UNIVERSITY OF FINANCE AND MARKETING

TOPIC 3
CUSTOMER SERVICE

M.A. Truong Thi Thuy Vi

Email : vitruong@ufm.edu.vn
 • What is customer service?
Product

marketing
Price Promotion

Place/customer service
Logistics

levels

Transportation
Inventory carrying costs
costs

Lot quantity costs Warehousing

costs

Order processing and

information costs
 CUSTOMER SERVICE
• Customer service is “the ability of logistics
management to satisfy users in terms of time,
dependability, communication , and convenience.”
Source: Roger A. Kerwin, Steve W. Hartley, and William Rudelius, Marketing, 9th ed. (Boston, MA:
McGraw-Hill/Irwin, 2009), Chapter 16.

• Customer service is much more difficult for

competitors to imitate than other marketing mix
variables such as price and promotion
 Elements of Customer service

Pre transaction Transaction Post transaction

Elements Elements Elements

v Written
statement of v Stock out level v Installation, warranty,
policy v Order information alterations, repairs,
v Customer receipt v Elements of order parts
of policy cycle v Product tracing
statement v Expedited shipments v Customer claims,
v Organization v Transshipment complaints, returns
structure v System accuracy v Temporary
v System flexibility v Order convenience replacement of
v Management v Product substitution products
services
 PRE TRANSACTION ELEMENTS
Base on customer needs, define service standard,
1. Written determine who reports the performance measurements to whom
statement of and with what frequency, be operational or capable of being
policy implemented

To provide a level of service designed to improve market

2. Customer penetration and then fail to inform the customer of what is being
receipt of policy provided
statement To reduce the likelihood that they will have unrealistic expectations
of performance

No structure is best suited to successful implementation of all

3.Organization customer
structure Structure should facilitate communication and cooperation among
those functions involved in implementing the customer service
policy
4. System To effectively respond to unplanned events such as snowstorms,
flexibility shortage of raw materials or energy and strike

5. Management Such as training manuals and seminars designed to help the

customer improve inventory management, ordering or
services
merchandising.
 Transaction Elements
1. Stock out level Is measurement of product availability
Is the ability to provide the customer with fast and accurate
2. Order information information about inventory status, order status, expected shipping and
delivery dates, back order status
Is the total time that elapses from customer initiation of the order
3. Elements of order until delivery to the customer. Order Cycle time include order
cycle communication, order entry, order processing, order picking and packing
and delivery.
4. Expedited Are those that receive special handling in order to reduce the normal
shipments order cycle time

5. Transshipment Is the transporting of product between field location to avoid stock out

6. System accuracy
The accuracy of quantities ordered, products ordered and billing
Refers to the degree of difficulty that a customer experiences when
7. Order convenience placing order. Problem result from confusing order form or nonstandard
terminology can lead to poor customer relations
8. Product
substitution Substitution ocurs when the product a customer ordered is placed by
the same item different size or by another product that will perform as
well as better.
 POST TRANSACTION ELEMENTS
Installation, warranty, Customer claims, Temporary
Product
alterations, repairs, complaints, replacement
tracing
parts returns of products
•These elements of customer •To avoid •A corporate policy •Customer
service can be significant factor litigation, should specify how to waiting for
in the decision to purchase. firm must be handle claims, receipt of a
•To perform these functions the able to recall complaints and purchased item
firm needs : potentially returns. The company or waiting for a
•assistance in seeing that dangerous should maintain data previously
product is functioning as products on claims, complaints purchase
expected when the from the and returns in order product to be
consumer begins using it marketplace to provide valuable repaired.
as soon as consumer
•availability of parts and
problems are information to
repair personnel
identified product development,
•documentation support for marketing, logistics
the field force and other functions
•an administrative function
that validate warranties
 CUSTOMER SERVICE
• Four dimensions of customer service include:
• Time
§ Refers to the period between successive events (example -
order cycle)
• Dependability
§ refers to the reliability of the service encounter
§ consists of three elements: consistent order cycles, safe delivery,
and complete delivery
• Communication
• Convenience
 CUSTOMER SERVICE
• Four dimensions of customer service include:
• Communication
§ If effective should be a two-way exchange between seller
and customer
§ Goal is to keep both parties informed
§ Requires correct parties to be involved in the process
• Convenience
§ Focuses on the ease of doing business with a seller
MANAGING CUSTOMER SERVICE

• Four specific customer service considerations

include:
• Establishing customer service objectives
• Measuring customer service
• Customer profitability analysis (CPA)
• Service failure and recovery
MANAGING CUSTOMER SERVICE

• Objectives for establishing customer service

• Specific
• Measurable
• Achievable
• Cost-effective
MANAGING CUSTOMER SERVICE
• Measuring Customer Service
• “you can’t manage what you can’t measure”
• Key issues include:
§ Determining data sources to be used
§ Determining what factors to measure
§ Organizations must resist excessive measurement
MANAGING CUSTOMER SERVICE
MANAGING CUSTOMER SERVICE
MANAGING CUSTOMER SERVICE
MANAGING CUSTOMER SERVICE
MANAGING CUSTOMER SERVICE

• Customer Profitability Analysis (CPA) is the

allocation of revenues and costs to customer
segments or individual customers to calculate the
profitability of the segments or customers
Impact of incremental customer service levels on
revenues, logistics costs and profit
PARETO ANALYSIS
Value
Group A

Group B

Group C

Q
 MANAGING CUSTOMER SERVICE
• Customer Profitability Analysis (CPA)
• Suggests that different customers consume differing amounts
and types of resources
• Recognizes that all customers are not the same and some
customers are more valuable than others to an organization
• Can help to identify when an organization should pursue
different logistical approaches for different customer groups
• Has been facilitated by the acceptance of activity-based
costing
MANAGING CUSTOMER SERVICE

• Service Failure and Service Recovery

• Situations will occur where actual performance does not
meet the customer’s expected performance (i.e. service
failure)
• Service failure is relevant to the order cycle
• Examples of order-related service failures include:
• Lost delivery
• Late delivery
• Early delivery
• Damaged delivery
• Incorrect delivery quantity
MANAGING CUSTOMER SERVICE

• Service Failure and Service Recovery

• Examples of order-related service failures include:
• Lost delivery
• Late delivery
• Early delivery
• Damaged delivery
• Incorrect delivery quantity
MANAGING CUSTOMER SERVICE

• Service Failure and Recovery

• Service recovery
§ Process for returning a customer to a state of satisfaction
after a service or product has failed to live up to
expectations
§ Is often costly
§ May lead to increases customer loyalty
§ Can result in better performing organization by learning
from failure and implementing processes and policies to
prevent reoccurrence
COPYRIGHT NOTICE

All rights reserved. No part of this publication may be reproduced, stored in a

retrieval system, or transmitted, in any form or by any means, electronic,
mechanical, photocopying, recording, or otherwise, without the prior written
permission of the publisher. Printed in the United States of America.