Basic Customer Service and its Impact on Customer Retention

11 Pages Posted: 29 Sep 2011

See all articles by Krishna K. Havaldar

Krishna K. Havaldar

Alliance Business School

Jacob Alexander

Alliance Business School (ABS)

Mihir Dash

Alliance University - School of Business

Date Written: September 27, 2011

Abstract

The term ‘basic customer service’ encompasses those services that are provided to customers free of charge, along with the core product and/or service offering. The concept is similar to that of supplementary customer service, developed by Parashuraman (1998).

OBJECTIVES: The primary objectives of the present study are: To examine the characteristics of organizations providing superior basic customer service as opposed to organizations delivering inferior basic customer service, in terms of customer complaint handling systems and culture, and to analyze the impact of such basic customer service on customer retention.

METHODOLOGY: The study is based on primary data collection using a structured questionnaire from a sample of business organizations in Bangalore, India. The sample companies were elicited from a panel of consumers who were asked to identify organizations providing superior basic customer service as opposed to organizations delivering inferior basic customer service, and what elements distinguished these two groups.

RESULTS: Some of the indicative findings are: Organizations providing superior basic customer service had a higher frequency of daily reviewing of customer complaints (58.2%) than organizations delivering inferior basic customer service (43.9%), but this narrows down when considering weekly review (82.1% and 79.0%, respectively). Thus, establishing a proper and timely customer complaint review system would enable organizations to provide superior basic customer service.

Organizations providing superior basic customer service had inbuilt corrective processes and/or actions for handling customer complaints (88.1%), as opposed to organizations delivering inferior basic customer service (75.4%). Thus, instituting an inbuilt corrective process for handling customer complaints would definitely provide greater satisfaction to the stakeholders and would thereby enable organizations to provide superior basic customer service.

Organizations providing superior basic customer service had a higher frequency of informing customers regarding customer complaint resolution within a day (32.8%) than organizations delivering inferior basic customer service (24.3%), and this gap widens when considering weekly information (55.2% and 32.5%, respectively). Streamlining the process of informing customers on complaint resolution would further enable organizations to provide superior basic customer service.

Organizations providing superior basic customer service fostered a customer-centric culture amongst employees, and in many such organizations it was top management’s involvement through periodic review of customer complaints that made the difference. In particular, organizations providing superior basic customer service strongly believe that customer service must be backed with top management commitment, with full employee involvement.

Organizations providing superior basic customer service had a higher rate of customer retention (51.08%) than organizations delivering inferior basic customer service (33.18%). Of course, customer retention/repeat purchase varied considerably with core product/service; superior basic customer service contributed to customer retention by providing a solid foundation for customer relationship.

CONCLUSION: The study indicates that systems for frequent reviewing of customer complaints, with inbuilt corrective processes for handling customer complaints, and for providing adequate and timely information to customers on their complaints status, and a customer-centric organizational culture are crucial in delivering superior basic customer service, thereby enhancing customer retention and loyalty.

Keywords: basic customer service, customer complaint handling system, customer-centric organizational culture, customer retention

JEL Classification: M31

Suggested Citation

Havaldar, Krishna Keshav and Alexander, Jacob and Dash, Mihir, Basic Customer Service and its Impact on Customer Retention (September 27, 2011). Available at SSRN: https://ssrn.com/abstract=1934385 or http://dx.doi.org/10.2139/ssrn.1934385

Krishna Keshav Havaldar

Alliance Business School ( email )

Alliance University
Bangalore, 560076
India

Jacob Alexander

Alliance Business School (ABS) ( email )

Bangalore
India

Mihir Dash (Contact Author)

Alliance University - School of Business ( email )

Chikkahagade Cross,
Chandapura-Anekal Road, Anekal
Bangalore, Karnataka 562106
India
9945182465 (Phone)

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