What Is Customer Service?

Customer service has been defined in many ways. The challenge is that appropriate service means different things to different people. It is often easier for customers to identify inappropriate service, than to define what they should experience.

Some Common Definitions of Customer Service
“Customer service is a commitment of all employees in a company to make being a customer a completely positive experience one that everyone customer will want to experience time and time again.” ~ Jack Ferreri

“Customer service is the ability of an organization to constantly and consistently give the customer what they want and need.” ~ ACA Group
Customer service means exceeding customer expectations. Service is judged by how it matches expectations. If the treatment the customer receives is better than his or her expectations, this is excellent service. ~ From Be Our Guest, Disney Institute

“Excellent customer service is the process by which your organization delivers its services or products in a way that allows the customer to access them in the most efficient, fair, cost effective, and humanly satisfying and pleasurable manner possible.” ~ Jack Speer, BizWatch Publisher

“Customer Service is the collection of skills, knowledge, and attitudes presented to your customers by your staff.” ~ Center for Business, Industry and Labour, St. Louis Community College

In this toolkit, MicroSave seeks to ensure that service levels in a financial institution exceed customer expectations despite the continuous challenges of growth and change. This has multiple implications. First, financial institutions need to understand customer expectations. Second, they must understand the internal factors that drive an appropriate institutional response to customer expectations. Third, performance needs to be continuously monitored and communicated to ensure it meets required service levels. This process occurs in a dynamic environment and therefore needs to be driven by an appropriate strategy.

Why Invest in Customer Service?
The simple answer is because your customers want you to. Quality of customer service consistently ranks high on any list of customer preferences for financial services. In a qualitative study in Uganda in 2003, Mukwana and Grace found staff attitude, flexibility of terms and speed of service to be key reasons for choosing a particular financial institution. Similarly, the companion quantitative survey found that the second most common reason for customers to leave financial institutions was congestion in branches and the poor service associated with it.

Competing financial services often don’t differ greatly from each other, so the way that a financial institution supplies its customers can become more important than the service itself. There are five compelling reasons why excellent customer service must be a “prime directive” for any market led MFI:

1. Good service keeps customers
2. Good service builds word-of-mouth business
3. Good service can help you overcome competitive disadvantages 4. Good service is easier than many parts of your business
5. Good service helps you work more efficiently
MicroSave Customer Service Toolkit 8
We All Know that Customer Retention Is Important, But Is It Really THAT Important?
Absolutely! Repeat customers are of vital importance to microfinance programmes. As a rule of thumb, it is 5-10 times more expensive to attract a new customer than it is to retain an existing one.1 Furthermore, reducing customer defections can boost profits by 25-95%.2

There are many reasons why retaining customers is so profitable. These include the ability to retain business, to cross sell products to existing customers, and to amortise initial costs over a longer period. Satisfied customers are also more likely to provide referrals and may be willing to pay a price premium. As a general rule, the longer an institution retains a client the lower the costs of serving and the greater the opportunities for earning income from that client. This concept is illustrated in the following diagram: Source: Neil Russell-Jones and Tony Fletcher, The Marketing Pocketbook (1998) Acquisition: To acquire a new customer, a typical bank undertakes expensive marketing campaigns. A credit-based microfinance programme often performs even more expensive one-on-one personal selling or client mobilisation. After acquisition, the customer has to learn the bank’s processes, or has to receive training from the loan officer. Early in a new customer relationship, these costs can be greater than the revenue generated.

Cross Selling: Once the customer is with an institution, there are frequent opportunities to sell additional products to the same customer. These opportunities can be enhanced through carefully targeting products towards customers that are more likely to need or want that product. The more products that an institution can sell to a single customer, the more profitable that customer will be. Repeat Clients: Repeat customers are those customers reusing the same services. Often the customer initiates the transaction, so acquisition costs for the financial institution are very low. Moreover, since the customer has already established a history with the institution, it can make informed lending decisions and reduce loan losses. Typically, it can also process transactions more quickly than it could the first time around