Building on the previous step, we now focus on the concept of customer service, which is essential for customer retention and achieving competitive advantage.
Customer service is the interaction of all factors that affect the process of making a product (or service) available to customers easily. It includes:
- Pre-transaction: all written statements relating to service policy and organisational flexibility
- Transaction: relating to physical distribution and delivery
- Post-transaction: elements relating to the supportive functions, like warranty services and product replacement, repair services and customer complaints
To retain and develop markets, companies need to consider and anticipate the expectations of customers.
Customer service is effectively the surrounding area of a core product (as shown in the image below), and should be augmented to achieve customer retention and competitive advantage.
(Christopher 2016: 31)
Customer retention, in particular, is very important and is underlined by the customer’s ‘life time value’. The life time value has a direct relation with ‘average transaction value of the customer’, their ‘purchasing frequency’, and ‘customer life expectancy’ based on the following equation:
Life time value = Average transaction value of the customer x Purchasing frequency x Customer life expectancy
As a way of being able to identify and customise customer service needs, businesses need to:
- Identify the key components of customers’ needs
- Determine the relative importance of each extracted component
- Cluster customers based on their similar customer service requirements
Think about a grocery store you visited recently. What customer services do they provide? How does it compare with other grocery stores? Discuss in the comments area.
Christopher, M. (2016). Logistics and supply chain management (5th ed.). Pearson.
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