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CUSTOMER
MANAGEMENT
EXCELLENCE
MIKE FAULKNER
Copyright © 2003 John Wiley & Sons Ltd, The Atrium, Southern Gate, Chichester,
West Sussex PO19 8SQ, England
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ISBN 0-470-84853-7
Typeset in 12/14.5 pt Bembo by Footnote Graphics, Warminster, Wiltshire.
Printed and bound in Great Britain by TJ International, Padstow, Cornwall.
This book is printed on acid-free paper responsibly manufactured from sustainable forestry
in which at least two trees are planted for each one used for paper production.
Dedicated to Jacqui, for her inspiration, determination and belief
With grateful thanks to Sara for her unstinting help
For Sheila, my Mum, to whom I owe a huge debt of gratitude
And to the other important people in my life
Katie, Hannah and Samuel
CONTENTS
Introduction 1
PART I
1 Evaluating a Customer-Centric Approach
11
Generic overview 12
Are you price-, product- or customer-driven? 13
Transition towards customer focus 16

Differentiation through service 17
What customer service excellence means to an organisation 19
Readiness checklist 19
Case study: Unipath 20
Case study: London Borough of Newham 22
2 Enter the Customer Service Director 25
Introducing the role of customer director 26
Customer elements of a commercial business 27
How do service personnel keep touch with the changing
corporate structure? 28
CONTENTS
v
What makes customers important enough to have a director? 29
Readiness checklist 30
Case study: Sun Life Financial of Canada 31
Case study: Legal & General Assurance Society 33
3 Recognising the Cultural Needs of a Service
Operation
35
Recognising the culture within different organisations 36
Marrying a culture of profit to a service excellence ethic 37
Undergoing a cultural change 39
Change management issues 40
Top-down approach to service culture 41
Readiness checklist 43
Case study: Thames Water Utilities 43
Case study: The Royal Bank of Scotland 45
4 The Shift from Call Centre to Contact Centre 47
The emerging multichannel call centres 49
Managing change while maintaining service levels 51

Multitasking CSRs and keeping staff on-message 52
Linking the data with the rest of the enterprise 55
Readiness checklist 56
Case study: Loop Customer Management 57
Case study: Newcastle City Council 59
PART II
5 Dealing with Lifetime Values
63
Calculating customer lifetime values 64
LTV is a key requisite to realise the full customer value 68
Emerging trends in LTV measurement 69
Is LTV being realised by companies and if so, how? 70
Readiness checklist 71
Case study: Carpetright 72
Case study: Zurich Financial Services 74
6 How to Deal with Unprofitable Customers 77
Evaluating your customers’ value, segment by segment 78
How to differentiate the service offering to your top
10 per cent 81
Should you continue to serve unprofitable customers? 82
How to offload the customers that cost you money 83
Creating a knowledge-base about serial complainers 84
Readiness checklist 85
Case study: Hilton plc 86
Case study: Vauxhall Motors 88
7 Complaint (Feedback) Management 91
Proactively managing complaints 92
Predicting service shortfalls to reduce complaints 94
Establishing transparency in terms of organisational culture 96
When to tell the truth, the whole truth and nothing but … 97

Admitting your failings 98
Communication as a tool to deal with disgruntled customers 100
Readiness checklist 102
Case study: Thomas Cook Retail 103
Case study: The Capita Group 105
8 Reputation Management 107
Executing effective damage limitation 108
How to distance yourself from third-party actions 109
Communicating with customers when you are powerless 111
How companies are addressing third-party issues 112
The emergence of customer unions 113
Readiness checklist 115
Case study: Travelcare 116
Case study: The Boots Company 118
9 Managing Expectation 121
Customer service excellence increases expectation 122
Customer service excellence becomes the norm 125
CONTENTS
vi
Should service be paid for to reduce customer expectation? 125
Reducing expectation can lead to reduction in
customer churn 126
How organisations are dealing with customer perceptions
and changes in expectation 128
Readiness checklist 130
Case study: International Rectifier Company (GB) Ltd 130
Case study: Powergen plc 132
PART III
10 Empowering Customer-Facing Staff 137
How empowering staff impacts on staff retention 138

