FOUR TYPES OF CUSTOMER SERVICE STRATEGY PROPOSITION, WHICH ONE ARE YOU?

We see our customers as invited guests to a party, and we are the hosts. It’s our job every day to make every important aspect of the customer experience a little bit better. ~ Jeff Bezos

One of the biggest challenges in the world of customer services is understanding what type of service proposition you have. What proposition have you developed and delivered? What value – both in terms of services revenue, as well as customer retention, renewal and growth – you are going to have over the medium term. Many times, when I pose the question “what type of service strategy proposition do you have”, I am greeted with a blank stare.

Let me explain what the four types are; their key attributes; what challenges you have to focus on to stay in the race and you will then recognise the value of understanding which you are. In addition, which proposition you aspire to have – as I am sure that may think you are in the wrong “box” – as it were. Let us start at the entry type and in reverse order:

Type 4.  Price Driven, High Turnover services

Attributes: Commodity-like proposition.

This is where the race to the bottom in terms of costs is key. You are in a race to deliver the service with the lowest possible costs. As a commodity, the customer regards you simply as a provider of service, much like a utility company such as one that provides electricity or gas.

Challenges: Cost leadership and economies of scale is key to survival.

You have to be ruthless in managing costs and driving out waste. Scale is also key and this is where people will seek to develop shared service capabilities, such as off-shoring into a shared service centre, that delivers remote services to multiple customers.

Type 3.  Feature Driven, High Turnover services

Attributes: Slightly better perceived benefits, normally SLA based, high performance

This is where you have sold and are delivering a “rich” mixture of services – remote, on-site, regional, international, reactive, proactive, project-based, etc. For many of these, as part of the contract, you will have agreed Service Levels [called SLA’s] with the customer. In fact, you will probably have set up internal agreements on service across your organisation [often called OLA’s – operational level agreements].

Challenges: Deliver beyond “just the SLA” and Constant pressure to add extras. There are two challenges here. The first one is to deliver beyond just the SLA. The “water -melon” effect where you might have green SLAs and yet the customer perceived service is rubbish is something you have to consider. I have previously written on this. “Customer Service, what do you measure when SLAs don’t work? Processes, outcomes, and benefits” http://martinsummerhay.livejournal.com/53367.html

The second challenge is that the customer is expecting you to constantly be delivering incremental and additional services – not necessarily free of charge, but you have to demonstrate their value. Often, customers will refer to this as “innovation” and you have to actively demonstrate this, else, you will be judged just on the SLA performance alone. A place you do not want to be in.

Type 2.  People Driven, Relationship-Based services

Attributes: Long-term personal relationships, but limited value proposition. For this type, the engagement and relationship is based on long-term personal relationships, at very senior levels in both the service provider and the customer. However, there is generally a limited ability to differentiate on value proposition of you as a service provider, but this is not important so long as the relationship remain strong.

Challenges: Understanding and addressing specific customer needs & relationship management. One of the major challenges is how you identify and co-create solutions with the customer. This requires extensive and deep knowledge of the customer and the customer’s medium and long term ambitions and how services can add value to these ambitions. The other challenge is to continually build and maintain strong relationships. Don’t forget this is a relationship, person based type and you can not rely on just the existing relationship you might have in the organisation. You have to extend the relationship network so that you are not reliant on just one or two people. After all organisations change and so do the people in positions of authority.

Type 1.  Brand Driven, High-Value Added services

Attributes: Compelling value proposition & solves complex service challenges. For this final type, this is brand driven based on both your brand as a service provider and also tied into the customers brand proposition as well. The services are extensive and add value to the customers business by solving complex issues that are recognised by the customer to support their business outcomes.

Challenges: Deep customer knowledge, globally consistent services & unique knowledge. To be able to compete and deliver the services, you have to have deep, extensive knowledge of the customer’s business and how your services compliment and add value to their business. To be able to deliver the complexity of services, you will generally have to have both local and global service provision and it has to be consistent – especially if it is a customer that is based in more than country, or you are working across their complete supply chain. You will have to proactively promote the customer experience you are delivering, going beyond the service descriptions and SLA’s and talk in the customer’s own language about the outcomes you are delivering.

Successful Service Strategies drive incremental margin:

To give you some idea of the revenue growth and margin you get from these different types of services, the list below compares the predicted margin levels for each type.

  • Price Driven – generally zero or 1-2% margin
  • Features Driven – up to 5% margin
  • Brand Driven – up to 10 – 15% margin
  • People Driven – over 15% margin

The conclusion is, that the two most successful service strategies are Brand and People Driven. THough you have to balance the amount of effort and time to develop these types of strategies. I have not touched on investments needed as they will be unique to each service provider and how much change is involved to develop the correct strategy.

I leave you with this quote as always….

You’ll never have a product or price advantage again. They can be easily duplicated, but a strong customer service culture can’t be copied. ~ Jerry Fritz

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