International Services Marketing

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Turning Customer Complaints into Opportunities

Marketing

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Customers like to see things right first time. But if things go wrong, companies must he responsive and remedy poor service to recover customer confidence and loyalty.

Leading service companies not only believe strongly in giving the customer good service, they have systems and procedures installed to offer a high level of customer service and care in service-recovery situations, especially in handling complaints. Finns that view complaints as a valuable source of opportunities establish effective complaint procedures to capture these opportunities. Customer complaint programmes pay off because the complaint points to possible improvement areas. They offer another chance to give service and satisfaction to the dissatisfied customer. Complaints that are put right to the full satisfaction of the customer prevent customer loss and are an excellent opportunity to strengthen loyalty. Moreover, they can enhance the firm's standing and may generate further businesses as a result of recommendations made by satisfied customers.

The firms must therefore develop strategies to ensure that complaints are received, listened to and resolved to the satisfaction of the customer. The latter is crucial because the customer may still be dissatisfied or the level of the complaint raised if the complaint was badly handled.

Because only a small minority of dissatisfied customers ever complain, the firm should pro-actively attract complaints from disenchanted customers. Channels of communication should be kept open to give customers access and to make it easy for them to offer feedback. Free telephone calis, regular follow-up of customer surveys and staff training all help. Customers themselves may use different channels of complaint: telephone, fax, letter or personal call. Whatever the tone of the complaint, it is important for the firm to respond with the urgency and seriousness that is expected by the customer - an abusive customer is as valuable over a lifetime as any other and is more damaging if not satisfied.

Organizations must develop a non-threatening culture that does not penalize the 'mistake', in order to encourage staff to analyze, resolve and learn from complaints. Apart from there being a 'no-blame policy', staff must be rewarded for Creating se rv ice -recovery opportunities.

Consider the following examples.

One company, British Gas, recognizes the benefits of a customer complaint scheme. British Gas, a privatized utility provider, now faces mounting competition in the marketplace. It therefore has to develop a policy to help it retain customers in a competitive environment. In the current tight economic environment, a profitable company like British CJas can be seen as a natural target for complaint and, indeed, a service provider of this stature has a moral and ethical duty to be a good corporate citizen.

A survey among customer managers in ali the districts covered by British Gas South Eastern area revealed the overwhelming consensus among the managers that complaints deserved to be dealt with individually and that remedies to customer complaints should be rapid and adequate. There was even a sense of resentment or hurt about some of the ways in which customers chose to complain. However, the managers were also found to be protective towards their staff and systems. Managers responded adversely to sarcastic, carping letters and also to complaints that were directed through more than one channel. Nonetheless, all managers claimed not only to have investigated and resolved complaints, but to have learned from them and applied the lessons. But there was no follow-up of complaints and 'learning' is sometimes fed back only to the management team.

A series of standards of service has been agreed with Ofgas, the industry watchdog. In some cases, breach of these standards will give rise to a fixed compensation payment. However, the company will not wait for payments to be claimed, but adopt a proactive stance. Publication of these standards and of the complaints and compensation scheme is consistent with the ideals of the Citizen's Charter. (In the United Kingdom, the Competition and Services Utilities Act 1992 requires the utility monopolies to relate to the principles set out in the Citizen's Charter -legislation that enshrines the ethos of customer care and service satisfaction.)

Another quality-conscious service organization is Marks & Spencer. The following excerpts reflect the seriousness with which die retailer and its supplier lake customer eomplaints. A customer returned a can of 'Danish Lean Ham' to the local M & S store after he discovered a piece of paper in the product. The store manager apologized, promptly issued a full refund of £1.45, offered a replacement can of lean ham and a sales voucher made out to the same value as the 'returned item', and then informed the customer that he would expect a full explanation from IIQ: soon. The letters arrived within days of the complaint being made:

I very much regret that despite this care [numerous quality cheeks], you were unfortunate enough to experience a problem of this natxire. Please accept our apologies for tliis lapse in our quality. ... Thank you for having taken the trouble to bring this matter to our attention. I would like to assure you that the problem will be reported to our Buying Department and Supplier as a matter of urgency. The investigations ... will help to ensure the elimination of problems of this kind in the future. We always wish our customers to enjoy the food products they purchase from us without experiencing any problems. Therefore I have pleasure in enclosing Marks & Spencer gift vouchers to the value of S3.00 as a sincere gesture of our customer good will,

(Customer Advisor, Pood Division, Marks & Spencer pic)

The same day, the customer also received a letter from the company that supplied Marks & Spencer Danish Lean Hani:

We are sorry to learn about your complaint ... Our Parent Company will be informed of this immediately and you can expect to bear from them in the very near future ... we thank you for bringing the matter to the attention of Marks & Spencer, and for our part, we apologise for any inconvenience which you may have been caused.

(Technical Manager, Jaka Foods Group Limited)

A week later, the response from Jaka Foods (the parent company in Denmark) arrived.

We were most concerned to learn that you had reason to complain about the product... We have passed on your complaint to our quality control department for examination. However, they are unfortunately at a loss to explain the origin of this piece of paper. The production lines ... are subject to very high hygienic standards which include an hourly wash-down of all machinery ... we believe this to be an isolated, but not less regrettable incident. We apologise for any inconvenience this matter may have caused you and thank you for bringing it to our attention ...

