Customer Service in Retailing - UK

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 sociodemographic

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

APPENDIX: RESEARCH METHODOLOGY