How empowerment impacts on customer retention 139
How to empower staff and to what level 141
Building staff confidence to ensure ownership of complaints 142
Developing a set of discretionary awards 143
Defining exactly how long that ‘extra mile’ should be 145
Readiness checklist 146
Case study: Currie & Brown 147
Case study: WHSmith 149
11 Service Personnel Adopting the Sales Role 151
A satisfied complainer will remain loyal forever 152
Cross-sell and up-sell opportunities with a satisfied
complainer 154
How to gain a 360-degree view of the customer 155
Identifying when a customer is satisfied 157
Interdepartmental communications: internal
collaboration – a vital link 159
Can service personnel see themselves as sales people? 160
Readiness checklist 161
Case study: Siemens Communications 162
Case study: AON Warranty Group 164
CONTENTS
vii
12 Caring for Your Carers 167
Avoiding jadedness in front-line staff 168
Avoiding inconsistent service levels 169
Taking a meaningful interest in your staff and their problems 170
Promoting openness and discussion in the workplace 172
Incentivising staff to go that ‘extra mile’ 173
Acknowledging service excellence through benefits 174
Understanding what motivates your staff and rewarding

accordingly 175
Readiness checklist 176
Case study: National Westminster Bank 177
Case study: Mid Kent College 179
The Final Chapter – A Summary 181
The process 182
And the final words for the doubters 186
6 Case studies featuring main category winners from
National Customer Service Awards
BT Cellnet 187
Eurostar UK 190
Midland Mainline 194
Sainsbury’s Supermarkets 197
Stannah Stairlifts 200
The Trafford Centre 204
Glossary of Terms 209
Index 213
CONTENTS
viii
INTRODUCTION
The past decade has seen a vast upsurge in the importance
attached to customer service from businesses operating in both the
B2B (business to business) and B2C (business to consumer) fields.
This increased activity has paid major benefits to early adopters.
Differentiation through service is rapidly becoming a vital addi-
tion
to any business process. Organisations that are at the fore-
front are reaping benefits in terms of customer loyalty, customer
retention and employee satisfaction. Yet this is just the tip of th
e

iceberg.
Three years ago Quest Media introduced the National Cus-
tomer Service Awards. The philosophy behind this was to recognise
and reward org
anisations that were pushing the barriers of service
to new limits; to recognise those organisations and individuals
who were going that ‘extra mile’.
The awards were also designed to lay down some bench-
marks, so that others could measure their own achievements
against the best of breed. The pursuit of best practice can be a long
and arduous one. Through a tough selection process, rigorous
judging and explicit entry criteria, the National Customer
Service
Awards help organisations achieve best practice levels.
This book will reflect some of the current thinking behind
today’s front-runners in the service excellence environment. It
will highlight some current trends and give realistic timeframes
for implementation and adoption of those trends. It will challenge
some thought processes and it will celebrate the achievements of
some of the most innovative organisations adopt
ing the customer
service excellence mantra.
Before any company can reach the highest recognition for
offering service excellence they will have undertaken several of
the following steps. Only then will they be positioned suitably to
offer exceptional service. Just because a company has incorpor-
ated certain philosophies, success is far from guaranteed. The
service culture is an on-going phenomenon, it is not a destina-
tion, it is a journey. All of the organisations featured in the pages
of this book have decided to adopt a service culture. For that

alone they should be acknowledged.
EFFECTING CHANGE
To adopt a service culture means major organisational change.
To drive forward a customer-centric approach needs buy-in from
the very top echelons of management. It then needs follow-up
from a designated manager and ultimately buy-in from employee
s.
Much has been written about that hackneyed phrase ‘employee
empowerment’, but for a customer-centric approach to work
you really do need to empower your employees. Staff must have
the ability to take ownership of problems, they must feel able to
make decisions to rectify those problems, and they must feel that
they are contributing.
None of this happens easily. Regardless of the size of the
organisation there are always the ‘doubters’. Determined organisa-
tions will think of ways to encompass the ‘doubters’, to
bring them
on side and involve them. The ‘what’s-in-it-for-me’ culture
abounds in many established businesses and it is not until manage-
ment can tangibly show the benefits of a new culture that the
‘doubters
’ will start to soften. The real hardliners, however, may
never change. Therefore it is sometimes necessary to be prepared
to let people go. The benefits to the business through effective
CUSTOMER MANAGEMENT EXCELLENCE
2
customer service are far greater than the loss of a few single-
minded employees.
Be brave; be committed.
CUSTOMER RETENTION

