There are two kinds of feedback: operational feedback and satisfaction/loyalty feedback. For operational feedback use mystery shopping. For satisfaction or loyalty feedback use customer surveys.

The question is not which one to use because they are two sides of the same coin. Both are needed. Customer surveys provide information about how customers feel about their experience, but provide little information about the process behind that experience. Mystery shopping on the other hand measures the processes that create the customer experience. The most important of these is the sales process.

Famed marketer Jack Trout says that service is a given – not a difference. Trout points to the work of Michael Porter, Professor of Business at Harvard University for the explanation as to why “better service,” or “better anything” for that matter, does not create competitive advantage.

Porter makes a clear distinction between what he calls, ”operational effectiveness” and “strategic positioning.” Operational effectiveness means performing the same things as your competitors, only better. You are running the same race.

Strategic positioning on the other hand means running a different race – one that you have set yourself up to win.

Curves for example runs a very different race to the average gym.

On the surface it would seem that when Curves started out in 1995 it was entering a saturated market. But now it is the world’s largest fitness franchise with more than 10,000 outlets. That’s a new opening every 12.2 hours!

So much for “saturation.”

The secret behind this staggering growth is not better customer service, but a different kind of service. Curves occupies a market position somewhere between the full service gym and exercise at home. Curves pulled customers from both by combining the convenience of home exercise with a supportive, female-only environment. They eliminated almost everything typically found in gyms (men, mirrors, hard-to-use equipment and long workouts).

You cannot win the game of business with “better.” You win by being different.

This series of articles explores the role of customer service in business strategy.

What went wrong at Nordstrom?

According to a study conducted at the University of Texas, “Nordstrom’s…problems (in part) stem(ed) from a poor choice of inventory which has alienated somewhat its fashion conscious customers ,”

and…

“Nordstrom’s weakness in spotting new fashion trends would be expected to have been particularly punishing since its customers are among the most fashion conscious of any store. ”

There you have it. Even legendary customer service did not protect their competitive position. Nordstrom’s problems were caused by not stocking the right product. And their customers did not hesitate to defect the instant they could not get what they wanted.

This series of articles explores the role of customer service in business strategy.

If great customer service does create competitive advantage then we should see increased sales in those businesses rated highly for service excellence. We should also see improved profits, and in the case of public companies, a growing share price.

US-based retailer Nordstrom is arguably the most famous in the world for customer service. It’s the stuff of legend. But there has been at least one occasion when even Nordstrom could not make their fantastic customer service work.

According to marketer and author Jack Trout, Nordstrom’s service excellence did not save the legendary retailer from financial troubles. In “Differentiate or Die” Trout cites an article in Business Week published April 19th 1999. Entitled, “Great Service Wasn’t Enough,” the article points out that Nordstrom was experiencing, “weak sales growth,” disappointing profits” and a “volatile stock price” despite its legendary reputation for service.

It’s clear is that customer service on its own does not confer competitive advantage. Should you doubt it, ask yourself when you last heard someone say, “I’m going to the shops to get some service.”

This series of articles explores the role of customer service in competitive strategy.