Customer Service in Retailing - UK - September 2007

Table of Contents

• Issues in the Market
• Main issues addressed
• Main themes
• Abbreviations
• Insights and Opportunities
• Market in Brief
• Customer service as a source of competitive advantage
• A good service experience is an essential element of a strong customer proposition
• Retailers are underdelivering on service -- human factors a key culprit
• Best and worst -- M&S ahead, electrical goods retailers underperforming
• The costs of delivering a bad experience -- reversing the damaging ripple effect
• Leveraging complaints into business changing feedback
• Point of sale technology can create a more satisfying experience
• Industry Insights
• Service issues rising up the differentiation agenda
• Low service standards provide an opportunity to establish differentiation
• Tackling queues through self-scanning
• Tackling queues through workforce management systems
• Feedback strategies to include staff as well as customers
• Conclusion: Raising proposition awareness in staff contributes to service culture
• Emphasising service to establish an advantage
• Competitive environment creating pressure to raise service standards
• Key Points
• Service standards a key differentiator
• Key Points
• Low service standards create an opportunity
• Key Points
• Towards an integrated sales/service culture
• Service culture sits comfortably alongside a sales culture
• Key Points
• Engagement and interaction with customers stimulates both service and sales
• Key Points
• Good service should be delivered instinctively
• Key Points
• How online service standards differ
• Managing a multi-stage process
• Key Points
• Personal contact versus automated responses
• Key Points
• Putting it right when things go wrong
• Key Points
• Overcoming weak service delivery
• Bad attitude cannot be tolerated
• Key Points
• Intolerance of queuing
• Key Points
• Positive response to self-checkout technology
• Key Points
• Information delivery a vital area for attention
• Key Points
• No alternative to face to face contact
• Key Points
• Developing staff to deliver great service
• Employing the right people
• Key Points
• Accurate assessment of training needs
• Key Points
• Effective communication strategies
• Key Points
• Measuring performance
• Key Points
• Use of motivational and incentive schemes
• Key Points
• Developing the customer experience
• Focus on human factors
• Key Points
• Structured change
• Key Points
• Harnessing the power of complaints
• Key Points
• Delivering satisfaction for staff and customers
• Key Points
• Internal Market Environment
• Quality of engagement defines service standards
• Degree of emphasis on engagement is a prime indicator of a retailer' s commitment to service
• Identifying critical engagement points provides the opportunity to deliver great service
• Pre-purchase information gathering
• Staff engagement in-store
• Gaining information and getting help once in-store
• Discussing needs and using staff to help assess the options
• Completing the sale
• After-sales service
• Rising operating costs and service standards
• Delivering better service experience without increasing staff costs
• Integrated sales and service ethos
• Cutting service standards a risk
• Using technology to improve service experience
• Self-scanning delivering service improvements
• Pre-pay terminals option
• In-store access to product information databases
• Improving staff levels through back office technology
• Brand values and proposition development
• Service ethos of growing importance
• Establishing brand values and reputation
• Monitoring the dynamics of change
• Broader Market Environment
• Service standards in the wider context
• Is retail better or worse than other sectors?
• Are UK consumers tolerant of bad service or demanding of good service?
• National Customer Service Week -- raising the profile of good service
• ICS launched a UK Customer Satisfaction Index in June 2007
• Competition and growth of online leaves no room for complacency
• Tightening economy likely to make it harder to win spend
• Growing presence of online shopping increases customer options
• Ageing population an opportunity for service-centric retailers
• Main source of population growth is the over 45s
  • Figure 1: UK population, by age, 2001-11
• Older people appreciate good service and will pay a premium for it
• Older people less inclined to use the Internet and will remain store-focused
• Who' s Innovating
• Tesco "one-in-front" queue busting cameras keeping it ahead
• Predictive monitoring by Tesco will assist queue management
• Asda' s Smiley Squad
• Bhs using customer feedback to recognise staff performance
• Lloydspharmacy automating dispensing services to create staff time for consultation
• Healthy advice
• Selfridges' Wonder Bar
• Mamas & Papas bumping ahead
• Shopping centre acknowledging good service provision
• Market in Context
• Tesco
• Customer first ethos at the heart of its proposition
• "One in front" delivered through new technology
• Queues remain a target for attention
• J Sainsbury
• Principles of recovery
• Recent turnaround based on improving service levels
• Leading by example
• Asda
• "Common sense" retailing winning new customers
• Warm and Friendly way to service
