CHAPTER 19

CUSTOMER SERVICE
CONVERSION NOTES
Berman & Evans, 10th edition

Chapter 2

CASES AND ANCILLARY CASES

CASE 1: Tractor Supply Company: Targeting the Hobby Farmer
Synopsis:

The Tractor Supply Company case introduces students to a unique retailing story. By
recognizing a target market with unique needs, TSC repositioned its traditional tractorparts business into a specialty retailer serving a variety of needs for consumers entertaining
their interests in part-time farming and ranching. This growing consumer segment has been
TSCs focus for the past 15 years as it developed a merchandise variety and assortment
well beyond its early focus on tractor parts. This case provides a comprehensive
illustration of TSCs retail mix. It describes TSCs growth strategies with a specific
emphasis on the firms current merchandise variety, target market relationships and
technology practices.

CASE 18:

Nordstrom Revamps its Loyalty Program

Synopsis:

Nordstroms Reward program is a customer loyalty program in which enrolled customers

obtain a lot of additional benefits, including a gift certificates, free gift boxes and access to
a personal shopper. The case describes the Nordstrom Reward program, along with two of
its competitors programs from Saks Fifth Avenue and Neiman Marcus. The case outlines
the details of these programs, as well as considering the impact they may have on superior
firm-customer relationships, especially with repeat customers. This case provides a
detailed illustration of upscale retailers customer loyalty programs.

CASE 19: Nolans Finest Foods: Category Management

Synopsis:

Nolans Finest Foods is a full-service retailer that offers shoppers the convenience of onestop shopping at its high-end food-and-drug combo stores in the San Francisco Bay area.
In the face of mounting competition, Nolans is experimenting with category management.
This case provides details on the shampoo category at Nolans, providing students an
opportunity to develop a category management plan.

CASE 27: Enterprise Builds on People

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Synopsis:

Enterprise is the largest and the most profitable U.S. car rental business. Enterprise's
primary target customer segment is the in-town renter. Its human resource strategy is key to
its success. The case describes the human resources strategy at Enterprise, as well as the
ways this strategy contributes to the levels of customer service Enterprise is able to
maintain.

CASE 30: Sephora

Synopsis:

Sephora is a beauty products retailer, headquartered in France and operating retail stores
in multiple countries in Europe and the United States. It has expanded rapidly in the
United States since the first store opening in mid-1998. The case describes the
phenomenal success of Sephora retail stores, its philosophy and strategy as well as the
success of its Internet retail site. The case illustrates the ways customer service can be
created through a unique retail format.

CASE 31 A Stockout at Discmart: Will Substitution Lead to Salvation?

Synopsis:

Discmart is a discount retailer similar to Kmart and Wal-Mart. On a recent Sunday

morning, an irate customer in the store was complaining about how the store was out of
stock of an advertised special on the morning of the first day of the sale. The case
illustrates a specific service breakdown and can be used to discuss the Gaps model
presented in the chapter.

CASE 32: Customer Service and Relationship Management at Nordstrom

Synopsis:

Nordstrom is an upscale department store known for its superior customer service. The
case details several aspects of Nordstrom's philosophy and strategy of providing superior
customer service and demonstrates how customer service is the cornerstone as well as the
primary source of Nordstrom's competitive advantage.

CASE 34: Is Apple Americas Best Retailer?

Synopsis:

This case explores the development of the Apple store, the consumer electronics
powerhouses venture into store-based retailing. Through intensive development efforts,
Apple has created a very unique shopping experience. The case provides background on
Apples rise to prominence in its industry, beginning with its online store. Next, the
competitive pressures and supply chain factors leading to development of the Apple store
are presented. The main sections of the case describe Apples early efforts to perfect a
prototype store and cover the layout, atmosphere and design features of todays Apple
stores in detail.

CASE 37: PetSmart: Where Pets are Family

Synopsis:

Video Segment 38, Pet Economy: Pampering Your Pets, complements this case. The
case provides an overview of the pet industry, the second fastest growing U.S. retail
category, with expenditures of more than $38 billion and continued projections for growth.
The case describes the transformation of the pet industry into a highly differentiated
market with diverse and creative offerings. The case goes on to describe the retail market
strategy of one key player in the industry, PetSmart. PetSmarts strategies to capitalize on
this high growth market, including merchandise and store decisions, service offerings, and
human resource practices are all described.

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Ancillary Case A5: SakFirst Builds Customer Relationships

Synopsis:

SaksFirst is a customer loyalty program in which enrolled customers obtain a lot of

additional benefits, including a preferred and a personal relationship between the customer
and a sales associate. Preferred customers also receive points that could be redeemed for
various tangible benefits as well as other rewards and benefits. The case describes the
SaksFirst program and the impact it may have on superior firm-customer relationships,
especially with repeat customers.

Ancillary Case A6: Mens Wearhouse: Adding Complementary Merchandise and Services
to Bring Value to Customers
Synopsis:

Mens Wearhouse, Inc. is one of the largest discount mens apparel companies in North
America. Mens Wearhouse operates 693 stores in 44 states in America and 10 provinces
in Canada under the Mens Wearhouse, K&G and Moores brand names. The retailer sells
high quality mens clothing at prices 20% to 30% lower than department stores,
specializing in suits and other tailored business apparel.

