Strategy & Organization Viewpoint

WOWing Customer Service Strategies
Key Success Factors to Design and Implement Service Excellence

Excellent customer service is a critical success factor for businesses across all industries. But how many organizations canreally claim to be giving fantastic, WOW factor customer service across all customer touch points? Particularly in B2C related
business segments involving a high number of customer driven transactions (e.g. Telco, airline, utilities, financial services)
customer expectations have grown tremendously over the last decade and most customers are dissatisfied with the service
they receive. That’s why companies with a strong brand image for excellence in service, like Apple, O2, Zappos, Virgin or
Coca Cola, invest heavily in their service strategy and are thus winning the biggest market share.
Recent research from Arthur D. Little shows that 76% ofcompanies with a successful service excellence program
have reshaped their existing customer management strategy
according to six dimensions. Applying its knowledge ofsuccessful service excellence programs across severalindustries, Arthur D. Little developed the newly defined
DIN-standard for service excellence in co-operation with theEuropean Business School (ebs), Fraunhofer Institute, and DIN.
Arthur D. Little, together with leading companies in Germany
has provided a solid framework for deriving optimization
potentials based on detailed gap assessments.

Drivers for service excellence
Acquiring customers has a big impact on the bottom line,
however losing customers or failing to create fabulous word of
mouth is even more expensive (estimations suggest this can beup to 10 times as costly). A customer that experiences a poor
service does not only cease to use your service or products
but also deters up to 55 people in your network! So, how manycustomers are you losing through bad service?
Previously two in three customers have switched a provider
within one year due to poor service – this significant level does
not even include the exponential effect through word of mouth.

Figure 1. Service excellence is a strong instrument of customer retention
Percentage of customers who switched a service provider
in 2010 due to poor service
Retailers

26%

Banks

22%

Phone Companies
Hotels16%

8%

Utility Companies

9%

Source: Arthur D. Little analysis

Retailers

20%

Banks

25%

Phone Companies

18%

10%

Airlines

Swichting rate 2010

Customers who indicate theirservice providers offer tailored service

Travel & Tourism
Utility Companies

30%
13%

Experienced very well tailored customer service

Strategy & Organization Viewpoint

The rates vary according to geography (rates are higher within
the emerging markets) but also according to industry. Within theretail and banking sector switching rates are more than threetimes higher than in the aviation industry.
The overall trend of switching service providers is contingent
on the extent of tailored customer service experiences.
Furthermore, the global assessment reveals that customers
have experienced the highest level of tailored services within
the travel and tourism sector. However, the offered customized
service does not create a WOWing momentum. In orderto generate such a remarkable effect in customer service
excellence, tailored offers are not sufficient; it is necessary
to consistently exceed current expectations. The creation ofa replicable model for exceeding customer service is one of
the most important drivers of continuous growth. Based on
Arthur D. Little’s analysis some sectors show devastatingly
low percentages of customer service excellence levels, e.g.
in the retailing sector, customized services are experienced byonly 20% of customers – directly relating to the high level ofswitching identified previously.
Word of mouth is still the most important source for customer
information and in the online world the availability of information
regarding customer (dis-)satisfaction is increasing exponentially.
Creating a positive WOW effect is closely linked to your brand.

Holistic lever system
Customer expectations are closely aligned to branding andassociated service attributes. Therefore a consistent perception
has to be created at all customer touch points according to yourbrand strategy.
In order to create a holistic approach for customer service
excellence, different dimensions are crucial to outperforming
competitors and assuring a sustainable market position.
1. Leadership: Service excellence is based on a clear
management direction. Companies that are successfully
implementing service excellence derive their specific service
vision from their overall vision and mission; measurable
strategic attributes outline what excellent customer
service means. Customer charters are used to explain anddemonstrate the importance of excellent customer service andthe leaders’ attitudes to communicating and demonstrating
customer service excellence plays a fundamental role.
2. People skills: Customer service is distinctly driven bypeople. Kindness and courteousness are only basic
requirements, since the main unique selling proposition
within this dimension of interaction is the proficient andrapid solution of problems or inquiries. Since people are theintegral drivers of service excellence, companies should pay
a great deal of attention to training and involving their agents.
2 WOWing Customer Service Strategies

