Here's how you can use customer service guarantees as a competitive advantage.
Chris Brown of ABC Electrical Contractors has stops to make at two electrical distributors. He placed the orders first thing in the morning, and asked Worst Electric Supply to have the order ready by 11 a.m. and asked Best Electric Supply to have the order ready by noon.
He walks in the counter area of Worst Electric Supply at 11:10 a.m. Two counter salespeople are immersed in a conversation about last night's Yankees-Red Sox game. No other customers are at the counter, but when Chris looks right at them, he receives no eye contact for what seems like an eternity to him. He feels acid building in his stomach, pops a Tums and waits. He thinks of his customer waiting at the job-site.
Finally, one of the counter salespeople grunts, “What do you want?” Chris explains that he's here to pick up his order. He adds that he telephoned at 7:30 a.m. today about this material and requested a will-call for 11 a.m. The counter salesperson casually looks around the counter and disdainfully responds that he doesn't see Chris' order. At Chris' irritated request, the salesperson finally gets around to locating his order. Chris has been at Worst Electric Supply for 28 minutes, and leaves at 11:40 a.m.
It's a different story when Chris walks into Best Electric Supply at noon. The counter area is bustling with customers, but Chris is still immediately greeted at the counter. “How can I help you today, Chris?,” asks Sam, the counter manager. Chris tells him that he wants to pick up his will-call order. Sam looks at the will-call staging area and says, “I'm sorry. Your order is not ready as we promised. I'll run back to the warehouse and bring it right out.” Sam returns shortly with Chris' order and says, “We're sorry that we did not meet your service expectations. Here's a $20 Service Guarantee because we didn't have your order ready. We hope to continue to earn your business in the future by doing it right 100 percent of the time. That's our service commitment, Chris.” Chris has been at Best Electric Supply for 8 minutes. He leaves at 12:08 p.m.
Where do you think Chris Brown will take his future business? Obviously, he will go to the electrical distributor that makes a service commitment and stands by it, Best Electric Supply. In this economy, Worst Electric Supply not only lost a customer, but will soon end up in the corporate junkyard of electrical distributors.
Farmington Consulting Group (FCG) has helped electrical distributors implement customer service guarantees since 1993. Our customer satisfaction survey research indicates service guarantees favorably influence the volume of business customers do with distributors. When asked, “Does our service-guarantee program favorably influence the volume of business you do with us?” 39 percent of our client survey respondents checked “yes.” Clearly, customer service guarantees generate more electrical distributor sales. We have found that customer service guarantees transform tertiary customers into secondary customers, secondary customers into primary customers and continues to build strong loyalty among primary customers.
What is a Customer Service Guarantee?
A customer service guarantee is a set of two promises: a commitment by a company to its customers to make good on a promised level of service and a commitment to compensate its customers when the first promise is not met. Successful companies promote their service guarantees to everybody. The classic service guarantee example is Fed-Ex: “If you want your package absolutely, positively to be at someone's doorstep the next day, then Fed-Ex it!” The company even guarantees a specific time for their overnight deliveries to reach the customers, or the delivery is free. There are three reasons to implement customer service guarantees:
Provide customer focus
Customer service guarantees force everyone in your organization to focus on customers. Knowing what your customers want is essential to providing them with service guarantees. The first step is to conduct a third-party customer satisfaction survey (read “Making Sure Customers Love You” in Electrical Wholesaling's January issue) to determine exactly what your customers want, and how you are currently performing based upon their wants. Once your survey results are tabulated through customer satisfaction indexes (CSI) and customer dissatisfaction indexes (CDI) for each service category, you can then design a customer service guarantee launch.
Set service quality performance metrics
Customer service guarantees generate feedback. A guarantee creates the goal and sets the service levels for your customers' expectations. A service guarantee compels you to create a system to discover errors. It forces you to discover why each service shortfall occurred and improve each service delivery process to prevent further service errors. Service guarantees require your company to gain control of its service quality.
Create key competitive advantages
Our customer-satisfaction survey research also reveals electrical distributors that implement customer service guarantees acquire two to three competitive advantages within one year. Examples of service guarantees that can help your company achieve competitive advantages are: counter will-call service; order-fill rate; order accuracy; timeliness of deliveries; emergency deliveries; invoicing accuracy; and treatment of credits and returns.
5 Key Success Factors
Your customer service guarantees must contain the following five key success factors:
- Must be unconditional
A good service guarantee has no conditions. They are for every customer, first-time or long-standing. If you cannot guarantee all elements of a specific service unconditionally, don't bother developing one.
- Must be specific and easy to understand
A good service guarantee is written in simple, concise language that pinpoints the promise. As with the above customer service guarantee examples, you must promise something specific, such as a 90-minute delivery guarantee, order fill-rate on 250 products, will-calls picked and staged within 25 minutes, 25-minute emergency response guarantee, all shipped orders will have both the items and the quantity 100 percent correct, etc. These are all measurable and no “gray” areas exist. Customers know precisely what to expect. Customer service guarantees define each employee's role and responsibilities in delivering superior customer service. Employees know precisely what is expected of them.