It is widely recognised that it takes time and money to attract
each and every new customer. For the first couple of years with
a newly acquired customer, every penny they spend with an
organisation has to be offset against those acquisition costs. Only
then can an acquired customer become profitable. Retaining a
customer to the ‘profit’ segment of the relationship is the cusp. If
they stay longer they are likely to create an emotional bond,
recommend friends and remain loyal for some considerable time.
Loyalty equals profitability.
The direct opposite of this will be the case if the customer
relationship has not been effectively managed. The customer will
feel no loyalty, have no emotional bond and will actively look
elsewhere for the services and goods that the original company is
offering.
For the organisation this means another round of customer
acquisition with its inherent cost implications. Therefore it is far
more beneficial to retain the customers that you have and look to
invest a limited amount in keeping them.
Buy wisely; treat well.
USE ALL AVAILABLE DATA
There is a plethora of information available to businesses today
relating to customer behaviour. Whether it is buying patterns,
buying sequences, product purchase or complaints, data is being
collected and stored. The sad fact is that too often this data is not
INTRODUCTION
3
being utilised. Offering excellent service does not have to start at
the complaint desk. Too many organisations collect data about
customers and use it only for internal purposes without seeing
the bigger picture. If a certain segment of customers uses your

services on Wednesdays only perhaps it would be wise to offer
‘rewards’ on Wednesdays to that customer segment – make those
customers feel valuable.
Recognising your customers’ habits is often the first step to
offering them outstanding service. Look at today’s supermarket
trade. Perhaps inadvertently, because of Internet shopping and
the need to deliver, supermarkets are returning to the original
‘corner shop’ mentality where they take orders and deliver free of
charge. The customers that use this service like this service. The
fact that these customers are probably marginally more affluent
than some others (by virtue of the fact that they have access to the
Internet, computer and telephone line) might mean that they
are more valuable to the organisation and worth retaining. When
these customers next go on-line to place an order, they have their
last shopping trolley on screen to reorder or remove items. This
bears more than a passing resemblance to Arkwright in Open All
Hours – but the important message is to use all the available data
and start thinking of customer service from a proactive stand-
point rather than a reactive one.
Analyse data; implement findings.
MEASUREMENT
A fundamental in embarking upon a service culture is knowing
where you are at the start and planning where you are aiming to
get to. Measurement is itself a leveller for many organisations.
Knowing what to measure, how to measure and how to interpret
findings can be difficult and disappointing. To embrace a service
culture, the organisation – from the top down – needs to be
prepared to accept failings. Mistakes happen and when they do,
CUSTOMER MANAGEMENT EXCELLENCE
4

they must be addressed. A rewarding occurrence is when an
organisation suddenly recognises that the service culture is being
driven from the bottom up. This is a real measure of success.
Measuring customer satisfaction is another necessary exercise.
It should be measured at the outset, then continually monitored
throughout the process. This will afford early indicators of suc-
cess. It will highlight the implementations that are working and
also those that are less effective.
Measure everything; act on results.
COMMUNICATION STRATEGIES
Be prepared to communicate your intentions in several different
ways to several different audiences. The embracing of a service
culture requires communication at many levels. At the outset the
initial decision has to be communicated at board level. A business
case for the pursuit of customer excellence must be conveyed so
that the highest echelon of management embraces the decision.
Managers then have to have the decision conveyed to them.
They need to know how it will pan out, what responsibilities
they will have, how it will be measured, what powers they
will have, and in some cases, what’s in it for them. The decision
then needs to be conveyed down the ‘food chain’ so that every
employee has the same understanding of what the organisation is
aiming to achieve.
Then it is important to convey – in yet another way – the
message to the customer. You cannot sit back and hope that the
customer will notice your service culture changes. You have to
tell them. You have to let them know what your aspirations are
and tell them how quickly you aim to get there.
Say it often; say it proud.
INTRODUCTION

5
TRAINING
It is often said that an organisation’s best asset is its employees.
This is swiftly being challenged with many of the front-runners
in the service excellence field believing that their best asset is
their customers. This is a moot point because employees and cus-
tomers are inter-reliant. What is not being challenged, however,
is the fact that great customer service doesn’t just happen.
Training is an integral part.
In Lessons from the Nordstrom Way by Robert Spector (pub-
lished by Wiley), the author takes us on a spectacular journey,
coast to coast across the USA, discussing fantastic customer service.
But behind each and every single success story, training played a
major part. Through effective training, great customer service
begins before the customer comes anywhere near the organisa-
tion. Word of mouth recommendations can flood in because
the staff are trained not to question the ethics of the company.
Customers then gain confidence in using the company, secure in
the knowledge that they understand the culture of that organisa-
tion.
Effective training will also serve to ensure that employees buy
in to culture change sooner rather than later. Training can be used
as a communication channel that involves people rather than
conventional communications channels, which often tend to
leave people feeling distant and bemused.
Train hard; train harder still.
These are just a few of the fundamental steps that a company
adopting a service culture will have undertaken. Those that have
honed the art of good service are celebrated within this book.
That should not detract from the efforts of other organisations

