Investment in customer service made in a thoughtful fashion has shown to pay off handsomely. When Jeff Bezos founded Amazon in 1994, he vowed to become obsessed about delivering excellent customer service. Amazon has received both good and bad press, but one thing everyone agrees with is that Bezos’ company has outstanding customer service. When Bezos rolled out the Prime program, he wrote that “two-day shipping becomes an everyday experience rather than an occasional indulgence.” It has irrevocably transformed shoppers’ expectations and started a competition for faster shipping. Prime keeps customers hooked to Amazon. Driving excellence in customer service has not only brought Amazon a large number of customers, but it has helped make it a force to be reckoned with in the retail industry. Prime also proved another important point for Amazon: Customers are willing to pay for better, faster service.
Most people associate customer service with the interaction that takes place between a company and its customer-facing employees, and not so much with the supply chain. However, a company’s ability to provide excellent customer service depends to a large extent on its operations—its ability to deliver a product or service quickly and as promised, or to replace or return a defective product quickly.
As Amazon demonstrates, customer service can provide a winning edge in a competitive world. To be known for service, a company must have intimate knowledge of customer needs, possess the ability to provide service that is difficult for the competition to match, and then find a way to get customers to pay for the increased service. Involving the supply chain organization upfront can help identify different service models that can be offered to the customer. The supply chain team can estimate the costs and effort associated with delivering each model. The sales team can then negotiate the price with the customer.
The companies can provide better customer service without breaking the bank by tailoring service levels to customer segment. This can be achieved,
- First, by classifying customers by segments and by developing a menu of service levels
- Second by identifying service levels appropriate for different segments
- Third by developing a service model that is difficult for the competition to match–e.g., Southwest Airlines’ 25-minute gate turnarounds, and
- Fourth, by pricing it appropriately and finding a way for the customer to pay for the increased service.
Read more in — The Supply Chain Revolution – Innovative Sourcing and Logistics for a Fiercely Competitive World — book available at Amazon.
About Author: Suman Sarkar is a partner at Three S Consulting, where he has helped leading companies drive excellence in their supply chain and sourcing.