• Asda' s Smiley Squad
• Self-scan driving service improvements
• Morrisons
• "The food specialist for everyone"
• Recovery phase being driven by operational efficiency improvements
• Business review highlights in-store service as key attribute
• Marks & Spencer
• Service standards an integral element of its brand culture
• Carried away by good service
• Healthy advice
• John Lewis Partnership, including Waitrose
• Unique ownership structure contributes to service culture
• Setting and maintaining high service standards
• Passion for selling
• Home Retail group, including Argos and Homebase
• Aiming for high customer service standards within a multi-channel operation
• Leader in use of point of sale technology
• Find & Pick Up and Instant Alert Service
• B&Q
• Lost in space
• Service squads targeting customer queries
• Recognition of its inclusion policies
• Woolworths
• Self-selection minimal staff contact operating model
• Faith in conga queuing
• Range extensions delivered through in-store ordering
• DSGi (including Currys.digital and PC World)
• Technical focus of these businesses creates strong need for sales and service skills
• Reserving items online for collection from a local store
• PC World launches fourth shopping channel in 2007
• Tech guys go national in July 2007
• Altering the mind set
• Comet
• Best price, best choice, best service
• Deliberate Customer Journey service initiative a key element of brand relaunch
• Advertising campaign focusing on staff training and service standards
• Comet on Call
• Boots
• Trust in Boots
• Longer opening hours to deliver enhanced pharmacy services
• Till receipts trigger customer feedback
• IKEA
• Product-led proposition
• Customers remarkably tolerant of low service standards
• Margin for improvement
• Market pressure creating change
• Amazon
• Pioneer of online retailing and continuing to set high service standards
• Paying for convenience
• Prime numbers
• What Consumers Think of Service Standards
• Satisfaction levels generally high but retailers not "wowing" many customers
• Results show extent of opportunities to develop the customer service experience
• Scope for "wowing" more affluent consumers
• Low levels of dissatisfaction characteristic of responsiveness of the industry
• Sizeable element of ABC1 shoppers up for grabs
• Conclusion -- no room for complacency
• Majority of consumers satisfied with service received
• Majority of high spending customers are "generally satisfied" with service standards
• Relatively low numbers of "very satisfied" shoppers
• Relatively low numbers of "dissatisfied" customers
  • Figure 2: Satisfaction with customer service standards, June 2007
• Who are the most satisfied customers?
• Significant influence of peer group selling
• Stores' influence on shoppers
• Who tolerates average service standards?
• Yet, more of those in affluent groups also gave negative responses
• Younger affluent shoppers open to persuasion
• Who are the least satisfied customers?
• What Consumers Think of Service Standards -- Detailed Consumer Demographics
  • Figure 3: Relative levels of satisfaction, by socio-demographic detail, June 2007
• The Makings of a Good Service Experience
• Most desired attributes relate to interaction with staff
• Good product knowledge commands respect and wins sales
• Going the extra mile to answer queries
• Turning an out of stock into an opportunity
• Conclusion -- targeting human factors will improve shoppers' perceptions
• Observing common niceties appeals most
• Satisfaction starts with a smile
• Product knowledge defines staff' s role
• Helpfulness has to show through
• Going the extra mile
• Closing the sale properly creates impetus for repeat visit
• Online environment requires rapid response
  • Figure 4: Elements of a good service experience, June 2007
• Good attitude and helpfulness has widespread appeal
• High expectations of product knowledge among the more affluent
• Going the extra mile can win sales from competing channels
• Stores with pleasant staff
• More affluent online users expect prompt reaction to queries
• The Makings of a Good Service Experience -- Detailed Consumer Demographics
  • Figure 5: Most important factors contributing to a good service experience, by socio-demographic detail, June 2007
  • Figure 6: Other factors contributing to a good service experience, by socio-demographic detail, June 2007
• The Makings of a Bad Service Experience
• Enough of the right people, in the right place, at the right time
• Attitude is everything
• Developing product knowledge, people engagement and communication skills
• Breaking the cycle
• Frequent small initiatives help maintain customer-centric focus
• Conclusion -- staff need to know how customers expect them to behave
• Accurate staff scheduling will address negative issues
• Unopened checkouts when queues are forming is main grievance
• Staff must project a sales as well as service ethos
• Staff need to be visible and accessible on the shop floor
• Access to back up needed to enhance staff knowledge
• Lack of responsiveness a factor for online shoppers
  • Figure 7: Elements of a bad service experience, June 2007
• More affluent most sensitive to causes of bad experience
• Staff need to be attentive to older people...