Ancillary Case A8: The Gap and Old Navy

Synopsis:

The Gap is a multinational apparel manufacturing and retailing conglomerate. In an effort to

expand and diversify its appeal, the company has in recent years opened up Old Navy, and
Banana Republic. All of the companys stores have customers of their own, but they all
compete with one another to some extent. The case provides an overview of some issues in
enhancing customer appeal and store loyalty.

Ancillary Case A14: Bloomingdale's Customer Service Reaches Abroad

Synopsis:

Bloomingdale's is an upscale department store chain, owned by Federated Department

Stores that takes pride in its superior customer service and unique merchandise. Due to its
positioning, the store attracts a significant number of wealthy customers from foreign
countries. The case illustrates how retailers can provide better customer service for target
markets.

VIDEO SEGMENTS
Video Segment 6: Build-A-Bear: Experiential Retailing
Teaching Use:

Chapters 19

Need for customer feedback to close the service gap

This video can be used alone or in conjunction with Case 2: Build a Bear Workshop, located in
Section V of the textbook.
Summary:
Build-A-Bear Workshop is a national mall-based specialty store retailer with over 100 locations in the U.S.
The stores target children and sell store stuffed animals. The unique aspect of the firms retail offering is
39

that children can create their own unique animals and clothes them. The video discusses the critical issues
such as employee training and human resource management for a retailer that provide a high level of
customer service.

Video Segment 9: Yum! Brands - Growth Strategies

Teaching Use:
Summary:

Chapter 19

Customer service to build brand loyalty

This video will introduce students to three different segments of the restaurant industry, explain how Taco
Bell reinforces this Mexican-inspired brand, describe the importance of excellent customer service in this
industry, and illustrate innovative growth strategies being employed by Yum! Brands.
Based on information from the companys homepage, Yum! Brands, Inc. is the worlds largest restaurant
company with more than 33,000 restaurants in over 100 countries and territories. Yum! Brands operates
several different restaurant brands including A&W, KFC, Long John Silver's, Pizza Hut and Taco Bell.
Each brand is a global leader in their food category.

Video Segment 11: CEO Jim McCann of 1-800-Flowers

Teaching Use:

Chapter 19

Customer Service

Summary:
This video is an interview with Jim McCann, Chairman and CEO of 1-800-Flowers. From this segment
students will learn how a would-be New York City police officer decided to "Stop and Sell the Roses."

Video Segment 12: How to Buy Diamonds

Teaching Use:

Chapter 19

Customer Service as a Strategic Advantage

This video can be used alone or in conjunction with the following two cases in Section V of the
textbook: Case 9 - Diamonds from Mine to Market and/or Case 13 - Tiffanys/Blue Nile.
Summary:
This video examines the decision-making process used by customers buying diamonds. Some diamond
customers prefer the personal selling that includes hands-on education from a gem expert. Other shoppers
are comfortable purchasing diamonds jewelry online. The video focuses on De Beers Group and Blue Nile.
De Beers was established in 1888 and is the largest diamond mining company in the world today, producing
over 40% of global gem diamonds generated from mines in Africa, as well as sorting and valuing two thirds
of the worlds annual supply of rough diamonds. De Beers and its joint venture partners operate in more
than 20 countries across five continents employing nearly 22,000 people. De Beers Group is a privately
owned company headquartered in Johannesburg, South Africa with three shareholders: Anglo American plc
owns 45%, Central Holdings Group owns 40%, and the government of Botswana owns 15%.
Source: http://www.debeersgroup.com/debeersweb.

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Blue Nile features a build-your-own program for choosing engagement rings, earrings, and pendants on its
web site. Diamond engagement rings account for some 70% of Blue Nile's annual revenue. Every order is
shipped free, guaranteed and returnable within 30 days, so consumers can be sure that they made the right
decision. Blue Nile is a publicly traded company listed on the NASDAQ under the symbol NILE.
CEO Mark Vadon, a discouraged engagement-ring shopper, and Ben Elowitz, formerly of Fatbrain.com,
founded the site in 1999 as RockShop.com and, briefly, Internet Diamonds Inc., before adopting the Blue
Nile brand name later that year. Blue Nile has grown to become the largest online retailer of certified
diamonds and fine jewelry. Internet Retailer Magazine reports Blue Nile is bigger than the next three
largest online jewelers combined. The company is built on a unique idea: choosing an engagement ring
doesn't have to be complicated. The company has been awarded the Bizrate.com Circle of Excellence
Platinum Award, which recognizes the best in online customer service as ranked by actual consumers. Blue
Nile is the only jeweler to have ever received this award, and has done so every year since 2002.
Sources: http://premium.hoovers.com.ezp.lndlibrary.org/subscribe/co/factsheet.xhtml?ID=rffxhxryycxhhsc
and http://www.bluenile.com/.

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Video Segment 20: The Container Store: The Best Company to Work For
Teaching Use:

Chapter 19

Customer Service: Exceeding Expectations

Summary:
The Container Store was voted the best company to work for in America by Fortune magazine and was the
runner-up on two other occasions. The company stocks more than 10,000 products designed to organize
and simplify your life. The Container Store is regarded as being staffed by some of the happiest and most
empowered employees to ever work in retail. This video describes the companys culture and positive
employee management philosophies.

