This research examined whether
specific service and sales skills could improve customer retention rates.
A literature review was conducted to examine the following issues: (1)
whether customer retention rates could be improved by attempting to resell
customers who wished to cancel their accounts or stop services; (2) service
quality factors that have been shown to contribute to customer retention;
(3) behaviors and skills that have been linked to service quality and customer
retention; and (4) the relationship of specific sales skills to these behaviors.
Improving Customer Retention Rates
Through Direct Intervention
The significance of customer retention
was first quantified by Reichheld and Sasser (1990). They found that profits
in service industries, including credit card companies, increased in direct
proportion to the length of a customer's relationship. They noted the experience
of MBNA America, citing its "customer defection 'swat' team staffed by
some of the company's best telemarketers," which achieved a 50% success
rate in persuading customers to retain their credit cards. At MBNA, a 5%
improvement in customer retention increased average customer value by 125%.
Reichheld and Sasser (1990) concluded that cutting defections in half could
more than double the growth rate of the average company.
Everett (1993) noted that a dedicated customer
retention unit developed by Patrick J. Swanick at the Society National
Bank in Cleveland, achieved a 57% success rate in persuading callers to
remain with the bank. According to Everett (1993), these representatives
first probed for causes, then tried to resolve the problem. He added that
they followed-up on each call with a letter to the customer.
The Link Between Customer Satisfaction
and Customer Retention
Many authors (Reichheld and Kenny, 1990;
Zeithaml, et.al., 1990; Bowen and Lawler, 1990; Schlesinger and Heskett,
1991) have cited the relationship between customer retention and the quality
of service experienced by the customer.
Reichheld and Kenny (1990) specified six
factors as imperative to improving retention: senior management commitment;
a customer-focused culture in which all employees and managers focused
their full attention on customer satisfaction; retention information systems
that tracked and analyzed the root causes of defections; empowerment of
front line employees to take actions that provided immediate customer satisfaction;
continuous training and development; and incentive systems based on customer
Parasuraman, et. al. (1984) studied quality
in four service businesses, including credit card services, and developed
a model of service quality. They noted that:
"A variety of factors, including resource
constraints, management perceptions of consumer expectations and the firm's
service quality specifications will affect service quality from the consumer's
(Parasuraman, et. al., 1984)
Parasuraman, et. al. (1984) identified
a set of discrepancies, or gaps, between how executives perceive the quality
of the service they provide and the tasks associated with delivering those
services to customers. They found that the customer's perception of service
quality depends upon the size and direction of the gap between the service
the customer expects to receive and what he or she perceives to have been
received. The magnitude of this gap (which can be either positive or negative)
was determined by four interrelated variables: (1) the difference between
actual consumer expectations and management perceptions of those expectations;
(2) between management perception of expectations and the translation of
those perceptions into service quality specifications; (3) between service
quality specifications and service delivery; and (4) between both service
quality specifications and service delivery, and external communications
to customers. Parasuraman, et. al. (1984) noted that these gaps "can be
a major hurdle in attempting to deliver a service which consumers would
perceive as being of high quality." Because this study focused on the interaction
between the firm's representatives and its customers, this author found
the fourth gap (between both service quality specifications and service
delivery, and external communications to customers) to be of particular
Schlesinger and Heskett (1991) suggested
that poor service was often built into the system by designing customer-contact
jobs to be "idiot proof." Bitran and Hoech (1990) differentiated between
transaction-oriented, "low contact" services, in which quality can be defined
as "conformance to specifications" and "high contact" services, such as
customer retention, that satisfy higher order human needs. They proposed
that "actively understanding and managing the relationship between server
and customer can yield higher service revenues through increased repurchase
Citing research on customer loyalty conducted
by the Forum Corporation, Schlesinger and Heskett (1991) noted that only
14% of customers stopped patronizing service business because they were
dissatisfied by the quality of the product, while more than two-thirds
defected because of what they judged to be indifferent or unhelpful service.
This finding supported the observation of Parasuraman, et. al. (1984) that
customers' judgements of high and low service quality depend on "how consumers
perceive the actual service performance in the context of what they expected."