3. Presentation: Intense competition calls for a positively
differentiating presentation of services and products. An
impressive presentation of the extraordinary service value
proposition is necessary.
4. Price: An indisputably important product / service attributeis pricing. More nuanced than purely a competitive
determinant, price is also a key component of branding andrelated customer expectations. Proactive communicationand service excellence associated with concise pricing isvital to the determination of customer perception.
5. Product: Closely aligned to the attributes mentioned above,
perception of the overall product or service is also a keyfactor. Consistently providing sound products or services iscentral to meeting customer expectations; while regularlyexceeding these expectations is essential to creating a
WOWing effect.
6. Organization: Since customers are time-driven and havefirm inquiries, the processes of customer interaction must
be designed to be easy, effective and fast. The organization
behind services should be set up to match customer needs.
These six components and their functional interactions are
the main determinants of customer excellence. Keep inmind that the configuration and level of these dimensions
is changing over time according to evolving customer
requirements. Therefore continuous improvement is vital.

Customer preferences and requirements
A real WOW effect will only be achieved through target-directed
measures. As a prerequisite, customer service objectives andrelevant attributes for customer satisfaction need to be definedand specified.
Some performance indicators of customer perception are
product or service specific, but the majority can be clusteredin general characteristics of service and representative-specificattributes; altogether they form the core of service excellence.
General characteristics mainly subsume factors related tothe accessibility of excellent services. “How easily can you
access the service through an agent or a call center?” isa realistic indicator of service perception. In a fast-moving
world customers demand convenient operating hours, fast
service, and multiple channels to get in touch with a company
representative. More than 50% highlight the amount of timethey have to invest in order to be served as very important.
Digital service channels continue to grow and excellent service
should be available anytime and anyhow. Companies need tointernalize customer expectations to be able to offer impressive
service offerings.

Strategy & Organization Viewpoint

The representative-specific attributes include factors related tothe quality of interaction and complaint resolution, or service
inquiries. The quality of interaction is highly dependent on
the agents’ knowledge and access to the right information.
Providing excellent services is based on a profound product andservice knowledge, a deep understanding of applications andthe related customer expectations. This is valued as the mostimportant criterion for customers.

Figure 2. Relevant set of customer touch points
Project example
Cascade of relevant customer touch points
Ease of access to call center
Ease of access to agent
Accessibility
IVR structure and ease of use
E-portal structure and ease of use

The self-evident criterion “representatives’ behavior” isimportant to customers and makes a big difference. Two thirds
cite friendliness and politeness as an extremely important factor
in determining service excellence.

Agent knowledge

Touchpoint CEIThe third category of representative-specific attributes is complaint
resolution. Solving issues at first point of contact is very importantfor customers, since the proposition of a first contact callresolution will save time and money. Ideally, the inquiry will beanswered in such an effective manner that customers forget thatthey had to take care of it. Hence more than 50% mention that thetime for resolving a problem is a crucial criterion of service quality.
Leaders in service excellence were identified in the global
survey across various industries. In terms of customer
perception, USAA (United Services Automobile Association) isperforming best across all industries with a notable strength inall dimensions. The insurance company is outperforming directcompetitors in the dimensions of people, presentation, price,product and process. Within the insurance industry the processlevel appears to be high, but the presentation aspect still
provides room for improvement.
Within the hotel sector, guests expect a high level of service andindividual requirements are much differentiated. The premium
hotel chain The Ritz Carlton shows notable strengths within thedimensions of people, presentation, product and process, only

Quality ofinteraction

Telco & HighTechDimension

Satisfaction with query resolution
Satisfaction with follow-up callComplaints
resolution

First call resolution
Customer’s effort required

Source: Arthur D. Little analysis

pricing is a negative factor. In the Banyan Tree Hotels, for example,
customers can book the ‘Intimate Package’ for couples, withrooms being transformed into magic places, or customers canchoose to enjoy their dinner on the ocean sandbank with a poem
written in the sand, freshly caught fish and music played by theboat crew. All these extra packages come with basic customer
service which for Banyan Tree Hotels means to build its hotels ina unique design, decorating beds each evening in a new, creative
flower design and addressing customers by their first names.

