Monday Mornings with Madison

CUSTOMER SERVICE ON STEROIDS, PART 2

STRATEGIES FROM THE TOP DOWN

While it is imperative for employees that deal face-to-face with customers to provide great service, the realm of customer service does not begin and end there.  Many senior level managers make decisions and implement policies that directly impact customer service.  Those policies can be customer-friendly or they can be customer-averse.  

When faced with problems or challenges, solutions can be business-wise but customer-foolish.  Take, for instance, the tougher return policies implemented by many retailers.  Stores find it a costly annoyance when consumers return merchandise.  Fraudulent returns have exacerbated the problem.  Return fraud is expected to cost retailers $4 Billion this holiday season alone, according to the National Retail Federation.  To solve this problem, many retailers have implemented stricter return policies, such as issuing a store credit instead of giving cash back, even if the customer brought a receipt.  But it doesn’t stop there.  Some retailers tightened their return policies even further. 

Case in point.  Retailers, such as Cabelas and The Limited, have hired The Retail Equation, a computer database system that tracks returns.  Each time a return is made, the retailer swipes the shopper’s driver’s license to learn the characteristics of the customer’s current return, such as the time since the item was purchased, the number of items purchased, the total dollar amount, and the time since the customer’s last return.  The Retail Equation also tells the retailer the characteristics of that customer’s return history, such as the number and kind of returns made, if receipts were provided, the duration between returns, the dollar amounts of returns, and the number of stores in which returns have been made. It even tells the retailer the performance of consumers who have return characteristics similar to that customer.  These retailers generally set a limit of how many returns they will accept from a customer.  If the store’s return limit is exceeded, the customer’s tendered return is denied.  However, those stores’ posted policies typically do not warn shoppers of a cap on frequent returns.  Sounds like a nifty way to stop fraudulent returns… but it also likely to anger many good customers.  Overall, such return policies discourage customers from purchasing items unless they are 100% sure they want and need it, all but quashing impulse buying.

On the other end of the spectrum, though, many companies with progressive, forward-thinking leaders are not only implementing customer-friendly return policies but taking it a step further.  They are identifying what a potential customer’s biggest fear is about doing business with them, and then assuming some or all of that risk.  This is known as “risk-reversal marketing.”  It’s different from refunding the purchase price or fees for doing business. Lots of industries are doing risk-reversal marketing, from parts suppliers that pay cash for late deliveries to consulting firms that collect only if clients meet performance goals.  The challenge in any risk-reversal marketing program is to eliminate the customers’ fears about doing business without taking on unmanageable liability. 

Case in point.  Consider the guarantee one shoe manufacturer offers.  Shoes for Crews sells slip-resistant shoes priced from about $30-$80.  They have lots of competitors.  What sets them apart is that they offer a $5,000 warranty on each pair of shoes sold through their Corporate Shoe Program.  That’s right.  $5K (that is not a typo)!  The warranty is 100 times the cost of the average price of a pair of shoes.  Based in West Palm Beach, FL, their guarantee covers medical expenses and workers’ comp costs for any chain’s employee (retail chains participating in the Corporate Shoe Program) who slips while wearing a pair of shoes purchased from Shoes for Crews.  Crazy?… like a fox!  This strategy motivated lots of chain stores to encourage or require their employees to buy their work shoes at Shoes for Crews.  Cheesecake Factory (a restaurant chain that in 2009 had 150 restaurants in 35 states) encourages all its 30,000+ employees to buy work shoes at Shoes For Crews and nearly all of them do. That’s 40,000 shoe orders a year.   The management at Cheesecake Factory is a fan of Shoes For Crews for safety reasons.  Their shoes helped Cheesecake Factory cut slip accidents 87% over five years.  The owner of Shoes For Crews knew slip injuries involving his shoes were unlikely. He rolled out the guarantee gradually, starting with a $500 cap, eventually rising to $5,000.  Yes, they do pay claims… several hundred each year, ranging from a few hundred dollars for an ambulance ride up to $5,000 for an accident involving broken bones.  But paying an average of $15,000 a year on a $2 million account is not only superb customer service (and really good PR), but also excellent ROI for the business generated. 

When a company’s leadership implements policies that affect customers, there is a careful balance between developing policies that are business-wise and ones that are customer-centric. But the truly creative, visionary leaders are those who are able to create policies that are both.

QUOTE OF THE WEEK

“Once you shape a company to service the marketplace and your services are necessary, the company develops a compulsion of its own to grow.” Elizabeth Claiborne Ortenberg

© 2011 – 2012, Written by Keren Peters-Atkinson, CMO, Madison Commercial Real Estate Services. All rights reserved.

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