Companies are under constant pressure to deliver continuous profit growth. Since the pandemic many businesses have driven hard down the cost-cutting line at the expense of customer service. There is tension between operational efficiency and great customer service. Can they co-exist in the same business, wonders David Gilroy at Store Excel.
Donald Tusk says that the average Pole will be better off than the average Brit by 2027. He’s the Prime Minister of Poland so he would say that wouldn’t he, but based on the relative progress of both countries he may well be correct. I have been closely associated with Poland for over ten years and have taken a keen interest in this impressive country. I have witnessed significant progress in that time.
Take the two-hour flight to Chopin airport and transport into central Warsaw and you will find a booming city fully emerged from its Soviet shackles and striding forward with confidence. Poland has a young well-educated population, at the frontier with technology, renewables, medical sciences, and contemporary music, yet respectful of its cultural heritage. The same can be said for their retail environment. The highly competitive convenience store sector for example is in rude health. It comprises nearly 30% of the grocery market compared to the UK at 21%. With over 8,400 owned stores and due to open a further 1,000 this year, Zabka (Frog) is the market leading brand in the convenience channel. This superbly run progressive chain stands comparison with any of the convenience operators in the UK. They are highly customer centric innovating and experimenting all the time with new and better ways to please their shoppers.
Despite the competitive trading environment there remain thousands of traditional family-run small stores across the country. They are under pressure and reducing in numbers. How do they survive? Service, service, service. Cost conscious, quality driven and with high service expectations, the Polish consumer is demanding. Many independent stores operate delicatessen, meat, and bakery service counters. They cram massive product assortments into small spaces and will source any products that their customers request. They deliver extensively to schools, hospitals, and offices. And they will pick and assemble orders for customers in store while they wait. This is all exceptionally hard work but the Polish retailers I know view this as essential to stay in business. Their take on self-scan is one of incredulity. Why sacrifice service for efficiency? This brings the efficiency versus service dichotomy into sharp focus. Here in the UK, we are being conditioned to accept lower service values with the likes of bulk self-scan, bag drops at airports, removal of service counters in our major supermarkets, the closure of high street banks, ticket machines in transport hubs and home printed documents by insurance companies. I regard myself as fairly tech savvy and I am not against these changes per se but where is the customer dividend? What’s in it for us? It is now becoming the norm to queue at the bag drops and at the self-scan checkouts which seems to defeat the object. All the work and costs are being passed across to us and we’re not being rewarded for it.
Great customer service transcends mere transactional interactions; it encompasses the entire customer journey, from initial engagement to post-purchase support. Research by Zeithaml et al. (1990) identifies five dimensions of service quality: reliability, responsiveness, assurance, empathy, and tangibles. These dimensions form the foundation of exceptional customer service, delivering promises, responsiveness to customer needs, assurance of competence and courtesy, empathy in understanding and addressing concerns and tangible, such as physical facilities and communication materials.
Operational efficiency is vital for businesses to remain competitive and sustainable in today’s fast-paced markets. Efficient processes to minimise waste, reduce costs and maximise output, allowing businesses to allocate resources effectively and achieve higher profitability. Research into operational management underscores the significance of streamlining operations through techniques like lean management and continuous improvement. By optimising workflows, eliminating bottlenecks, and enhancing resource utilisation, businesses can enhance their competitiveness and adaptability in dynamic environments.
Many businesses, particularly since the pandemic have focused almost entirely on operational efficiency at the expense of customer service. How many times have you struggled to find a contact number for (say) an energy provider? Why? They want you to interact through online only, thus saving manpower on phone lines. Customers (especially business customers) know when service has been sacrificed on the altar of efficiency and this is the great challenge for business leaders and management in our industry. Like me, I bet you can list several service providers who have knowingly cut back on service to boost profits. Unless I absolutely must, I don’t use them anymore. Despite their individual merits, great customer service and operational efficiency often appear to be at odds with each other. There is an exceptionally difficult line to be navigated between the two. Striving for exceptional service may entail additional resources, such as hiring more people or offering personalised experiences. Conversely, focusing solely on efficiency may risk compromising service quality, leading to customer dissatisfaction and erosion of brand reputation. There is undoubtedly an interconnectedness across service quality, customer satisfaction, employee engagement, training, development, culture, and financial performance.
Good service and operational efficiency don’t have to be mutually exclusive. Great businesses find ways to combine efficiency and service into becoming complementary forces. And the key to this resides with culture. Amazon’s mission to be “Earth’s most customer-centric company” is a testament to its relentless focus on customer satisfaction. Initially their trading platform and pricing proposition gave them the unique selling proposition. But it is their operational excellence that has delivered benchmark customer service and underpinned their sustained growth. Amazon continually integrates customer feedback into its product and service development processes, ensuring that customer needs and preferences drive innovation. They double down on operational weaknesses that impede service. Their returns and refunds procedures are good examples of this.
As businesses drive hard into operational efficiencies at the expense of service an opportunity opens for those who put customers first by intelligently introducing processes to delight their customers. This starts with a permeated culture initiated and led from the top.
David Gilroy, Store Excel
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