire product life cycle should be focused around the customers needs. The idea should be to make the customers touch points with the organization as customer friendly as possible. There is no point in implementing systems and processes which make customer interaction a pain and leave a bad taste in the customers mouth, this way the customer is bound to shift his loyalties to other avenues where he expects to experience better and customer friendly interaction level.
The attitude or the way the employees of an organization perform towards providing effective customer service standards goes a long way in deciding the fate of the customers loyalty. They have the capability of making or breaking the relationship with the customers. No matter how friendly or customer focused the organization systems and processes are, if they are not being practiced by the people with the right kind of attitude, organizations should be ready to part with lot of their regular and loyal customers.
Having a grip on the customers needs is another important avenue, which potentially decides the fate of the relationship between and organization and its customers. The organization needs to be aware of the changing needs and requirements of its customers and should constantly keep on upgrading their product services according to them. Regular communication with the customers is important as it helps in analyzing the changing demands and needs of the customers and the organizations can fine tune their offerings accordingly.
These basic things ensure that the organizations are up to date with the customers expectations as the moment there is a lapse in the service levels, more often than not customers will shift their loyalties to other service providers without even bothering to tell the organizations about their shortcomings. Regular assessment and analysis of the way the organization is functioning with it customers both internal as well as external will highlight the shortfall areas which need attention. Tackling these shortfall areas will automatically ensure that the customers experience an improved service experience while dealing with the organization.
Posted by saurabhsaini at 4:29 PM 0 comme
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