• ...but must not overdo it
• Men want staff that know about what they are selling
• More affluent families frustrated by lack of product knowledge
• The Makings of a Bad Service Experience -- Detailed Consumer Demographics
  • Figure 8: Most important factors contributing to a bad service experience, by socio-demographic detail, June 2007
  • Figure 9: Other important factors contributing to a bad service experience, by socio-demographic detail, June 2007
  • Figure 10: Least important factors contributing to a bad service experience, by socio-demographic detail, June 2007
• Service Standards -- Best and Worst Retailers
• Majority of retailers delivering adequate levels of satisfaction
• Modest numbers of satisfied customers suggests scope for improvement
• Marks & Spencer' s advantage likely to increase in future
• Electrical goods retailers have the worst reputation for service
• Conclusion -- big impact with small changes
• Overall levels of satisfaction modest
• Research indicators employed
• Customers of leading retailers are underwhelmed by service standards
• Marks & Spencer marginally outperformed Asda and Tesco
• Marks & Spencer also has the strongest balance of responses
• A relatively small proportion of shoppers experience inconsistent or poor service
• Leading household goods retailers attracted most criticism for poor service
• Four companies have a negative balance
  • Figure 11: Retailers rated for giving good and poor service, June 2007
• Those viewing standards favourably reflect regular user characteristics
• Value of further analysis lies in who is not attracted to specific retailers
• Good but not exceptional numbers of regular grocery shoppers rate the service they get as good
• Many are tolerant of indifferent service standards or do not attach importance to them
• Men not as enamoured of service standards of clothing and department stores as women
• Marks & Spencer underperforms among young affluent shoppers
• Women less impressed with household goods retailers' service standards than men
• Women also less impressed with online retailers' service standards
• Superdrug has it all to do to attract ABC1 shoppers
• ABC1 families most vociferous about inconsistent and poor service
• Some shoppers are tolerant of poor service
• Service Standards -- Best and Worst -- Detailed Consumer Demographics
  • Figure 12: Grocery retailers' ratings for consistently good levels of service, by socio-demographic detail, June 2007
  • Figure 13: Clothing and department stores' ratings for consistently good levels of service, by socio-demographic detail, June 2007
  • Figure 14: Household goods retailers' ratings for consistently good levels of service, by socio-demographic detail, June 2007
  • Figure 15: Online retailers' ratings for consistently good levels of service, by socio-demographic detail, June 2007
  • Figure 16: Health and beauty retailers' ratings for consistently good levels of service, by socio-demographic detail, June 2007
  • Figure 17: Retailers' ratings for inconsistent and poor levels of service, by socio-demographic detail, June 2007
• The Impact of Bad Service
• Bad service changes shopping behaviour
• Strong ripple effect of bad service can be turned to positive effect
• Standards directly affect commercial success
• Conclusion -- high business risk posed by bad service makes strong case for investment
• Impact spreads beyond those directly affected
• Direct impact of bad service is significant
• Bad service could cost a retailer half its customers...
• ...but ripple effect also spreads to friends and beyond
• Considerable credibility gap
• Mixed reaction to online service standards
  • Figure 18: Reaction to bad service experiences, June 2007
• More women might defect but more men have actually done so
• ABs and older people more reactive to bad service
• AB families' extensive networks compound the ripple effect
• Slight bias to ABC1s among those perceiving a credibility gap
• Online attracting younger consumers but frustrating them as well
• The Impact of Bad Service -- Detailed Consumer Demographics
  • Figure 19: Most likely reactions to bad service experience, by socio-demographic detail, June 2007
  • Figure 20: Other reactions to bad service experience, by socio-demographic detail, June 2007
• Customer Complaints and the Service Experience
• Putting it right when it goes wrong
• Staff need to be empowered and encouraged to take responsibility
• Right response to right people required
• Conclusion -- free feedback needs to be acted on
• Plenty of experience of complaints
• Only 20% of respondents have not made a complaint
• Generally good levels of satisfaction with response to complaints
• But many complaints not resolved at first time of asking
• Not all staff using complaints as an opportunity
• Negative approach by staff not widespread but neither is ownership of problem
  • Figure 21: Experience of customer complaints, June 2007
• Nine out of ten ABC1 families have complained about a purchase
• ABC1 families have high levels of satisfaction having complained
• ABC1 pre-family and family adults are most dissatisfied with complaints
• Customer Complaints -- Detailed Consumer Demographics
  • Figure 22: Most common experiences of customer complaints, by socio-demographic detail, June 2007
  • Figure 23: Other experiences of customer complaints, by socio-demographic detail, June 2007
• Future and Conclusions
• Always room for improvement
• Operational shortcomings main cause of annoyance to customers
• Customers have modest expectations of retail store staff
• Bad service is bad for business
• The future -- empowering staff with technology
• The future -- delivering good service in a multi-channel world