Zeithaml, et. al. (1990), built on
their earlier research (Parasuraman, et. al., 1984) to identify five dimensions
of service quality, as perceived by customers: tangibles, reliability,
responsiveness, assurance and empathy. These dimensions, which they incorporated
into their "SERVQUAL" model, are defined in Figure 1.
Parasuraman, et. al. (1984) had positioned
consumers' perceptions of service quality along a continuum ranging from
ideal quality to totally unacceptable quality, depending on whether the
customers perceived the service they receive as meeting, falling short
of, or exceeding their expectations. Among credit card customers, Zeithaml,
et. al. (1990), like Schlesinger and Heskett (1991) found that tangibles
were of the least importance to customers. The mean importance of the remaining
four criteria, reliability, responsiveness, assurance and empathy, all
rated above 9 on a 10 point scale, with reliability receiving the highest
individual rating (48.6) as the dimension most important to customers (Zeithaml,
et. al., 1990).
Zeithaml, et. al. (1990) studied whether
customers' perceptions of quality were influenced by whether or not they
had experienced a recent service problem (Figure 2). They examined customers
who had experienced recent service problems and those who had not. They
found that service problems adversely affect customers' perception of service
quality, and that customers who were dissatisfied with the resolution of
their problems were twice as dissatisfied as those whose problems were
resolved to their satisfaction (Zeithaml, et. al., 1990).
Zeithaml, et. al. (1990) concluded that:
"The most important thing a service company
can do is be reliable that is, perform the service dependably and accurately
... do it right the first time. When a service problem does crop up, however,
all is not lost unless the company ignores it. In other words, by resolving
the problem to the customer's satisfaction, -- by performing the service
very right the second time -- the company can significantly improve
customer retention rates."
Like Zeithaml, et. al. (1990), Heskett, et.
al. (1990) found that good service delivery elicits the best outcome in
terms of customer satisfaction. They noted that the next best outcome was
achieved when problems were elicited and resolved, followed in descending
order by problems that were elicited but not satisfactorily resolved and
problems that were not elicited or expressed.
Bowen and Lawler (1990) also recommended
that service workers be empowered to solve problems creatively and effectively.
Like Zeithaml, et. al. (1990), they emphasized the importance of keeping
frontline personnel informed about organizational performance; providing
problem solving skills and other knowledge that helped employees contribute
to organizational performance; and basing rewards on performance. They
found that empowering employees to provide a quick response to customer
frustrations "can turn a potentially frustrated or angry customer into
a satisfied one" (Bowen and Lawler, 1990). Bitran and Hoech (1990) also
noted that defections are seldom the result of ordinary interactions, but
of an organization's failure to handle abnormal situations to the customer's
Behaviors and Skills Linked to Service
Quality and Customer Retention
Zeithaml, et. al. (1990), Bowen and Lawler
(1990), Reichheld and Kenny (1990) and Schlesinger and Heskett (1991) cited
the need for customer-contact personnel to "take responsibility, think
for themselves and respond well to pressure from customers" (Schlesinger
and Heskett, 1991).
Schlesinger and Heskett (1991) further
emphasized the importance of training and support in "communication, performance
management, team building, coaching and empowerment" for front-line workers
and their managers. Both Reichheld and Kenny (1990) and Schlesinger and
Heskett (1991) found that companies that exhibited these policies and attitudes
experienced not only higher customer retention and profits, but also an
increase in employee loyalty and a reduction in job turnover.
Zeithaml, et.al. (1990) found that a "Service
Performance Gap" occurred when employees were unable or unwilling to perform
the service at the desired level. They found that this gap was common among
the service businesses they studied due to problems related to: role ambiguity;
role conflict; employee-job fit, technology-job fit, supervisory control
systems; perceived control; and teamwork.