Video Segment 21: Wild Oats Markets; Building Employee Commitment

Teaching Use:

Chapter 19

Customer Service: Service Quality

Summary:
Wild Oats Markets was founded in Boulder, Colorado in 1987 and was the number two Organic Foods
retailer behind Whole Foods Market. Wild Oats Markets was acquired by rival Whole Foods Market in
August 2007 for about $565 million. This video examines Wild Oats Markets commitment to hiring,
training and corporate responsibility and was recorded prior to the acquisition. Source:
http://premium.hoovers.com.ezp.lndlibrary.org/subscribe/co/boneyard/factsheet.xhtml?ID=crkrkrhhttsfyt
Video Segment 34: Centralized Cash Wraps at JCPenney
Teaching Use:

Chapter 19

Customer service

Summary:
Cash wraps are the place in stores where POS terminals are located so that customers can buy merchandise
and have it put into a bag to carry out of the store. In discount stores and supermarkets, customers buy
merchandise at POS terminals located in checkout lines at the entrance/exits to the store. However, in
department stores and some category specialists, the cash wraps are located in each department within the
store. Kohls, a very successful department store chain, initiated the practice of using fewer centralized
cash wraps, typically located at the entrances and near the escalators. Now other middle market
department stores, JCPenney and Sears, are adopting this practice. This video presents the reason why
JCPenney adopted this approach and how it has implemented it. Note that JCPenney refers to these
centralized cash wraps as quad wraps.

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INSTRUCTOR NOTES

ANNOTATED OUTLINE

Customer Service is the set of activities and

programs undertaken by retailers to make the
shopping experience more rewarding for their
customers. These activities increase the
value customers receive from the
merchandise and services they purchase. All
employees of a retail firm and all elements of
the retailing mix provide services that
increase the value of the merchandise.

Most of the services provided by retailers

furnish information about the retailer's
offering and make it easier for customers to
locate and buy products and services.

Retailers can take advantage of the

opportunities to develop strategic advantage
by providing high-quality service.

See PPT 19-4

Generate a discussion among students about their
experience with customer service at various
retailers. What were the possible reasons for
good service at some retailers versus bad service
at others?
PPT 19-5 provides a list of services which may be
offered by retailers

I. Strategic Advantage Through Customer

Service

See PPT 19-6

Successful retailers differentiate their retail

offerings, build customer loyalty, and develop
a sustainable competitive advantage by
providing excellent customer service. Good
service keeps customers returning to a
retailer and generates positive word-of-mouth
communication, which attracts new
customers.

Ask students if they had chosen to buy a branded

good at a specific retailer, even though it was
available at other stores in the area. If so, was
the decision to patronize a specific retailer due to
the better service at that store?

Providing high-quality service is difficult for

retailers. Automated manufacturing makes
quality of most merchandise consisted from
item to item. But the quality of retail service
can vary dramatically from store to store and
from salesperson to salesperson within a
store.

In addition, most services provided by

retailers are intangible customers can't see
or feel them. Intangibility makes it hard to
provide and maintain high-quality service
because retailers can't count, measure, or
check service before it's delivered to
customers.

The challenges of providing consistent highquality service provides an opportunity for a

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retailer to develop a sustainable competitive

advantage.
A. Customer Service Strategies

Personalized and standardized are two

approaches retailers use to develop a
sustainable customer service advantage.

Successful implementation of the

personalized approach relies on the
performance of sales associates and service
providers, while the standardized approach
relies more on policy, procedures, and store
design and layout

See PPT 19-7

Ask students for examples of retailers that use
customized and standardized service approaches.
What are the advantages and disadvantages of
each of these approaches? What are the factors
that retailers should consider when deciding
which approach to use?

1. Personalized Approach

The customization approach encourages

service providers to tailor the service to meet
each customer's personal needs.

Some retailers, such as Lands' End, are

introducing a human element into their
electronic channel. At Lands' End, customers
can simply click on a button and chat
referred to as instant messaging with a
service provide.

At other retail stores, such as Target, several

employees called guest ambassadors roam
the store looking for customers who need
assistance.

The customized approach typically results in

customers receiving superior service. But the
service might be inconsistent because service
delivery depends on the judgment and
capabilities of the service providers.

In addition, providing the customized service

is costly since it requires more well-trained
service providers or complex computer
software.

See PPT 19-8

2. Standardized Approach

The standardized approach is based on

establishing a set of rules and procedures and
being sure that they are implemented
consistently. By strict enforcement of these
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See PPT 19-9

procedures, inconsistencies in the service are

minimized.

Store or website design and layout also play

an important role in the standardization
approach.
See PPT 19-10

3. Cost of Customer Service

Providing high quality service, particularly

customized service, can be very costly.

However, from a long-term perspective, good

customer service can actually reduce costs
and increase profits.

B. Customer Evaluation of Service Quality

When customers evaluate retail service, they

compare their perceptions of the service they
receive with their expectations.

Customers are satisfied when the perceived

service meets or exceeds their expectations.
They are dissatisfied when they feel the
service falls below their expectations.
See PPT 19-11

1. Role of Expectations

Customer expectations are based on

knowledge and past experiences with a
retailer and its competitors.

Technology is dramatically changing the

ways in which customers and firms interact.
Customers can now interact with companies
through automated voice response systems
and place orders and check on delivery
through the Internet. But customers still
expect dependable outcomes, easy access,
responsive systems, flexibility, apologies, and
compensation when things go wrong.

Ask students to describe a situation in which they

received good and poor service from a retailer.
What factors influenced their perceptions?