(Export Manager)

Marks & Spencer and its supplier clearly take customer complaints very seriously. Consistently to resolve customer complaints quickly, efficiently and effectively, the firm has a clear policy on solutions and compensation. Resources are set aside and planned beforehand to ensure that, when complaints occur, departments handling these complaints are able to resolve them quickly. Staff must be both aware and knowledgeable of company policy, and have sufficient network contacts within the firm and with outside suppliers to exercise chosen solutions with a minimum of argument and paperwork.

In conclusion, unless the firm is open and honest with its customers, agrees solutions and keeps its promises of customer care and service recovery, its complaint programme will not achieve the goal of customer retention through customer satisfaction.

SOURCES: Peter Barbey. 'Looking for trouble', Marketing Business (September 1994), pp. 21-4; 'Effective complaint systems', leaflet (London; HMSO, 1993); see also David Clutterbuck, Graham Clark and Colin Armistead, Inspired Customer Service (I^indnn: Kogan Pa£e, 1993).

into his hotel room in Atlanta - the hotel is owned by a British company and managed by an American firm. The Zurich branch of a Japanese bank participates in a debt offering for an aircraft-leasing company in Ireland. A British construction firm builds an airport in Japan, and an American insurance company sells its products in Germany. These are just a few examples of the thousands of sendee transactions that take place each day around the globe. A lot of trade no longer involves putting things into a crate and sending them abroad on ships! More and more, the global economy is dominated by services. The World Trade Organization estimates that commercial-service trade was worth around ecul.07 trillion in 1996, almost one-quarter of the value of trade in goods. Indeed, a variety of service industries - from banking, insurance and communications to transportation, travel and entertainment - now account for well over 60 per cent of the economy in developed countries around the world. The worldwide growth rate for services (16 per cent in the past decade) is almost double the growth rate of manufacturing.15

Some industries have a long history of international operations. For example, the commercial banking industry was one of the first to grow internationally. Banks had to provide global services in order to meet the foreign exchange and credit needs of their home-country clients wanting to sell overseas. In recent years, however, as the scope of international financing has broadened, many banks have become truly global operations. Germany's Deutsche Bank, for example, has branches in over 41 countries. Thus, for its clients around the world that wish to take advantage of growth opportunities created by German reunification, Deutsche Bank can raise money not just in Frankfurt, but also in Zurich, London, Paris and Tokyo.

The travel industry also moved naturally into international operations. American hotel and airline companies grew quickly in Europe and the Far East during the economic expansion that followed World War II. Credit card companies soon followed - the early worldwide presence of American Express has recently been matched by Visa and MasterCard. Business travellers and holiday-makers like the convenience and they have now come to expect that their credit cards will be honoured wherever they go.

Professional and business services industries such as accounting, management consulting and advertising have only recently started operating on a worldwide scale. The international growth of these firms followed the globalization of the manufacturing companies they serve. For example, increasingly globalized manufacturing firms have found it much easier to have their accounts prepared by a single accounting firm, even when they operate in two dozen countries. This set the stage for rapid international consolidation in the accounting industry1. During the late 1980s, established accounting companies around the world quickly merged with America's 'Big Eight' to become the international 'Big Sis' almost overnight. Similarly, as their client companies began to employ global marketing and advertising strategies, advertising agencies and other marketing services firms responded by globalizing their own operations."1

The rapidly expanding international marketplace provides many attractive opportunities for service firms. It also creates some special challenges, however. Service companies wanting to operate in other countries are not always welcomed with open arms. Whereas manufacturers usually face straightforward tariff, quota or currency restrictions when attempting to sell their products in another country, service providers arc likely to face more subtle barriers. In some cases, rules and regulations affecting international services firms reflect the host country's traditions. In others, they appear to protect the country's own fledgling service industries from large global competitors with greater resources. In still other cases, however, the restrictions seem to have little purpose other than to make entry difficult for foreign service firms.

Most of the industrialized nations want their banks, insurance companies, construction firms and other service providers to be allowed to move people, capital and technology around the globe unimpeded. Instead they face a bewildering complex of national regulations, most of them designed to guarantee jobs for loeal competitors. A Turkish law, for example, forbids international accounting firms to bring capital into the country to set up offices and requires them to use the names of local partners, rather than prestigious international ones, in their marketing. To audit the hooks of a multinational company's branch in Buenos Aires, an accountant must have the equivalent of a high school education in Argentinian geography and history ... India is perhaps the most [difficult] big economy in the world [to enter] these days ... New Delhi prevents international insurance companies from selling property and casualty policies to the country's swelling business community or life insurance to its huge middle class.17

Clearly, service organizations face plenty of difficulties when seeking to enter foreign markets. The most recent round of the General Agreement on Tariffs and Trade (GATT), the Uruguay round, which ended in 1993 (see Chapter 5), began to address some of these problems by extending international trade rules to cover services in addition to manufactured goods. New service agreements should ease the barriers that limit such trade. Thus, despite the difficulties in international service marketing, the trend towards growth of global service companies will continue, especially in banking, telecommunications and professional services. Today, service firms arc no longer simply following their manufacturing customers. Instead, many are taking the lead in international expansion.

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