rb i new 107 chapter 1

DO NOT COPY

155© Retail Banking Academy, 2014

RETAIL BANKING I

RETAIL BANKINGACADEMY

Chapter 1: A Brief Historical Journey –

Customer Service in Retail Industries

The emergence of customer service as a key di!erentiator can be traced back to the last third of the 19th Century in Chicago, where a city grew out of the ashes of a devastating "re that had levelled it in 1871. One of the industries that most bene"ted from the revitalised city was retailing. There were households to be re-established and homes to be redecorated and modernised.

An entrepreneur by the name of Marshall Field, then a young but hardy veteran of retailing in Chicago, understood that most of his sales were to the women in Chicago who were spearheading the revitalising of local households – an early recognition of the value of knowing your customer. Field had already founded a multiple-line retail establishment, and forged a new path in retailing, purveying a sense of service in addition to an impressive array of clothing and home furnishings.

Field apparently told employees at his eponymously named establishment that ‘the customer is always right’, and created a consumer-friendly environment. That saying became legend throughout the retailing world, and a way of life among shoppers in Chicago and the American Midwest. The approach endured for more than 125 years, through three acquisitions and several "nancial panics and disruptions.

There was tremendous uproar in Chicago in the early 21st Century when, after all those iconic years as the city’s leading retailer, its latest purchaser, Macy’s, (ironically another long-term, self-named American retailer) decided to change the Marshall Field’s name to its own.

Later, Harry Selfridge, who worked for Marshall Field, found himself managing Field’s dry goods department. Some have credited Selfridge with coining the phrase ‘the customer is always right’; in any event the emphasis on customer needs took shape. Selfridge left for London and in 1909 founded a retail store that still thrives today, urging his sta! to ‘assist’ customers, with a commitment to serving its customers’ retailing needs better than any other department store.

César Ritz took a di!erent path on the broader service road, "rst as a restaurateur and ultimately as a hotel owner. The hospitality business in the late 19th and early 20th Centuries was, in many ways, similar to the industry in the late 20th Century. The key di!erence was that there were many more providers, with proximity to transportation centres often being the only real di!erentiating factor among them. Ritz saw additional opportunities for material change, and his success with his namesake establishment in Paris paved the way for chances in other markets.

Course Code 107 - Customer Service Quality

DO NOT COPY

RETAIL BANKING I

156


Ritz opened The Ritz hotel in London, and imported his winning slogan – ‘Le client n’a jamais tort’ (the customer is never wrong) – in 1906. His legacy of luxury hospitality and a knack for knowing how to please his guests has survived for more than a century, and The Ritz-Carlton Hotel Company has developed an extremely successful ancillary business: customer service training for a variety of industries, including banking.

Several banks around the world have instituted The Ritz-Carlton service quality training programme. In fact, a few require every sta! member to complete the training. During this training, employees learn how to ‘never say the word no’. There is always a way to turn a negative into an option for the customer. Another training point is to ‘show the customer to their destination, you never point them to their destination’. Whether it was the hotel mechanic or housekeeper, if a customer asked for directions to a point in the hotel, you would "nd them escorting the customer. This seems like a minor detail in the world of banking, but the results in the eyes of a customer are rewarding.

In 1963, Carrefour (founded by Marcel Fournier and Louis Deforrey) opened the "rst so-called hypermarket, combining a supermarket with a department store. That meant huge footprints, usually in suburban areas, a recommitment to customer service and attention to new elements of service – parking and what was called spectacle. Echoing the calls of the merchandising guru Bernardo Trujillo, Carrefour management became experts at siting their stores and delivering against the expectations of their customers.

As the Fournier-Deforrey combination was perfecting its service delivery, at "rst in France, and then around the world – in San Francisco, the Bank of America was also entering the fray. Bank of America, which was one of the few large banks that actually served retail banking customers relatively well, had noticed the increasing credit card activity among retailers in the US, and the growing success of the Diner’s Club charge card, which had been introduced in 1950.

Bank of America had lending experience and felt that there wasn’t a need for balances to be repaid each month, like Diner’s Club, but that the interest charges on revolving monthly balances could be quite pro"table. The bank also believed that it could trade on the market value of its brand and convince local merchants to accept its new BankAmericard for purchases by its card-holders. Of course, the success of this new type of lending product would at least in part depend on getting the card into the wallets (and hands) of as many customers as possible.

Bank of America was correct on almost every front – except the last one. Its large-scale introduction of the new card in Fresno, California, in 1958 went well at "rst, with many customers using the card. The bank had failed to educate the market adequately about how the service worked, though, and that lack of understanding by card users led to widespread defaults over the initial o!ering term. When the bank relaunched the re"ned BankAmericard in 1966, it was ready, and the new bank credit card became a tremendous success.

Bank of America licensed its new sensation in several overseas markets, including Canada, where it was known as Chargex; France, where Carte Bleu became a hit; and the United Kingdom, where Barclays mimicked Bank of America’s approach and incorporated its bank name into the card – Barclaycard.