Expectations vary depending on the type of

45

Describe the role of expectations. Relate the role

of expectations to the student descriptions of
service encounters. Ask students what factors
influence their expectations?

Get students to provide examples of unusual

service situations, both good and bad. Then get
them to provide examples of ordinary service.
They wont know what to do about the ordinary
service situation question because they wont
remember any. They will remember, however,
really good or really bad service.

store. Since expectations aren't the same for

all types of retailers, a customer may be
satisfied with low levels of actual service in
one store and dissatisfied with high service
levels in another store.

Customer service expectations vary around

the world. Although Germany's
manufacturing capability is world renowned,
its poor customer service is also well known.
Because Germans are accustomed to good
service, they dont demand it. On the other
hand, Japanese expect excellent customer
service.

See PPT 19-12

2. Perceived Service

Customers base their evaluation of store

service on their perceptions.
Five customer service characteristics that
customers use to evaluate service quality are
reliability, assurance, tangibility, empathy,
and responsiveness.
Employees can play an important role in
customer perceptions of service quality.
Customer evaluations of service quality are
often based on the manner in which store
employees provide the service, not just the
outcome.

II. The Gaps Model For Improving Retail

Service Quality

Discuss the factors to consider when evaluating

retail service. Five characteristics used to
evaluate service quality are shown in PPT 19-13.
Ask students to indicate how store employees
affect their perception of service offered by a
retailer. Why do employees have such an
important affect on service perceptions? Do
students feel that technology -- computers, robots
-- will replace store employees? Would this
improve service?

See PPT 19-14 and 19-15

When customers' expectations are greater

than their perceptions of the delivered
service, customers are dissatisfied and feel
the quality of the retailer's service is poor.
Thus, retailers need to reduce the service
gap the difference between customers'
expectations and perceptions of customer
service -- to improve customers' satisfaction
with their service.

Four factors affect the service gap:

Ask students if they had received unexpected

services from a retailer.

Knowledge gap: The difference between

customer expectations and the retailer's
perception of customer expectations.

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Standards gap: The difference between the

retailer's perceptions of customers
expectations and the customer service
standards it sets.

Delivery gap: The difference between the

retailer's service standards and the actual
service provided to customers.

Communication gap: The difference

between the actual service provided to
customers and the service promised in the
retailer's promotion program.

These four gaps add up to the service gap.

The retailers objective is to reduce the
service gap by reducing each of the four
gaps.

A. Knowing What Customers Want: The

Knowledge Gap

See PPT 19-16

The most critical step in providing good

service is to know what the customer wants.

Retailers can reduce the knowledge gap and

develop a better understanding of customer
expectations by undertaking customer
research, increasing interactions between
retail managers and customers, and
improving the communication between
managers and employees who provide
customer service.

Market research can be used to better

understand customers expectations and the
quality of service provided by a retailer.

Methods for obtaining this information range

from comprehensive surveys to simply
asking some customers about the stores
service.
1. Comprehensive Studies

Some retailers have established programs for

assessing customers expectations and
service perceptions.
2. Gauging Satisfaction with Individual

47

Work with students to develop a questionnaire

that could be used to assess customer satisfaction
with service provided by a local retailer.

Have students go to a shopping center and ask

customers about the service they received.

Transactions

Another method for doing customer research

is to survey customers immediately after a
retail transaction has occurred.

Customer research on individual transactions

provides up-to-date information about
customers' expectations and perceptions. The
research also indicates the retailer's interest
in providing good service.

Since the responses can be linked to a

specific encounter, the research provides a
method for rewarding employees who
provide good service and correcting those
who exhibit poor performance.
Work with students to develop a procedure for
conducting a customer panel. How many
customers? What types of customers? When and
where would it meet? What specific questions
would be asked?

3. Customer Panels and Interviews

Rather than surveying many customers,

retailers can use panels of 10 to 15
customers to gain insights into expectations
and performance.
4. Interacting with Customers

Ask students what retail managers can do to

improve communications with contact people.

Owner-managers of small retail firms

typically have daily contact with their
customers and thus have accurate first-hand
information about them.

In large retail firms, managers often learn

about customers through reports so they miss
the rich information provided by direct
contact with customers.
5. Customer Complaints
Ask students what retailers could do to stimulate
comments and complaints about service.

Complaints allow retailers to interact with

their customers and acquire detailed
information about their service and
merchandise.

Handling complaints is an inexpensive means

to isolate and correct service problems.

Although customer complaints can provide

useful information, retailers can't rely solely
on this source of market information.

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Typically dissatisfied customers don't

complain. To provide better information on
customer service, retailers need to encourage
complaints and make it easy for customers to
provide feedback about their problems.
6. Using Technology

New, affordable information technology

packages are enabling even small retailers to
improve their customer service by
maintaining and providing customer
information to sales associates.
7. Feedback from Store Employees

Salespeople and other employees in regular

contact with customers often have a good
understanding of customer service
expectations and problems. This information
will improve service quality only if they're
encouraged to communicate their experiences
to high-level managers who can act on it.
Ask students if retail managers really need to
interact with customers to determine customer
expectations and perceptions? Can't they learn
this through talking with employees and looking
at market research?

8. Using Customer Research

The service gap is reduced only when

retailers use this information to improve
service.

Feedback on service performance needs to be

provided in a timely manner.

