Commerce Bank made the decision to cater to clients who valued convenience and friendly, in-person service. It has evening and weekend hours, bright, spacious buildings, and a creative machine for exchanging spare change. Despite its limited product selection and relatively unattractive interest rates, its retail clientele has significantly increased.
Extended hours and friendly service, not low prices or a wide selection of products, are how Commerce Bank competes. It hires for attitude and trains for service because it understands that it doesn’t need straight-A students to master its limited product set. For example, it uses straightforward hiring standards like “Does this person smile in a resting state?” and it encourages staff members to hire people they observe offering excellent customer service in other fields.
Airlines made sure that passengers could complete the transactions with a great deal fewer keystrokes than check-in personnel previously required in order to encourage customers to use the new self-check-in kiosks. Contrarily, shops that offer self-service checkouts haven’t made it simple for customers to use them. Additionally, shops anticipate customers to take charge of preventing fraud by weighing bags at the register. Result? Anxious customers avoid the machines.
Let me submit that some new tools are necessary. Whether it’s a highly complex product like a digital camera or a basic commodity like corn, a company must develop a workforce that can produce the product at a competitive price in addition to making the product itself compelling. Both jobs are undoubtedly difficult to perform well; a great deal of management attention as well as academic research has been devoted to these difficulties. However, providing a service also involves managing the clients, who can play a crucial role in both the service’s creation and consumption. Additionally, service businesses must find innovative ways to finance their competitive advantages because customers’ participation as producers can have a disastrous impact on costs.
A service business may fail due to any of these four components: the offering, its funding source, the employee management system, or the customer management system. My examination of service companies that have had difficulty over the past ten years amply demonstrates this. However, it is equally obvious that there is no one “correct” way to combine the components. Each of them requires a different design, which is dependent on the other three. When we examine service companies that have developed and thrived—companies like Wal-Mart in retail, Commerce Bank in banking, and the Cleveland Clinic in healthcare—their successful integration of the components stands out more than the cleverness of any individual component on its own.
This article describes a strategy for creating a successful service business based on these four essential components, which are referred to collectively as the “service model.” This strategy acknowledges the distinctions between service businesses and product businesses. It was developed as a core teaching module at Harvard Business School. In my course, students learn to consider these variations and their implications for management practice. Above all, they discover that in order to create a great service business, managers must ensure that the fundamental components of service design work together, failing which they run the risk of tearing the company apart.
The challenge of service-business management begins with design. A service company can’t survive for very long if the offering is fatally flawed, just like with product companies. It must successfully satiate the wants and needs of a desirable clientele. However, managers must make a significant shift in their way of thinking when considering the design of a service. While product designers prioritize features that consumers will value, service designers would do better to prioritize the experiences that users want to have. Customers might associate your service brand with convenience or cordial communication, for instance. Due to its more accessible hours, closer location, wider scope, or more affordable prices, they may find your offering to be superior to that of your competitors. Your management team must be crystal clear about the service characteristics that the company will compete on.
A common definition of strategy is what a company decides not to do. Similarly, what a company decides not to do well can be characterized as service excellence. If this sounds odd, it should. We almost never suggest that the way to excellence is through subpar performance. The majority of successful businesses, however, decide to deliver a portion of that package poorly because service businesses typically don’t have the luxury of merely failing to deliver some aspects of their service—every physical store, for instance, must have employees on-site, even if they’re not particularly skilled or plentiful. They don’t make this choice casually. Instead, my research has demonstrated that they underperform in some areas in order to excel in others. This can be considered a hard-coded trade-off. Consider the business that can afford to remain open later because it charges more than the rivals. This company performs admirably in terms of convenience but poorly in terms of price. The price dimension fuels the service dimension.
Managers must decide which characteristics to focus on for superior performance and which to focus on for subpar results in order to develop a successful service offering. The needs of the customers should heavily influence these decisions. Managers must ascertain the relative weight that customers give to various attributes before allocating investments in excellence in accordance with those priorities. For instance, low prices and a wide selection are most valued by Wal-Mart’s customers, while ambience and sales assistance are least valued by them. Several other characteristics fall somewhere in the middle. (See the exhibit “Wal-Mart’s Value Proposition” in David J. Collis and Michael G. Can You Say What Your Strategy Is? by Rukstad)) The trade-offs that Wal-Mart makes are purposefully influenced by these preferences. The business tailors specific aspects of its service offering to meet the needs of its clients and refuses to overinvest in undervalued qualities. Its performance is driven by the fact that it loses to rivals in areas where its customers are less interested.
