What does service mean to customers?

Customer service wears many faces. That fact was highlighted in a recent editorial in this newspaper, which reported on a Gallup survey which revealed a wide discrepency between retailers' perceptions of the customer service they offered and their customers' perceptions of those same services.

Customer service apparently means one thing to the retailers and something else to their customers. Retailers, then, will not improve their delivery of what customers need and expect until they can find out more accurately what those needs and expectations really are.

But how do you find out, with a high degree of certainty, what your customers want? The Direct Marketing Association found in a recent study, conducted by Deloitte & Touche, that many of its members are integrating data from a range of sources to learn more about just who their customers are and what they want and expect.

Marketing databases can help you answer the key questions about your customers, such as: * What are they like? * What products (and services) do they complain about most? * What promotions work best with them? * What media do they see and hear most frequently? * How large are their families?

Many of the things direct marketers are doing can be done by other retailers as well. For example, Philip Miller, chief operating officer of Saks Fifth Avenue, recently told a reporter that one of the ways his company is improving customer service is by implementing a number of advanced data retrieval systems. Much data is available to retailers through such means as applications for credit cards, frequent buyer and price club cards, rebate forms, questionnaires, vendors and researchers.

This article reviews some of the ways that retailers can gather this information to learn more about their customers and provide the service those customers want.

Think of a database marketing system as a central repository of all information on the relationship your company has with the customer. This includes demographic, transactional, and market research/ affinity information.

Demographic information--name, address, sex, income, education, and asset ownership--is either volunteered by the customer on forms or purchased from vendors. Advanced database systems can link households, enabling retailers to analyze customers individually or in groups.

Transactional information is a history of the customer's transactions with the company--what he bought, when, and at which location.

Market research and affinity information includes psychographic and cluster analysis data purchased from outside vendors. Deloitte & Touche, for example, has produced scores of in-depth customer profiles based on intercept surveys done at various shopping locations throughout the country. You can overlay such information to your demographic and transactional data, rounding out the profile of who the customer is, what he or she does and prefers.

Using this set of integrated information, you can create models of different customer groups. These groups can be Of any size and configuration. You might, for example, create models for groups of customers who have small children, or who earn more than $50,000 a year, or for those who have bought a small appliance or piece of hardware in the past six months. Then you can tailor specific offers to each group.

Or in mailing one circular to all your customers, you can have a different front cover for each of your models. If you find that unreasonable, consider Farm Journal, which publishes 5,000 different versions of the same magazine based on subscriber-specific interests and needs.

The driving force behind marketing databases is integration, being able to pull together information captured at the POS terminal, on credit card applications, from warranty and return forms, and then tying this to information derived from outside sources.

Once you have integrated this information and learned to read it, you can make more informed marketing decisions and come closer to the needs and expectations of your customers.

Knowing what works and what doesn't, of course, is the challenge of retailing and the key to delivering customer service. Astute use of a sophisticated marketing database system enables you to analyze past promotions and purchase activity. You can come to know with greater assurance what items to order in larger quantities and which products to promote more heavily.

Some direct marketers are using their databases to measure the relationship between sales and the position of promotions in their catalogs. Retailers can do the same thing with regard to their ad circulars or in-store signing, and use the results in designing future pieces.

For example, if you code every item that is shown in the circular, you can determine if power tools sell better when they are advertised on the centerfold or on the back page. Or you can try to learn what items gain the most from front-cover exposure. In other words, you can gain reliable, quantifiable evidence for constructing media pieces in a certain way.

You can also use your marketing database system to understand what people buy. That is, you can analyze purchases by identifying the "market basket" as a whole, or by determining specific affinity sales. For instance, one mass marketer found, that although his database tied into his point-of-sale information, that young men often bought baby's diapers and beer in the same shopping trip. The retailer then moved the two items closer together and saw sales in both categories increase by near double-digit percentages.

The cost of acquiring a new customer is about 10 times the cost of keeping an old one. You can use technology to reduce the number of customers you lose. Marketing database systems, coupled with defection modeling tools, can predict which customers are likely to defect. Having identified potential defectors, you can send special promotional materials to them and try to strengthen your relationship with them.

Similarly, you can reduce your costs o? acquiring new customers. Using the database and analytical modeling tools, you can segment the customer base for better targeting. You can customize offers and be more accurate in predicting responses.

We are living in what is called the Information Age, as technology enables us to process information at incredible rates. The information that may mean most to the retailer is information about customers--what they want and expect, what attracts them, what produces loyalty. It only seems logical, then, to use this powerful tool to gather all the information we can to help reveal most accurately what customers mean by customer service.

Harvey Braun is a national partner of Deloitte & Touche, the Big Six accounting and auditing, tax and management consulting firm, and is co-chairman of its Trade/Retail & Distribution Services Group.

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