Feedback must be prominently presented so

service providers are aware of their
performance.

B. Setting Service Standards: The Standards

Gap

Service standards should be based on

customers perceptions rather than on
internal operations.

To close the standards gap, retailers need to

(1) commit their firms to providing highquality service, (2) develop innovative
solutions to service problems, (3) define the
role of service providers, (4) set service
goals, and (5) measure service performance.

See PPT 19-17

Ask students what a retailer can do to remind
employees about the need to provide good
customer service.

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See PPT 19-18

1. Commitment to Service Quality

Service excellence occurs only when top

management provides the leadership and
demonstrates commitment. Top management
must be willing to accept the temporary
difficulties and even increased costs
associated with improving service quality.

Store managers are the key to achieving

service quality standards.
See PPT 19-19

2. Defining the Role of Service Providers

Mangers can tell service providers that they

need to provide excellent service, but not
clearly indicate what excellent service means.
Without a clear definition of the retailers
expectations, service providers are
directionless.

3. Setting Service Goals

Retailers often develop service goals based

on their beliefs about the proper operation of
the business rather than the customers' needs
and expectations.

Employees are motivated to achieve service

goals when the goals are specific,
measurable, and participatory in the sense
that they participated in setting them.

Employee participation in setting service

standards leads to better understanding and
greater acceptance of the goals.

Ask student to give specific example of services

goals that might be set for a sales associate in a
Gap store.

4. Measuring Service Performance

Retailers need to continuously assess service

quality to ensure that goals will be achieved.

Retailers also use mystery shoppers to assess

their service quality. Mystery shoppers are
professional shoppers who shop a store to
assess the service provided by store
employees and the presentation of
merchandise in the store.

5. Giving Information and Training

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Query students on the types of information that

could be collected by mystery shoppers.

Store employees need to know about the

retailers service standards and the
merchandise they offer, as well as their
customers needs. With this information,
employees can answer customers questions
and suggest products.

In addition, store employees need training in

interpersonal skills.

III. Meeting And Exceeding Service

Standards: The Delivery Gap

See PPT 19-20

To reduce the delivery gap and provide

service that exceeds standards, retailers must
give service providers the necessary
knowledge and skills, provide instrument and
emotional support, improve internal
communications and reduce conflicts, and
empower employees to act in the customers
and firms best interests.

Ask students to indicate the kind of information a

salesperson in the following departments of a
department store should have: china, consumer
electronics, mens ties, womens hosiery, and
mens suits.

1. Providing Instrumental and Emotional

Support

See PPT 19-21

Ask students to give examples of emotional and
instrumental service support they might have
received when working in a retail outlet.

Service providers need to the have the

instrumental support -- the appropriate
systems and equipment to deliver the
service desired by customers.

In additional to instrumental support, service

providers need emotional support from their
coworkers and supervisors. Emotional
support involves demonstrating a concern
for the well-being of others. Dealing with
customer problems and maintaining a smile
in difficult situation is psychological
demanding.

Service providers need to be in a supportive

and understanding atmosphere to deal with
these demands effectively.
2. Improving Internal Communications

When providing customer service, store

employees must often manage the conflict
between customers needs and the retail
firms needs.

Retailers can reduce certain conflicts by

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having clear guidelines and policies

concerning service and by explaining the
rationale for these policies.

Conflicts can also arise when retailers set

goals inconsistent with the other behaviors
expected from store employees.

Finally, conflicts can also arise between

different areas of the firm.
3. Empowering Store Employees

Empowerment means allowing employees at

the lowest level of the firm to make important
decisions on how service is provided to
customers. When the employees responsible
for providing service are authorized to make
important decisions, the quality of service
improves.

Ask students what effects does empowering store

employees have on the employees? On customers?
Have students relate work experiences they have
had in which their lack of empowerment reduced
the quality of service they could provide.

However, empowering service providers can

be difficult and the benefits may not justify
the costs.
Ask students about the benefits and problems with
offering incentives. Review the material on
incentives in Chapter 17.

4. Providing Incentives

Many retailers use incentives, like paying

commissions based on sales to motivate
employees.

But retailers have found that commissions on

sales can decrease customer service and job
satisfaction. Incentives can motivate highpressure selling which leads to customer
dissatisfaction.

However, incentives can also be used to

effectively improve customer service when
the rewards are tied to solving customer
problems and the rewards are provided at
about the same time the appropriate behavior
occurred.

5. Developing Solutions to Service Problems

See PPT 19-23, 19-24, 19-25

Retailers also use systems and technology to

close the delivery gap.

a. Developing New Systems

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Finding ways to overcome service problems

can improve customer satisfaction, and in
some cases, reduce costs.
See PPT 19-26, 19-27

6. Using Technology

Many retailers are installing kiosks with

broadband Internet technology in their stores
to allow customers to order merchandise and
to provide routine customer service, freeing
employees to deal with more complicated
customer service issues.

Other technology applications used to

enhance customer service are hand-held
scanners and intelligent shopping carts.

A. Communicating the Service Promise: The

Communications Gap

The fourth factor leading to a customer

service gap is a difference between the
service promised by the retailer and the
service actually delivered.

Overstating the service offered raises

customer expectations. Then, if the retailer
doesnt follow through, expectations exceed
perceived service, and customers are
dissatisfied.

The communication gap can be reduced by

making realistic commitments and by
managing customer expectations.