Zeithaml, et. al. (1990) defined role ambiguity
as a situation in which employees were: (1) uncertain about what their
managers or supervisors expected from them and how to satisfy those expectations;
(2) lacked the training or skills to provide the service needed for customer
satisfaction; and (3) did not know how their performance would be evaluated
To achieve role clarity, Zeithaml, et.
al. (1990) suggested the use of four tools: communication, feedback, confidence
and competence. They emphasized that employees need accurate information
about their roles; specific and frequent communication from managers about
what they were expected to do; and complete and current information about
products, services and customer expectations.
Zeithaml, et. al. (1990) concluded that
training and feedback in two areas, technical knowledge and interpersonal
skills (which were related to their "SERVQUAL" dimensions of responsiveness,
assurance and empathy), could increase employees' confidence and competence,
and provide greater clarity regarding their roles. Bitran and Hoech (1990)
also noted the importance of providing feedback to employees on their interactive
Bitran and Hoech (1990) suggested that
high-contact, high-communication service providers require skills in: diagnosing
problems; gathering, checking and disseminating information; resolving
conflicts; disseminating cost information; and managing waits. The first
three of these tasks are shared by customer retention representatives.
(See Figure 3.)
Relationship of Sales Skills to Behaviors
Linked to Customer Satisfaction and Retention
Williams, Spiro and Fine (1990) noted that
very few researchers have explored the customer-salesperson interaction
from a communication perspective. They proposed a model that focused on
communication as the primary element of this interaction. They found that,
although many authors stressed the importance of "verbal and non-verbal
code (Marks, 1981; Jackson et. al. 1988) such as message order, patterns
of argument, use of evidence, visual contact, etc. in personal selling,
most of the research had concentrated on non-sales interactions. The customer
retention function required that sales skills be combined with service
skills associated with quality and customer loyalty. This researcher identified
areas in which these two skill sets overlapped, to determine which (if
any) behaviors on the part of the representatives might alter a customer's
decision to take some or all of their business to another supplier.
Rackham, et. al. (1971) studied whether
some individuals interact more successfully than others because they are
more skilled -- "they either do certain things that others do not, or they
do them better." While admitting that personality and aptitude factors
account for some differences, they found that interpersonal skills, which
they classified as "interactive behaviours," could be influenced more readily.
(The spelling of the term reflects the British origin of Rackham and his
associates.) They defined an interactive behaviour as "one which involves
two or more people in such a way that the behaviour of one person may influence
the behaviour of others." This definition also describes the desired individuals
who are expected to influence the behavior of customers in favor of retaining
Rackham, et. al. (1971) developed a method
of data collection and analysis for measuring interactive behaviors. Trained
observers have used this method for training needs analysis, process consultation,
course design and on-the-job feedback. The behavior analysis breaks an
individual's contribution to a discussion into discrete bits of observable
behavior. Rackham et. al. (1971) found that successful individuals tended
to use a quantifiably higher proportion of certain behaviors in specific
interactive situations than did their less successful counterparts.
The methods developed by Rackham, et. al.
(1971) were used by Motorola Training and Education Center in studies of
the interactive behaviors used in interpersonal discussions, sales negotiations,
presentations and meetings. Working with members of Rackham's organization,
Huthwaite, Inc., researchers trained in these methods (including this author)
correlated the behaviors demonstrated by individual performers with the
outcomes of their interactions. In each type of interaction, the researchers
found that the most successful performers used significantly more of some
behaviors and significantly less of others than did either average or below
These behaviors varied, depending on the
type of interaction. However, successful performers in two-way interactions
consistently demonstrated a substantially higher use of three behaviors:
seeking information, supporting the ideas or feelings expressed by others,
and testing understanding. Conversely, the less successful performers provided
a higher proportion of information (facts, reasons and opinions) than those
whose two-way interactions were more successful.
Farber and Wycoff (1992) interviewed top
sales performers at more than 50 companies. These individuals emphasized
the importance of establishing and maintaining rapport with customers.
The Motorola research identified this skill with two interactive behaviors:
"Supporting" and "Testing Understanding." Supporting was defined as acknowledging
or expressing empathy toward the feelings, ideas or positions of the other
party. Masser and Leeds (1984) also stressed the importance of this behavior
in telephone sales.