Soon after Visa’s conglomeration, another new retail-"nancial concept was introduced, but unfortunately this solution as service did not originate at a retail bank. Harking back to a generation earlier, Merrill Lynch took the lead in melding a transaction account, an investment account and a convenient payment vehicle for its customers under the auspices of the Cash Management Account, or CMA.

The CMA was a breakthrough, providing true ease of access to funds that CMA customers deposited with Merrill Lynch. A current (checking) account was the basis of the service, and customers could sweep excess funds from that current account to an investment account. CMA users could write cheques to access their funds, or use an ATM card to withdraw cash. They also had a choice of investments and over the years Merrill Lynch enhanced the service through debit cards, home mortgages and other consumer-lending vehicles.


DO NOT COPY

157© Retail Banking Academy, 2014

RETAIL BANKING I


Today, CMAs are accessed via online banking, completing a service approach that is the equal of most banking solutions. This early entrant in broad retail-"nancial products/services was a favourite of enlightened retail customers, but even though it had the potential to signi"cantly disrupt traditional banks’ relationships with their customers, it didn’t.

Standout retailers that have embraced the ‘customer service quality’ paradigm include the following:

Amazon.com

New technology companies were the most obvious models in the virtual, web-based world. And perhaps the best example of a new-technology success story was Amazon.com. The company had debuted early in the online age, incorporating in 1994. It sold its "rst book in the US in 1995 and in the UK in 1998. It garnered a strong and loyal following from its earliest days, and displayed its technology con"dence as it developed, especially as it related to anticipating customer needs. Employing fuzzy logic that interpolated customer purchases into available titles that a purchaser may "nd of interest, Amazon.com advanced its model to sales of nearly US$13 billion in the fourth quarter of 2010 alone. Sales in the fourth quarter of 2013 totalled US$21.27 billion.

An interesting twist that Amazon.com employed was a predictive-purchasing model, which integrated information that visitors supplied – namely the titles of the books they were seeking on the Amazon site. Whether or not the prospective customer purchased a title, another option that featured the same subject matter as the "rst title requested was presented for consideration.

Singapore Airlines

Singapore Airlines was expert at recognising that superior service delivery de"nes success in the airline business. The explosive economic growth of Singapore and its emergence as a "nancial hub of the Asia-Paci"c region created huge demand for convenient air travel and the decision to make its #ight attendants the collective face of its business meant Singapore Airlines was on its way to success. Of course, it certainly helped that Singapore Airlines relentlessly delivered on its ‘excellence in service’ promise. Setting a high bar and clearing it every time is essential in a service-based business, and Singapore Airlines followed its customers and added new routes as those #yers propelled Singapore’s message and promise around the world.

Singapore Airlines employees take to heart the challenge of making each interaction with a customer the one that customer will remember as the best #ying experience they’ve ever had.

What lessons can be learnt from this historical journey?

Retail banks started to view superior customer service quality as a key di!erentiator. Case studies show that the operating model was based on four components:

Information that permits the bank to identify customers’ needs

Products that meet customers’ "nancial needs and deliver a fair return to the bank’s bottom line

Delivery that seamlessly places the bank’s products and services at convenient contact points within the bank

Experience that is consistently excellent from the customers’ perspective, and that is repeatable from the bank’s perspective

In addition, it is imperative to track, measure and reward bank employees for delivery of superior customer service. Some banks have gained a reputation for this proactive service quality strategy.

For example, at Umpqua Bank in Portland, Oregon, the Culture department was formed to


DO NOT COPY

RETAIL BANKING I

158


oversee these tasks while reporting directly to the President. Service quality at Umpqua is tracked on a monthly basis covering not only every branch, but also every bank department. Every month each branch is measured through new account surveys, transaction surveys and in lobby customer comment boxes.

The results are tabulated as to the quality of customer responses and a report is produced that provides the customer service score, from the best to the worst. These scores are then used to support the monthly incentives for the branch o!ering a multiplier for the best branches and a penalty for the worst. Likewise, each branch rates the bank departments, or back o$ces, that support their e!orts in providing excellent customer service. These scores are reviewed monthly by the president and senior executives to determine where improvement is necessary.

Finally, social media, whether in the form of Twitter, Facebook, blogs, YouTube or other online communities has become commonplace in our world. Instantly, news from around the world can be made public through these new and expanding communication channels. Consumers are quick to reference a service situation that they have experienced, good or bad, and within minutes their message can be witnessed by thousands of followers.

Several banks have established either in-house or outsourced personnel to follow social media to watch for comments about their institution. Responding to good messages with a thank you, or delving into a posted service issue immediately to rectify the problem, this form of service quality tracking must be followed. When a service complaint is addressed and corrected, the next message normally o!ers a positive comment about the responsiveness of their institution.

Given this brief historical account, we consider the main drivers of customer service quality in Chapter 2.


rb i new 107 chapter 1

Business