Ask students to describe customer service

technologies they have encountered in retail
stores.

See PPT 19-28

Discuss the paradox of wanting to tell customers
about great customer service but not wanting to
raise expectations too high.

1. Realistic Commitments

Advertising programs are typically developed

by the marketing department, while the store
operations division delivers the service. Poor
communication between these areas can
result in a mismatch between an ad
campaign's promises and the service the store
can actually offer.

2. Managing Customer Expectations

Information presented at the point of sale can

be used to manage expectations.

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Ask students to indicate some complaints they

have made about service provided by a retailer.
Use these situations in a role playing exercise
assigning one student to play the part of the
customer and the other to be the retail employee
receiving the complaint.

Communication programs can inform

customers about their role and responsibility
in getting good service, and can give tips on
how to get better service, such as the best
times of the day to shop and the retailer's
policies and procedures for handling
problems.

VI. Service Recovery

Rather than dwelling on negative aspects of

customer problems, retailers should focus on
the positive opportunities they generate.

Service problems and complaints are an

excellent source of information about the
retailer's offering its merchandise and
service.

Armed with this information, retailers can

make changes to increase customer
satisfaction.

Service problems also enable a retailer to

demonstrate its commitment to providing
high-quality customer service.

Most retailers have standard policies for

handling problems, however, in many cases,
the cause of the problem may be hard to
identify, uncorrectable, or as a result of the
customer's unusual expectations. In such
cases, service recovery might be more
difficult.

The steps in effective service recovery are:

(1) listen to the customer, (2) provide a fair
solution, and (3) resolve the problem quickly.

See PPT 19-29

Have students relate service failures they have
experienced and describe situations in which the
retailer made a good recovery and a poor
recovery.

A. Listening to the Customer

Customers can become very emotional over

their real or imaginary problems with a
retailer. Often this emotional reaction can be
reduced by simply giving customers a chance
to get their complaints off their chests.

Store employees should allow customers to

air their complaints without interruption.

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Ask students why it is important for an employee

to listen carefully to the complaint. Why is the
best policy always to give the complaining
customer what he or she wants? Do customers
always know what they want?

Customers want a sympathetic response to

their complaints.

Employees also need to listen carefully to

determine what the customer perceives to be
a fair solution.

B. Providing a Fair Solution

Favorable impressions arise when customers

feel they have been dealt with fairly. When
evaluating the resolution of their problems,
customers compare how they were treated in
relation to others with similar problems or
how they were treated in similar situations by
other retail service providers.

Customers evaluations of complaints

resolutions are based on distributive fairness
and procedural fairness.
See PPT 19-30

1. Distributive Fairness

Ask Students: What is distributive and procedural

Distributive fairness is the customers
fairness? Which one is more important? Why?
perceptions of the benefits received compared
to their costs (inconvenience or loss).
Customers want to get what they paid for.

Customers typically prefer tangible rather

than intangible resolutions to their
complaints.

Customers may want to let off steam, but

they also want to feel the retailer was
responsive to their complaint. If providing a
tangible restitution is not possible, the next
best alternative is to let customers see that
their complaints will have an effect in the
future.
2. Procedural Fairness

Procedural fairness is the perceived fairness

of the process used to resolve complaints.

Customers consider three questions when

evaluating procedural fairness: (1) Did the
store employee collect information about the
situation? (2) Was this information used to
resolve the complaint? and, (3) Did the

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customer have some influence over the

outcome?

Discontent with the procedures used to

handle a complaint can overshadow the
benefits of a positive outcome.

Customers typically feel they are dealt with

fairly when store employees follow company
guidelines.
3. Resolving Problems Quickly
Ask Students: What can retailers do to resolve
complaints quickly? Is it always best to resolve
complaints as quickly as possible?

Customer satisfaction is affected by the time

it takes to get an issue resolved.

Retailers can minimize the time to resolve

complaints by reducing the number of people
the customer must contact, providing clear
instructions, and speaking in the customer's
language.
1. Reducing the Number of Contacts

As a general rule, store employees who deal

with customers should be made as selfsufficient as possible to handle problems.

Customers are more satisfied when the first

person they contact can resolve a problem.
2. Giving Clear Instructions

Customers should be told clearly and

precisely what they need to do to resolve a
problem.
3. Speaking the Customers Language

Customers can become very annoyed when

store employees use company jargon to
describe a situation. To communicate
clearly, store employees should use terms
familiar to the customer.

IX. Summary

Due to the inherent intangibility and

inconsistency of services, providing highquality customer service is challenging.

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However, customer service also provides an

opportunity for retailers to develop a
strategic advantage.

Retailers use two basic strategies for

providing customer service: the personalized
approach and the standardized approach.

The personalized approach relies primarily

on sales associates. The standardized
approach places more emphasis on
developing appropriate rules, consistent
procedures, and optimum store designs.

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ANSWERS TO DISCUSSION QUESTIONS AND PROBLEMS

1.

2.