Testing (or Checking) Understanding was
defined as paraphrasing or restating what the other party had said or the
implications of those statements. Masser and Leeds (1984) also recommended
this behavior, which they categorized as hearing, interpreting and evaluating,
to distill an accurate interpretation of the customer's meaning in telephone
sales. The Motorola research linked both Supporting and Checking Understanding
to "active listening," which was prominent among Bitran and Hoech's (1990)
list of the process skills required of service providers.
Many authors (Reichheld and Sasser, 1990;
Rackham, 1988; Farber and Wycoff, 1992; Masser and Leeds, 1984; Bitran
and Hoech, 1990; Boyan and Enright, 1992) have linked the ability to ask
probing questions with success in sales. Reichheld and Sasser (1990) stressed
the value of "defection analysis" to determine and correct the root cause
of defections, mentioning the value of skillful probing (questioning) in
identifying the reasons why customers cancel, and using that information
as an "early warning signal" for improvement.
Bitran and Hoech's (1990) task categories
of diagnosing problems and gathering information implied the need for questioning
skills among high-communication service providers. The fact that questioning
skills are identified with success in each of the roles played by individuals
seeking to retain customers (retention, sales and service), indicated that
such skills might also be linked to their success.
Farber and Wycoff (1992) advocated asking
questions to develop a "natural flow, which in turn will lead to a natural
solution." Masser and Leeds (1984) emphasized the importance of "qualifying
skill," which they defined as: (1) spontaneously creating probing "subset"
questions and truly responding to the customer's situation; (2) the ability
to use listening skills to ensure that customer's comments are understood
and interpreted correctly; and (3) smooth and logical connection of steps
in the conversational process.
In studying the "interactive behaviours"
of sales people, Rackham (1988) found that a category of behavior, which
he classified as "Benefits," was significantly higher in calls that resulted
in orders. He defined a Benefit as a statement that explains how the sales
person's company or product can meet an explicit need that the customer
has expressed. He also identified a related behavior as being correlated
to success in smaller sales. This second behavior, which Rackham (1988)
referred to as "Advantages," shows how a product or service can be used
or can help a customer.
The difference between Advantages and Benefits
was that a Benefit must meet an explicit need expressed by the customer.
At a study conducted at Motorola Canada, Rackham (1988) found that sales
people who used Benefits rather than Advantages increased their dollar
volume of sales by 27 percent.
Rackham's (1988) research also revealed
that a common category of sales behavior known as "Features" (presenting
facts or characteristics of a product or service) were unpersuasive. This
finding may be related to the Motorola research which found that the more
facts, reasons and opinions an individual provides in a two-way interaction,
the less likely that individual was to obtain a successful outcome.
Many authors (Boyan and Enright, 1992;
Shafiroff and Shook, 1990; Masser and Leeds, 1984) have described a complex
process of overcoming objections and closing as the most important part
of the sales interaction. Rackham (1988) found that individuals who received
very high numbers of objections used a higher than average number of Advantages
in their calls.
Conversely, skilled people received up
to ten times fewer objections per selling hour, by preventing rather than
handling objections, by questions to develop explicit needs, and then offering
Benefits, rather than Features or Advantages. He also found that the more
closing behaviors a salesperson used, the less likely he or she was to
complete the sale.
Farber and Wycoff's (1992) interviews with
top sales performers at more than 50 companies also revealed that overcoming
objections and closing were perceived as less significant than other behaviors.
Like Rackham (1988), Farber and Wycoff (1992) stressed the importance of
matching the solution to the customer's needs.
The literature revealed significant relationships
between: customer retention and quality of service as perceived by customers;
the use of interactive communication skills by customer contact personnel
and the perception of service quality by customers; and skills identified
with success in sales and service tasks related to the customer retention
Major Media Learning Resources provides
proven tools and tactics to rapidly and effectively improve customer retention
and loyalty. For further information, please contact:
Vice President and Director
Major Media Learning Resources
3326 Commercial Avenue
Northbrook, Illinois 60062
FAX (847) 272-1534
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