Canada Markets closed

Customer service can make or break in retail wars

Chris Nicols
Chris Nicols
Shoppers make their way past Nordstrom at Woodfield Mall in Schaumburg, Illinois, in this October 22, 2007 file photo. Nordstrom Inc on November 14, 2013, reported a lower quarterly profit, due in part to the earlier timing of its Anniversary Sale, and took down the top end of its full-year forecast for sales at established stores. REUTERS/John Gress/Files (UNITED STATES - Tags: BUSINESS)

In these still-shaky economic times, it's no small matter for a retailer to ensure shoppers feel welcome in its stores. Otherwise, these consumers aren’t going to be handing over their hard-earned and precious cash.

Clearly, some merchants get this more than others, but conversations with experts in the field suggest commonalities exist among those providing superior customer service and those not. According to a March 2012 report by research firm J.D. Power, companies that excel in this field typically:

  • Ensure employees are experts who want to help.
  • Go the extra mile to truly understand customers.
  • Prioritize strong service regardless of whether interactions are conducted in person, on the phone or online.

Of course, you won't find many retailers who would admit to anything else. We're all versed in the notion that "the customer is always right," but the reality is that some stores actually live by the philosophy, while others not so much.

The Nordstrom example

On the various service-ranking lists available, it's not unusual to see the same retailers near the top -- Amazon.com, L.L. Bean and Nordstrom, for instance, perennially rank high.

Nordstrom, in particular, gets repeated kudos, for a few reasons. David VanAmburg, managing director of the American Customer Satisfaction Index, says even though you'll pay more at a one of these higher-end stores than at a Target or a Kohl's, shoppers who can afford to do so will.

"And that differentiator is customer service," VanAmburg says. "Nordstrom wants to be known as a place where you come to shop, and you know you're going to be treated well. You know you're going to find knowledgeable people who can help you find what you're looking for."

That product knowledge plays a crucial role in Nordstrom's ability to meet or exceed customers' already elevated preconceptions of their visit, industry experts say. As Bruce Temkin, managing partner with the Temkin Group, explains, our final evaluations depend heavily on the expectations that preceded them.

"If I go into Nordstrom and I expect someone to be doting over me and helping me right away -- if they're not, they get a low score," he says. "If I go into Sam's Club, I'm not expecting that."

As the J.D. Power report noted, a spirited, helpful employee base is another critical factor with service, and the two are closely linked, Temkin says.

"If people aren't happy at work, there's no way they're going to be happy with customers," he says. "You can't have great customer service unless you have really engaged employees." Another important aspect, he adds, is what he describes as "purposeful leadership," meaning the example for how to treat customers starts in the executive suite. "If the leaders aren't clear about where they're going, and communicating why it's important to get there, then everything underneath them is going to be done inconsistently," he says.

Echoing that sentiment is Ty McMahan, the content director at StellaService, a firm that monitors online-retail service. "Those guys that continue to be at the top of our rankings are not shy about [saying] that they have built internally a culture of service," he says. "It starts at the top. It trickles down to the agents that are customer facing."

Service only part of the equation

Temkin Ratings reviewed 235 companies in 19 industries for its 2013 customer service report, and the category encompassing retailers was the second-highest scoring, behind only grocers. Ace Hardware, Dollar Tree and Costco led the way, while Wal-Mart, RadioShack and Apple Store were the lowest-rated in the retail arena, which comprised 42 chains.

VanAmburg's American Customer Satisfaction Index uses "service" as only one component toward valuing how pleased customers are after dealing with companies. Beyond service itself, the ACSI tries to capture input on product quality, value and other attributes to gauge the entirety of the experience.

The service part undoubtedly is more important to some industries than others, with retail being one where it matters considerably. VanAmburg says the level of competition plays a sizable role with regard to how seriously companies take this aspect of their business. For example, with a regional utility, you might pretty much have to take what you get, so these companies have no particular incentive to exceed expectation. But with retailers, they effectively have three legs to stand on -- product, price and service. If they can't beat their rivals on the first two, the third is likely their only shot at survival.

At the opposite end of the spectrum from Nordstrom, VanAmburg says, are companies like Wal-Mart (whose own rating trails the department and discount stores' industry norm in the ACSI's methodology). These chains concentrate more on keeping prices down. "By focusing on price, by necessity, you tend to have a lower level of customer service," he says. "You're simply not paying as many people."

What's the way to the top? One idea is to embrace failure. The best companies, he says, tend to actually encourage consumers to let them know when they aren't satisfied. That's "because the best companies understand that complaints are an opportunity."