THE COSTUMER TAKE CONTROL
So much has been written and talked about service, quality and
excellence that there is no escaping the fact that the customer in today’s
marketplace is more demanding, not just of product quality, but also of
service.
Customer service may be defined as the consistent provision of
time and place utility. In other words, products don’t have value until they
are in the hands of the customer at the time and place required. There are
clearly many facets of customer service, ranging from on-time delivery through
to after-sales support. Essentially the role of customer service should be to
enhance ‘value-in-use’, meaning that the product becomes worth more in the eyes
of the customer because service has added value to the core product. In this
way significant differentiation of the total offer (that is the core product
plus the service package) can be achieved.
Those companies that have achieved recognition for service
excellence, and thus have been able to establish a differential advantage over
their competition, are typically those companies where logistics management is
a high priority. Companies like Xerox, Zara and Dell are typical of such
organisations.
The attainment of service excellence in this broad sense can
only be achieved through a closely integrated logistics strategy. In reality,
the ability to become a market leader depends as much upon the effectiveness of
one’s operating systems as it does upon the presentation of the product, the
creation of images and the influencing of consumer perceptions. In other words,
the success of McDonald’s, WalMart or any of the other frequently cited
paragons of service excellence is due not to their choice of advertising
agency, but rather to their recognition that managing the logistics of service delivery
on a consistent basis is the crucial source of differential advantage.
Managing The “4Rs”
1.
Responsiveness
Supplier have to implies
the ability to move quickly and to meet customer demand sooner. Responsiveness also
implies that the organisation is close to the customer, hearing the voice of
the market and quick to interpret the demand signals it receives.
2.
Reliability
One of the main reasons
why any company carries safety stock is because of uncertainty. It may be uncertainty
about future demand or uncertainty about a supplier’s ability to meet a
delivery promise, or about the quality of materials or components. One of the
keys to improving supply chain reliability is through reducing process variability.
In recent years there has been a considerable increase in the use of so-called ‘six
sigma’ methodologies
3.
Reselience
Whereas in the past the prime
objective in supply chain design was probably cost minimisation or possibly
service optimisation, the emphasis today has to be upon resilience. Resilience
refers to the ability of the supply chain to cope with unexpected disturbances.
4.
Relationship
Underlying all of this is the idea that
buyer/supplier relationships should be based upon partnership. Increasingly
companies are discovering the advantages that can be gained by seeking mutually
beneficial, long-term relationships with suppliers. From the suppliers’ point
of view, such partnerships can prove formidable barriers to entry for
competitors. The more that processes are linked between the supplier and the
customer the more the mutual dependencies increase and hence the more difficult
it is for competitors to break in.
2. LOGISTIC AND COSTUMER VALUE
It is a simple idea that is not always easy to recognise if you
are a manager involved in activities such as production scheduling or inventory
control which may seem to be some distance away from the marketplace. The fact
is of course that everybody in the organisation has a stake in customer
service. Indeed many successful companies have started to examine their
internal service standards in order that everyone who works in the business understands
that they must service someone
The Marketing and Logistic Interface
Even though the
textbooks describe marketing as the management of the ‘Four Ps’– product,
price, promotion and place – it is probably true to say that, in practice, most
of the emphasis has always been placed on the first three. ‘Place’, which might
better be described in the words of the old cliché, ‘the right product in the
right place at the right time’, was rarely considered part of mainstream
marketing.
There are signs that this view is rapidly
changing, however, as the power of customer service as a potential means of
differentiation is increasingly recognised.In more and more markets the power
of the brand has declined and customers are more willing to accept substitutes;
even technology differences between products have been reduced so that it is
harder to maintain a competitive edge through the product itself. In situations
like this it is customer service that can provide the distinctive difference
between one company’s offer and that of its competitors.
Delivering customer value
Ultimately the
success or failure of any business will be determined by the level of customer
value that it delivers in its chosen markets. Customer value can be defined
quite simply as the difference between the perceived benefits that flow from a
purchase or a relationship and the total costs incurred. Another way of expressing
the idea is:
‘Total cost of ownership’ rather than ‘price’
is used here because in most trans-
actions there will be costs other than the
purchase price involved. For example,
inventory carrying costs, maintenance costs,
running costs, disposal costs and
so on. In business-to-business markets
particularly, as buyers become increasingly sophisticated, the total costs of
ownership can be a critical element in the
purchase decision.