- Must be meaningful
A good service guarantee process is meaningful in two respects. It guarantees those aspects of your service that are most important to your customers, and it has financial significance to your customers by providing a payout when a service promise is not kept. A payout that creates financial pain when errors occur is a powerful statement to customers and employees alike that your company demands customer satisfaction. Putting a company's profitability at risk provides every employee with a solid incentive to improve upon service shortfalls.
- Don't over-promise
It's important to offer customer service guarantees within your capacity to deliver. If you can't consistently meet your service guarantee, it will advertise to your customers that you have a service weakness.
One example is how ABC Electric Supply (fictitious name for a real electrical distributor) recognized that order accuracy was of primary concern to his customer base. However, ABC Electric surmised that installing a service guarantee prematurely would be a mistake because their error rate was too high. ABC had no measurement system in place, so they installed a tracking system. ABC then combined a new tracking system with a warehouse incentive plan to provide individual and team rewards for high order accuracy. With a successful tracking system in place, they now could define root causes of most of the errors and provide solutions. Within months, the order-accuracy rate for this electrical distributor greatly improved. ABC then implemented a service guarantee the competition could not match.
- Provide employee service guarantee training
Before introducing your service guarantees to your customers, you must first provide thorough customer service guarantee training to all your employees. Every employee should be encouraged and empowered to administer customer service guarantees. Your people must cheerfully and proactively give out service-guarantee pay-outs when the service level is not what your customers expect. This is a critical step, because your aim is to provide hassle-free service that will delight your customers. Don't ever burden your customers with having to ask for a guarantee pay-out. A customer who is already dissatisfied should not have to jump through hoops to receive his service guarantee. Recognize and even reward employees who cheerfully and proactively give them out. My firm has developed a four-hour customer service guarantee training module for electrical distributors that motivates every employee to take active ownership as a service-guarantee provider.
Customer service guarantees will significantly shape the service quality of your company, improve customer satisfaction and increase sales and profitability. Don't think it's crazy to pay customers for your service failings. You will go out of business if you don't guarantee customer satisfaction. Very few customers will take advantage of you. They don't want the money; they want an electrical distributor who can deliver on the services promised by doing things right the first time, every time.
Customer service guarantees make customers choose your business over your competitors. They launch a chain reaction that engenders truly break-through service for your customers and will help your company survive these difficult economic times.
Thomas J. O'Connor owns Farmington Consulting Group (FCG), Farmington, Conn. He has been a growth strategy consultant for distributors, manufacturers, and manufacturers' representatives for 27 years and is a frequent contributor to Electrical Wholesaling magazine. You can reach him at (860) 676-7876 or by email at email@example.com. His company's website is www.fcgltd.com.
Examples of Customer Service Guarantees
25/25 will-call guarantee. Electrical contractors and other customers are continually frustrated when they arrive at a distributor to pick up a will-call order only to find out that it isn't ready. They don't want to waste valuable time sitting at the counter, waiting for their will-call order to be pulled and processed. With a 25/25 will-call guarantee, the distributor guarantees that will-call orders will be ready in 25 minutes or less. If the customers arrive in 25 minutes and the will-call order is not ready to go, the distributor issues a $25 customer service guarantee certificate.
Order fill-rate service guarantee. 100 percent fill rates are the only acceptable performance level from electrical distributors. With this guarantee, distributors promise that their Top 250 products (most commonly ordered) will never be out of stock. If the distributor is out of stock on these products, the company issues customers a $25 customer service certificate.
Order-accuracy guarantee: Customers should expect 100 percent order accuracy from their electrical distributors and that the items appearing on their tickets will be the exact items ordered and in the proper quantities. If the distributor doesn't get it right, they issue a $25 customer service guarantee certificate.
90-minute delivery guarantee. On-time delivery is also the only acceptable performance level from electrical distributors. With this guarantee, delivery of orders placed between 8 a.m. and noon will be delivered within 90 minutes or the distributor issues the customer a $25 customer service certificate.
25-minute emergency service response guarantee. To guarantee 24-hour emergency service seven days a week, a distributor commits that when a customer leaves a message an on-call salesperson will be paged. That salesperson must respond within 25 minutes or the distributor issues the customer a $25 customer service certificate.
Invoicing accuracy guarantee. The distributor guarantees an accurate invoice the first time. If the company fails to provide a customer with an accurate invoice, it issues that customer a $25 customer service certificate.
Instant credit on returns guarantee. The distributor guarantees that it will issue customers a credit on stock material purchased and returned within one business day of receipt of material. If the distributor fails to issue an instant credit, it issues the customer a $25 customer service certificate.