Measurement approach
Achieving continuous service excellence requires investment
in all relevant dimensions. As financial efforts require a positive
return on investment, it is necessary that the enhancement ofcustomer satisfaction is reflected in terms of profitability.

Figure 3. Customer service best in class examples
Industry

Agent behavior

not exhaustive

Automotive

Retail &Consumers

TravelFinancialServices

Leadership The Carphone Warehouse
 O2

 Virgin Four Seasons Frontier Tesco Zappos (Amazon)

 RBC Financial GroupPeople The Carphone Warehouse Microsoft

 Virgin Ritz (Marriott) Air Berlin Oxfam John Lewis
 Zappos (Amazon)

 First direct

Presentation

 O2

 Ritz (Marriott) Banjan Tree Four Seasons Nespresso
 Pizza Express CocaCola Deutsche Bank HSBCPrice eBay RyanAir

 Aldi Lidl IKEA Cortal ConsorsProduct Apple Skype Facebook

 Porsche BMW Daimler

 Lufthansa
 time: matters
 Ritz (Marriott) Nespresso
 Pret A Manger
 IKEA Deutsche BankOrganization

 O2
 DELL Google Daimler Porsche Ritz (Marriott) Four Seasons

 Amazon John Lewis

 First direct
 RBC Financial Group

Source: Arthur D. Little analysis

3 WOWing Customer Service Strategies

 Daimler
 BMW PorscheStrategy & Organization Viewpoint

From a short term perspective improving customer loyalty
should be the target as the churn rate of customers can belowered. This top-line improvement is important, since winning
new customers is expensive in all industries. In a mid-term
perspective, churn rates as well as binding costs can belowered by a vitalization of customer service through measuresfor dissatisfied or churn-endangered customers. Thereby
sales will increase through cross-selling opportunities, lower
price sensitivity due to service excellence and an improved
recommendation rate. In order to succeed in these dimensions
on an ongoing basis it will be necessary to continuously create
and renew positive customer experiences: Service excellencemust be improved, efficiency must be enhanced and the ability
to resolve customer inquiries must also be ameliorated.
In addition to top-line growth, the reduction of costs is an
important strategic goal. The costs associated with badservice could amount to up to 30% of gross sales within
the manufacturing and service sector. Costs of bad service(COBS) arise because of lost sales through churn or inaccurate
tracking of customers, inefficient capacity handling, missing
handoff between organizational units, or increased manpower
requirements to manage inquiries. Costs of rework or repair are
seen as direct costs related to COBS; in addition, indirect costs
such as complaint management, compensation or refunds arealso constant drivers of COBS.
Based on the different effects on top- as well as bottom-line
development, more attention should be given to customer
service excellence. Developing a continuously improving setof all relevant service excellence dimensions requires ongoing
effort and therefore costs money. However, the benefits
out-weigh the expense; through enhancement of the related
attributes, companies – regardless of industry – will develop a
substantial competitive advantage and an improvement intheir profitability.

Conclusion
Due to increasing product harmonization and consumer
influence, customer service excellence will become an evenmore important driver for success and a key differentiator. Do you
already differentiate your business through outstanding service
excellence? When do you make your customer think “WOW”?

Contacts
Wilhelm LernerPartner Strategy & Organization Practicelerner.wilhelm@adlittle.com

Matthias Riveiro
Partnerriveiro.matthias@adlittle.com

Additional Author
Kaja Kerger

Arthur D. Little
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