Catalog Age: Playing service roulette

Does your catalog offer exceptional service to your customers? Are you setting the standard for service levels in the industry? If so, you may be sacrificing profits without necessarily increasing customer loyalty. Increasing service levels without customer participation and detailed analysis of costs and benefits is playing service roulette. Long-term growth, profitability and customer retention require a balance between service and risk.

The service demands of catalog consumers increase daily. Same-day delivery, calls answered on or before the first ring, no back-orders, free shipping and handling, toll-free calling: The list goes on. But every item on the service list has a price tag, and even though good service will usually reduce costs, exceptional service increases costs. Catalogers can manage costs by evaluating inventory risk vs. service in terms of customer expectations, inventory management, order-processing efficiency and delivery time.

Customer needs and expectations vary tremendously by demographics, product lines and price points. Customers who live in rural areas that aren't well-served by retailers tend to be less demanding than customers in areas that provide a dense retail market. Similarly, unique product lines or discount pricing can offset demands for superior service. Still, every company has unique customer expectations and responses to its service levels, and any one customer may expect different levels from different catalogs. Determining customer expectations for a specific company requires a combination of customer participation and analysis.

When asked for feedback, most customers are willing to participate in surveys or focus groups if the time required is minimized and a reward, such as a gift certificate or discount, is offered. (Typically, customers don't regard the promise of better service as sufficient reward.)

General feedback, in the form of comments made to customer service representatives and letters to the company, is invaluable because the scope of the feedback isn't confined to specific areas such as marketing or merchandising. It's also hard to analyze for the same reason. Customers will comment on everything from the dialect of a telephone rep to the quality of packaging. To manage feedback, summarize the content and volume of specific responses and create surveys to address major issues. Such a survey provides a forum in which you can analyze overall customer expectations and perceptions more effectively.

Perceived service quality

It's not unusual for a survey to indicate that customer perception of service is very different from the actual service provided. For example, Customer One is told to expect delivery in two weeks, but receives it in one week. Even though the delivery time isn't next day, she perceives that service is prompt. Customer Two is told that all items are available for immediate shipping. When the shipping address is rejected through credit card processing as an incorrect billing address, a card is mailed to notify the customer. A few days later, she calls customer service searching for the order. She needed the merchandise for a special occasion, and even though she gave an incorrect billing address and didn't indicate any urgency, she perceives that overall service is poor.

In both scenarios, the catalog conducts business as usual, but with differing results. A negative variance between actual service and customer perception of service indicates poor communication between the company and its customers. A review of customer perceptions will highlight areas for communication improvements.

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RELATED ARTICLE: TEN KEYS TO BALANCING SERVICE WITH RISK

1. Establish service objectives based on customer expectations instead of competitive pressures.

2. Customer perceptions of service often differ from actual service.

3. Involve both customers and employees in the evaluation of service levels.

4. Identify critical service levels specific to your business.

5. Don't accept information without verification.

6. Define fulfillment costs and monitor the effects of service changes.

7. Test all service level changes as you would marketing and merchandising modifications.

8. Establish realistic objectives.

9. Periodically re-evaluate service vs. risk in all areas.

10. Carefully document all information.

Debra Wilson Ellis is a principal with operations consultant Wilson & Ellis.