For each of these services, give an example of a retailer for which providing the service is
critical to its success, then give an example of a retailer for which providing the service is not
critical: (a) personal shoppers, (b) home delivery, (c) money-back guarantees, and (d) credit
a)

Personal shoppers are critical to the success of clothing department and specialty stores in that
they can help customers find merchandise that might be otherwise hidden in the many isles and
racks. On the other hand, personal shoppers are not needed in discount clothes stores, where
people like to hunt through the racks themselves for their special deal.

b)

Home delivery is important in most online retailers. In this growing industry differentiation is
needed. If a store can delivery quickly and carefully, this will definitely add to their success.
However, delivery is not as important in strictly bricks and mortar stores selling smaller goods, like
clothing, jewelry, books, etc. Customers can just walk in and pick up the goods themselves, with
no need for delivery.

c)

Money-back guarantees are important are important in most retail industries to build customer
loyalty. Gift retailers should focus on promoting money back guarantees, because it is possible the
receivers of the goods will be returning them if disliked. A money-back guarantee is always a good
idea with any retailer.

d)

Credit is critical in stores with high priced goods, like jewelry, or cars. Customers want to be
able to buy on credit in order to pay for the goods over a period of time. However, store credit is
not critical in retail stores that sell inexpensive goods, where the customer can most likely pay
cash.

Nordstrom and McDonald's both are noted for their high-quality customer service, but their
approaches to providing this quality service are different. Describe this difference. Why have
the retailers elected to use these different approaches?
In the chapter, we discuss to approaches for providing high quality customer service
standardization and customization. McDonald uses the standardization approach. Its service
providers follow a set of rules and procedures when providing service. By strict enforcement of
these procedures, inconsistencies in the service are minimized. Through standardization, customers
receive the same food and service at McDonalds restaurants across the globe. The food may not
be exactly what customers want, but it is consistent.
On the hand, Nordstrom uses a customization approach. It encourages service providers to tailor
the service to meet each customers personal needs. This approach can result in customers
receiving superior service. But the service might be more inconsistent because the service delivery
depends on the judgment and capabilities of the service providers.
The individual retailers use customer service to build customer loyalty and develop a sustainable
competitive advantage. Good customer service keeps customers returning and generates positive
word-of-mouth communications, which attracts new customers and a larger market share.

3.

Have you ever worked in a job that required you to provide customer service? If yes, describe
the skills you needed and tasks performed for this job. If no, what skills and abilities would

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you highlight to a potential employer that was interviewing you for a position that included
customer service in the job description?
While student answers will vary. This discussion is a good time to review the Standards gap and
the ways retail employees take part in closing that gap. The retailer needs to ensure that its
employees know about the firms service standards, merchandise/service offering and customer
needs. Having complete knowledge allows these employees to feel confident and competent in
working directly with customers, handling their questions and requests, and providing the service
that they need.
Students are likely to respond, and the discussion should definitely consider, the role of
interpersonal skills in providing good customer service. Retailers need to support employees in
enhancing and using these skills, as they will be critical in dealing effectively with difficult
customer situations. Employees should also be encouraged to develop a skill set to deal with stress
caused by facing these difficult interactions.
4.

Retailing View 19.1 describes how drug stores and discounters are providing health care
services for customers. In addition to one-stop shopping convenience, how does this customer
service mesh with the stores merchandise to create a strategic advantage and increase
customer loyalty?
The in-store health clinics described in Retailing View 19.1 offer the ultimate in one-stop shopping.
The clinics offer a quick, practical solution at minimal cost for busy consumers needing medical
assistance for routine issues like flu shots and physical exams for sports and school registration.
The drug store and discount retailers offering these clinics stand to benefit substantially as well.
Consumers stopping in can make a one-stop shopping visit out of their trip to the clinic. They are
highly likely to purchase any prescription or O-T-C medications, or supplies like bandages, cough
drops, tissues, related to their clinic visit while in-store. Even when no special merchandise related
to the clinic visit is required, these time pressed consumers are likely to consider other shopping
needs and use the clinic visit as an opportunity to pick up needed products. Offering this added
convenience service will likely create stronger loyalty as consumers choose the store that offers
them one more way to save time and reduce hassle.

5.

Assume you're the department manager for menswear in a local department store that
emphasizes empowering its managers. A customer returns a dress shirt that's no longer in the
package in which it was sold. The customer has no receipt, says that when he opened the
package he found that the shirt was torn, and wants cash for the price at which the shirt is
being sold now. The shirt was on sale last week when the customer claims to have bought it.
What would you do?
I would first inspect the merchandise to determine if the shirt was torn. If indeed the shirt was torn
when the customer opened the package, it is unlikely that he would have worn it. If the shirt
appeared to be worn, I would assume that the customer was attempting to be deceitful; but I would
still convey the goodwill of the store by offering the customer the opportunity to exchange the
merchandise or accept a store credit at the sale price.
If however, the customer was someone who I knew to be a loyal repeat customer, I would simply
accept the return and give him what he was asking for. If the customer is unfamiliar to me or is
known for making questionable returns, I would stick to the offer described above or not accept the
return at all if he was unwilling to accept my offer.

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6.

Consider a situation in which you received poor customer service in a retail store or from a
customer service provider. Did you make the stores management aware of your experience?
Whom did you relay this experience to? Have you returned to this retailer? For each of these
questions, explain why you did what you did.
While discussing student responses about poor customer service experiences, review the concept of
service recovery and emphasize the importance of the retailer focusing on the positive aspects of
customer complaints, the learning opportunities to improve practices and enhance their offerings to
provide better customer satisfaction. Service recovery, encouraging complaints and handling
problems in a satisfactory way, provides the retailer with the opportunity strengthen their
relationship with the customer. Effective efforts at service recovery can increase customer
satisfaction, purchase intentions, and positive word of mouth about the retailer. Review the two
critical aspects of effective service recovery: listening to customers and providing a fair solution.