that are currently making great strides towards a customer-
centric approach. To achieve best practice status is not something
that is achieved quickly or easily. Service excellence is, and must
CUSTOMER MANAGEMENT EXCELLENCE
6
always remain, just one small part of the overall business strategy.
It must be submitted to the same processes as any other part of the
business plan. It will need to be cost-effective and beneficial on
the balance sheet.
For this book I have researched over 200 companies who are
at the forefront of the pursuit of customer excellence in the UK.
From this research I have been able to identify key trends and
implementations that are at the leading edge of customer service
excellence. I have also spoken to eminent thought leaders in the
customer service field and from these findings I have been able to
assess the timeframe between concept and implementation. I hope
that this book will serve you well in your pursuit of customer
service excellence.
INTRODUCTION
7

PART I

CHAPTER 1
EVALUATING A
CUSTOMER-CENTRIC
APPROACH
‘Our customers are loyal and keep coming back,
therefore we must be customer-focused, right?’ Wrong.
Customer focus is, at best, only one element of the relation-

ship between a company and its customers. At worst it is a board-
room buzzword, which makes every board member feel a
little more secure. Not unlike the phrase ‘working towards equal
opportunities’, it is showing an awareness of a need but it is not
addressing the issues. Customer focus must lead to something
meaningful, will probably require sacrifices and is just one of the
steps necessary to become truly customer-centric.
A customer focus puts your customers high on your list of
priorities. When you put your customers into the heart of your
business, make customers part of the culture, then you start to
become customer-centric.
GENERIC OVERVIEW
One department within an organisation cannot function in isola-
tion. You cannot departmentalise a customer-centric approach.
It must emanate from the very heart of the organisation. All
departments need to work in harmony, if not complete synchron-
icity
, in all communications with customers. Somebody high
up in the organisation has to take complete control of the total
customer experience for a true customer-centric approach to work
.
This person should assume the role of communicator, champion
and relationship developer. Not all organisations are ready to do
this. Some companies rely on individuals ‘who are good with
customers’ to assume this role. It has limited effect.
To evaluate an organisation’s readiness to become customer-
centric is simple. To become customer-centric is a far more arduous
task. Having addressed all the points in the ‘readiness checklist’ in
this and every chapter, it is time to see where the shortfalls lie,
and identify how to overcome them. Identifying the shortfalls is

relatively easy; overcoming them is far more difficult. If you need
to undertake cultural change in order to adhere to the readiness
checklist then the task ahead takes on magnificent proportions.
Educating an entire workforce to change in a way that is generally
customer-centric is time-consuming and can cost the company
an awful lot more than merely the financial costs.
One of the most established customer-centric approaches in
the retail sector must be Marks & Spencer’s policy of exchanging
goods regardless of reason. This was, at the original time of imple-
mentation, quite phenomenal. Although it was later to prove open
to abuse, it was mimicked by many other retailers and, before
long, the differentiation value diminished with it. This is a factor
to try to avoid when implementing a customer-centric approach.
If it is possible to avoid your service offering being mimicked
or copied, then do so, even if it pushes your costs a little higher.
The value of differentiation through service is featured in further
detail later in this book but it is, needless to say, a very, very
valuable, powerful and cost-effective business process.
CUSTOMER MANAGEMENT EXCELLENCE
12
On the plus side, there will be many elements implemented
within your current business processes commensurate with
adopting a customer-centric approach. It is important that having
embarked upon the journey, which is customer service, organisa-
tions look inward and establish all those elements that are positive.
If the positive elements within current business processes only
require an almost imperceptible change of emphasis, then look to
utilising them within your customer-centric approach. If certain
departments are more customer-orientated – either during cus-
tomer facing situations or in handling customer complaints – then

