Serving Customers for Long-Term Success

In a commercial landscape marked by volatility and uncertainty, the old rules of strategic advantage are being re-written in front of us. One of the big shifts, reflected as the first point of many company Beliefs, is that customers determine success — higher quality service can be a competitive edge, so long as service is tuned to longer-term objectives.

That is what three professors at Harvard Business School identified in a study of more than 80,000 retail banking customers in more than 600 geographic markets over a five-year period. Through this detailed analysis of quality of service and customer defection, HBS Profs Frances X. Frei, Ryan W. Buell, and Dennis Campbell explain that there is a “positive relationship between the relative level of service quality sustained by a firm in a given market and the profitability of customers it attracts and retains over time”. In other words, there are long-run effects of service positioning: organizations that focus on delivering and sustaining higher quality service, over time, outperform their peers.

Prof Frei adds a few more important caveats to their research on serving customers and sustaining long-term success in this 16-minute video. She summarizes her four main points in the first three minutes, and these are:
(1) In order to be great, you have to be courageous to choose the trade-off (“the well intentioned desire to be great at everything is precisely what leads to exhausted mediocrity” and is also “what will stop us from dominating the industry.”)
(2) It costs money to deliver service excellence — you need to identify means to assure steady revenue to sustain this service
(3) You need to set up your team members for service success (“design jobs for the team members you have, not the team members you wish you have”)
(4) You need to manage and train your customers along the way

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Among her examples are Commerce Bank, Southwest Airlines, Walmart. In the end, Prof Frei says you have to be really smart about which elements are critical to your customers and your strategy.