7.

Gaps analysis provides a systematic method for examining a customer service program's
effectiveness. Top management has told an information systems manager that customers are
complaining about the long wait to pay for merchandise at the checkout station. Take the role
of the systems manager and use the gaps analysis table below to evaluate this problem and
suggest possible approaches for reducing the wait time.
Problem Encountered

Strategies to Close this Gap

Knowledge gap (1)

Standards gap (2)
Delivery gap (3)
Communications gap (4)
GAP One exists when there is a difference between customer expectations and managements
perceptions of customer expectations. In this case the manager needs to do marketing research to
determine exactly what amount of time customers are willing to wait in line to pay for
merchandise. Based on the complaints, apparently a GAP exists here. Several techniques to
improve the managers understanding of consumer expectations are available such as customer
panels and interviews, interacting with customers, getting feedback from store employees, and
reviewing the content of the customers complaints.
GAP Two exists when there is a difference between managements perceptions of customer
expectations and the specified service. If long waits in line are perceived by management not to be
important to customers and the store does not implement measures to maintain short waiting times
in line, then a GAP Two situation exists. Several techniques are available to bridge the standards
gap including setting more clear service goals related to customer wait times, definite the role of
service providers in reducing wait times, and measuring service performance through techniques
such as mystery shoppers to determine whether employees can be playing a role to reduce customer
wait times.
GAP Three exists when there is a difference between the specified service and the delivered service.
In this case, if management thinks that customers are willing to wait for ten minutes, but in reality
they usually have to wait for fifteen minutes, then a GAP Three situation exists. Improving internal
communications, providing support, providing incentives, using technology, and empowering store
employees are three ways retailers can bridge this gap.

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GAP Four exists when there is a difference between the delivered service and the retailers
communication about service. In this case, if Kmart advertises that there is no waiting in line at
their stores, but in reality when customers come to the stores there is a long wait, and then there is
a GAP Four situation. Strategies to bridge this gap include making realistic commitments and
managing customer expectations.
8.

How could an effective customer service strategy cut a retailer's costs?

Ninety-one percent of customers dissatisfied with a firms offering may never buy from the firm
again. In addition, these dissatisfied customers will tell nine other people, on average, about their
unsatisfactory experience. The Customer Service Institute estimates that it costs five times more to
acquire a new customer than to generate repeat business from present customers.

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9.

Give an example of how a retailer would resolve a customer complaint through procedural
fairness. Does the resolution depend on the channel or store format? Explain your reasoning.
Procedural fairness is the perceived fairness of the process used to resolve complaints. Customers
typically use three questions to evaluate procedural fairness: (1) Did the employee collect
information about the situation? (2) Was this information used to resolve the complaint? (3) Did the
customer have some influence over the outcome?
Customers are most likely to feel they have been dealt with fairly when company guidelines are
followed, reducing variability in resolution of the complaint. However, store employees should be
allowed some flexibility in applying policies to accommodate customers unique situations.
Although the in-store resolution is likely to be handled face-to-face while the Web or catalog
resolution will be handled via Internet or email, all retailers should follow these practices of
establishing a clear set of guidelines to be followed for all customers, with just enough flexibility
for employees to response to unique situations.

10.

Consider a recent retail service experience, such as a haircut, doctors appointment, dinner in
a restaurant, bank transaction or product repair (not an exhaustive list), and answer the
questions below:
a) Describe an excellent service delivery experience.
b) What made this quality experience possible?
c) Describe a service delivery experience in which you did not receive the performance that
you expected.
d) What were the problems encountered and how could they have been resolved?
Students answers will likely vary quite a bit here to provide a rich basis for discussion of excellent
and poor retail service experiences.
Students answers should consider some of the cues used by customer to evaluate retail service:
1) Tangibles: appearance of store; display of merchandise; appearance of salespeople; 2)
Understanding and knowing customer: providing individual attention; recognizing regular
customers; 3) Security: feeling safe in parking lot; communications and transactions; treated
confidently; 4) Credibility: reputation for honoring commitments; trustworthiness of salespeople;
guarantees and warranties provided; return policy; 5) Information provided to customers:
explanation of service and its cost; notes sent to customers informing them of sales; assurances that
a problem will be resolved; 6) Courtesy: friendliness of employees; respect shown to customers;
interest shown in customers; 7) Access: short waiting time to complete sales transaction;
convenient operating hours; convenient location; manager available to discuss problems; 8)
Competence: knowledge and skillful employees; customer questions answered; 9) Responsiveness:
returning a customers call; giving prompt service; 10) Reliability: accuracy in billing; performing
service at a designated time; accuracy in completing sales transaction.

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Students should identify the steps a retail employee should take to handle customer complaints.
There are several steps that salespersons can take to handle a customer complaint successfully: 1)
Listen carefully, sympathetically, and without interruption. 2) Express regret for an inconvenience
suffered. 3) Reassure the customer that the firm wants to do what is fair. 4) Talk issues about
which there is agreement. 5) Inquire, investigate, and examine to get the facts. 6) Try to get
agreement on responsibility for the problem. 7) Take action as quickly as possible. 8) Educate the
customer to avoid future problems. 9) Follow through to make sure that the agreed upon action
has been taken.

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