The phenomenon, of course, has a circular aspect. Customers who have preferences that are compatible with Wal-Mart’s advantages self-select into its clientele. Meanwhile, those who don’t prefer Wal-Mart’s attributes buy elsewhere. Determining customer segments based on attribute preferences—or, as some marketers prefer, based on customer needs—is crucial. The process of identifying what might be referred to as customer operating segments differs from traditional psychographic segmentation. This type of segmentation seeks to identify populations of customers who share an understanding of what constitutes excellent service, as opposed to emphasizing differences that enable increasingly targeted and effective messaging.
The goal is clear once a desirable customer operating segment is identified: Management should create a new offering or modify an existing one to correspond with that segment’s preferences. Consider the success of Commerce Bank, which has been able to significantly increase its retail customer base despite having some of the worst rates in its markets and making only a small number of acquisitions. The group of clients that Commerce Bank focuses on are those who value the experience of visiting a physical branch. These clients come in all sizes and shapes, ranging from young, first-time bankers to time-pressed urban professionals to aging retirees. However, as a working segment, they all concur that convenience is a bank’s most crucial quality and favor Commerce Bank for its evening and weekend hours. The friendliness of interactions with employees comes in second place for them, so the bank’s core offering now includes the guarantee of a cheerful, dependable teller. Interior features that are both lovely (high ceilings and natural light) and fun (a funny contraption for reclaiming loose change) have improved the ambiance of Commerce’s branch. Price and product selection are factors that are less important to bank customers, so management is willing to concede the war to rivals in these areas.
It is tempting to believe that if I am a great manager, I won’t have to give anything up to the competition. Ironically, this well-intentioned reasoning may prevent you from becoming an expert in anything. The only organizations I have seen that are superior at most service attributes demand a price premium of 50% over their competitors Due to the fact that the majority of industries cannot support this premium, trade-offs are required. I like to tell managers that they have a choice between mediocrity in all areas and excellence when combined with subpar performance. The creation of excellent service is not far behind when managers realize that subpar performance in one area fuels superior performance in another.
The 123’s of Customer Service Model
8 customer service models to try
The following are some customer service models that a business might want to try:
Although the customer may not receive personalized service under a convenient customer service model, they may still choose to do business with you because of how convenient and possibly cost-effective it is. You may not need to have a very involved or extensive customer service approach if you provide your customers with reasonably priced goods or services in a manner that is especially convenient for them. In fact, some customers who shop for convenience might prefer to be left alone and have limited interactions with customer service representatives. It can be beneficial to have less obvious customer service if convenience is one of your company’s key selling points.
2. One team
Any staff members performing customer service duties in a one-team model are completely trained to manage all facets of customer service. Every employee of the customer service department is knowledgeable about how to assist customers, so there is no need to refer them to another person or division. In this kind of customer service, an employee would consult with colleagues before returning to their customer if they had a need or question they couldn’t answer, as opposed to having the customer speak to someone else.
3. In-depth personalized service
Businesses that provide in-depth, individualized customer service typically do so because they are aware that their target market will find it appealing or because they are selling something pricey that needs a little extra tender loving care. This could entail having one customer service representative assist a customer both during and after the sale, as well as gathering specific information regarding their needs and wants. This customer service model can be more expensive because it involves more work and frequently needs more staff to be effective.
4. One-on-one contact
In-depth, personalized service is similar to one-on-one contact, but it involves the customer a little less. When a customer service representative interacts with one customer at a time to address their needs before moving on to assist other customers, this is known as one-on-one contact. Salespeople who deal with specific clients and call center staff who converse with a single client at a time are examples of this. Given that the customer is likely to work with a different employee in the future if they need assistance, this isn’t quite the same extensive support that an in-depth, personalized service would offer.
5. Redirected service
Redirected service is a type of customer service where a customer contacts one employee who listens to their needs before directing them to the appropriate department or person. A receptionist or a staff member with specialized customer service training may be the customer’s first point of contact. In this model, the customer may speak with several people to complete a transaction, schedule a service, or address a problem rather than remaining with one employee throughout their interaction.