Picture shows the
‘iceberg’ effect of total costs of ownership where the immediate purchase price
is the only aspect of cost that is visible, whereas below the surface of the water
are all the costs that will arise as a result of the purchase decisions.In the same
way that the total cost of ownership is greater than the initial purchase price
so too the benefits that are perceived to flow from the purchase or the
relationship will often be greater than the tangible product features or
functionality. For example, there may be little difference between two
competitive products in terms of technical performance, but one may be superior
to the other in terms of the customer support that is provided.
.
Logistics management is almost unique in its ability to impact both the
numerator and the denominator of the customer value ratio. This point becomes
clearer if we expand the ratio as follows :
Each of the four constituent elements can briefly be defined as
follows:
Quality: The functionality,
performance and technical specification of the offer.
Service: The availability,
support and commitment provided to the customer.
Cost: The customer’s
transaction costs including price and life cycle costs.
Time: The time taken to respond to customer
requirements, e.g. delivery
lead
times.
What is customer
service
It has been
suggested that the role of customer service is to provide ‘time and place
utility’ in the transfer of goods and services between buyer and seller. Put
another way, there is no value in the product or service until it is in the
hands of the customer or consumer. It follows that making the product or service
‘available’ is what, in essence, the distribution function of the business is
all about. ‘Availability’ is in itself a complex concept, impacted upon by a
galaxy of factors which together constitute customer service.
LaLonde and Zinszer
2 in a major study of customer service practices suggested that customer
service could be examined under three headings:
1.
Pre-transaction elements
2. Transaction element
3.
Post-transaction elements
The
pre-transaction elements of customer service relate to corporate policies or
programmes, e.g. written statements of service policy, adequacy of
organisational structure and system flexibility. The transaction elements are
those customer service variables directly involved in performing the physical
distribution function, e.g. product and delivery reliability. The
post-transaction elements of customer service are generally supportive of the
product while in use, for instance, product warranty, parts and repair service,
procedures for customer complaints and product replacement.
Tabel : The component
of costumer service
Impact out-of-stock
The
research found that on a typical day a shopper in the average supermarket will
face stock-outs on 8 per cent of items in the categories studied. The reaction
of customers when faced with a stock-out was highlighted by the same study
Shopper
behavior when faced with a out-of-stock
Over
a quarter of shoppers bought a different brand and 31 per cent said they would
shop elsewhere for that product. This represents bad news for both the
manufacturer and the retailer. Even worse, other research 4 has suggested that
over two-thirds of shopping decisions are made at the point of purchase, i.e. the
purchase is triggered by seeing the product on the shelf. If the product is not
on the shelf then the purchase will not be triggered. Persistent stock-outs can
also drive customers away from the brand and/or the store permanently. The
potential loss of business fot both manufactures and retailers caused by out –
of – stocks situations is clearly significant.
The
Impact of Logistic and Costumer Service on Marketing
Suggestion here
is that customer service impacts not only on the ultimate end user but also on
intermediate customers such as distributors. Traditionally marketing has
focused on the end customer – or consumer – seeking to promote brand values and
to generate a ‘demand pull’ in the marketplace for the company’s products. More
recently we have come to recognise that this by itself is not sufficient.
Because of the swing in power in many marketing channels away from
manufacturers and towards the distributor (e.g. the large concentrated
retailers) it is now vital to develop the strongest possible relations with
such intermediaries – in other words to create a customer franchise as well as
a consumer franchise. The impact of both a strong consumer
franchise and a customer franchise can be enhanced or diminished by the
efficiency of the supplier’s logistics system. It is only when all three
components are working optimally that marketing effectiveness is maximised. To
stress the interdependence of these three components of competitive performance
it is suggested that the relationship is multiplicative. In other words the
combined impact depends upon the product of all three.