build on and utilise that expertise. In some organisations, owner-
ship of the customer can be a clouded issue. Some sales people
would like to say they own the customer, some accounts people
would also say that they service and own the customer; for a
customer-centric approach to be effective, the reality is that owner-
ship of the customer should not be the domain of any one depart-
m
ent and all departments should shift in unison.
The customer has to be central to most of the decisions made
by the company. The payback will be high, but the cost can be
high also. Will you ever be in a position to credit yourself as a
customer-centric organisation? The answer to that is doubtful. The
r
eality is, it becomes a way of doing business rather than a goal
that you achieve.
ARE YOU PRICE-, PRODUCT- OR
CUSTOMER-DRIVEN?
Most commercial relationships can be broken down to three dis-
tinct categories: price-driven, product-driven or customer-driven.
Price-driven organisations, not surprisingly, compete on price,
look at price as a differentiator and are forever concentrating on
margins. That does not mean to say that organisations in the other
categories do not look at margins but it is an ethos within an
organisation that makes everything surround the product price.
EVALUATING A CUSTOMER-CENTRIC APPROACH
13
This will require those organisations to cross out the value of
their customers. They find themselves in a precarious position in
terms of customer service because when somebody else comes
along with a lower price the customer feels justified in switching

because no loyalty has been built.
Product-driven companies differentiate on their particular
products; sometimes this can be an ideal solution especially if
the product is unique. However, unique products can be either
franchised – as in the case of Wimpy – or copied, creating
unexpected competition. Product-driven companies rely upon
the product to keep the customer. If the product is particularly
good, efficient, cost-effective and economic to run, then cus-
tomers will acknowledge these facts and remain loyal. However,
sometimes competitors can mimic goods and customers can be
tempted to buy your competitor’s stock.
Customer-driven organisations do not necessarily need to
compete on price or product – although it is important that the
price and product are of an acceptable standard. It is not an
imperative always to be cheaper or for the product to be unique.
The customer-driven organisation will look at its customers as part
of the overall business process. A true customer-driven organisa-
tion will want to go that extra mile (a cliché, but a valid one) to
please the customer and to ensure that they enjoy the experience
of being a customer of that organisation.
It is well documented that the top 10 per cent of your cus-
tomers can represent as much as 120 per cent of your profit.
Therefore, it becomes vital to be able to see who your valuable cus-
tomers are. It is an on-going dilemma whether you should deal with
the 10 per cent in a way that is different from how you deal with
the remainder of your customers. Obviously you want to retain
the top 10 per cent because of the value that they add to your
organisation, but you will not always necessarily want to lose any of
the other 90 per cent because of economy of scale. It is important
to evaluate exactly how much you are prepared to invest for the

retention of the 90 per cent of the customers in relationship to how
much you are willing to invest in the top 10 percent.
CUSTOMER MANAGEMENT EXCELLENCE
14
How you communicate with your most valuable customers is
a dilemma. If you treat them in a favourable way, offer them
inducements that are not offered to the rest of your client base,
you risk being ‘found out’. If you are ‘found out’ by some or many
of the rest of your customers they may feel alienated and defect;
your economy of scale will diminish and therefore the true value
of your top 10 per cent will diminish with it. Communication is an
important tool but it can also be a minefield.
A customer-driven organisation will have data supporting its
customer relationship. This data will be analysed, either by trans-
action, by value, by location or geography. The data will have
been collected, maybe by the sales or the marketing departments,
but it will be shared. Shared data is valuable data. Data that is not
used is of no use. Data that is out of date is also of no value, so the
information that is held on the customer must be shared through-
out the organisation and must be able to be updated from various
sources.
Loyalty marketing is a way of making sure that the customers
who are repeating business on a regular basis benefit from their
loyalty – thus engendering further loyalty. Collecting data and
number-crunching are vital for the process to be successful. The
explosion of loyalty cards in the retail grocery business from the
early 1990s was nothing short of phenomenal. Differentiation
was quick to diminish. Each of the big five supermarket chains
were employing the same tactics. Two things occurred: massive
data collection on a scale unknown before about the customer,

and none of the supermarkets maximising the collected data to
its full extent. Therefore, ‘customer loyalty’ became a total mis-
nomer. Shoppers (customers) had ‘loyalty cards’ from all of these
companies. The lessons learnt took a veritable age to filter through.
Loyalty marketing needed to ‘become of age’ and only customer-
driven organisations are able to employ today’s sophisticated loyalty
marketing processes.
EVALUATING A CUSTOMER-CENTRIC APPROACH
15