Self-service is used more often in conjunction with other models or as a method for customer support than for customer service as a whole. Customers of some businesses may prefer self-service kiosks or other options where they do not need to ask a person at an in-person location, even if the company has a lot of frequently asked questions or technical information available online.
7. Online service
Offering online customer service is a method that businesses are using more and more frequently to provide customer service. This includes features like a live chat option on your website or the ability for customers to email a customer service representative for help. Despite the fact that this model may be especially helpful for businesses with an online-only business model, it can also be beneficial for other kinds of businesses. Because different customers have different preferences, some may favor chatting with a staff member for assistance in making a decision rather than going to a store.
8. Hybrid models
When a company chooses to combine two or more of the aforementioned options, they are creating a hybrid that is best for their customers. For instance, a company might employ the one-on-one approach for its physical locations, have a self-service area on its website, and provide live chat for customers online. All of these models would be specifically chosen to assist the clients of the company in the most efficient manner.
What are customer service models?
The techniques a business employs to offer its customers customer service are known as customer service models. Different models exist because every company has different priorities and requirements, so not every customer service model will be effective for every business. Some businesses may have a structured customer service model when they first launch, but others may not think about a specific model until they are up and running and realize that their customer service processes could use some clarification.
How to choose and implement a customer service model
The actions a business can take to select and apply a customer service model are as follows:
1. Evaluate your companys needs
Evaluating what your business and customers need is the first step in selecting the best customer service model for your business. For example, if you sell luxury items and want to make sure your customers feel taken care of throughout the process, you might decide that providing in-depth, individualized service will be the most successful in retaining customers. Given this circumstance, your company needs to compete with what other luxury companies have to offer in order to sell its luxury goods.
However, that company’s requirements in the aforementioned scenario are probably different from those of a business providing a different kind of good or service. Even if certain customer service models have proven successful in the past, individual businesses will want to find what works best for their particular industry.
2. Evaluate current customer service employees
You can assess your current customer service personnel once you’ve assessed your business and customer needs and have an idea of which model or combination of models might work best. This is usually easiest for a manager to handle. This could entail reviewing prior performance reviews, testing workers to identify their strong points and areas for improvement, or even just asking anyone who works in customer service about what they think they do well.
You can use this knowledge to assess potential customer service models by being aware of what current customer service staff are capable of. For instance, if you discover that two of your customer service representatives are excellent at communicating via technology but are currently interacting with customers face-to-face, you may decide that you have the option of adding online customer service with those two representatives.
3. Determine what would be most effective for your business
You can choose which customer service model or models might be a good fit once you know what your company’s and customers’ needs are and what your current customer service staff are capable of. You don’t necessarily need to worry about what you can afford at this point; instead, consider what would be best for the company and any employees who provide customer service.
It can be challenging to strike a balance between what you want to be able to offer your customers, what the team handling customer service can currently do, and what the company can afford. However, there are numerous inexpensive and incremental ways for a business to change or modify its customer service strategy. The first step in implementing changes that can result in happier customers is evaluating your company to determine the best strategy for your customers.
4. Fill in gaps for your model with training and new hires
If you discover that your company’s ideal customer service model requires skills that your current staff lacks, you may need to invest in training or hire more staff. Some employees may be eager to use their skills for the new customer service model, according to your team, while others may be interested in learning new ones and able to provide a different kind of customer service if they receive the necessary training. If your customer service model changes, some employees might be less eager to pick up new skills but they might have other strengths that can be put to use.
Implementing the required changes may take some time, depending on the customer service model your business has determined to be most successful. For other businesses, it may only require a quick reorganization and new directives for personnel who deal with customers.
What are the models of customer service?
- Convenient. …
- One team. …
- In-depth personalized service. …
- One-on-one contact. …
- Redirected service. …
- Self-service. …
- Online service. …
- Hybrid models.
What are customer models?
These four qualities—promptness, politeness, professionalism, and personalization—are essential to any positive customer experience and, when you think about it, are the fundamentals you demand as a customer.
What are the 5 P’s of customer service?
Customer modeling is the process of foreseeing and predicting the future perspectives of customers’ behavioral aspects. Targets for marketing and campaigning are identified, and predictive analysis is optimized.