Uncommon Service: How To Win by Putting Customers at The Core of Your Business

Uncommon Service
How to Win by Putting Customers at the Core of

Your Business
© Frances X. Frei 1
The Four Service Truths
Create value for customers, employees, and shareholders.
Funding Someone has to pay

Mechanism for it
Service Employee It’s not your

Offering Management System employees fault
You can’t be good at

everything Customer You must manage
Management System your customers
Funding
Mechanism
Service Offering Service Employee

Offering Mgmt System
Customer
Mgmt System
Conventional Wisdom in Retail Banking
• Growth comes from attractive rates or acquiring other banks
• Commerce offers the worst rates, avoids acquisitions, yet
became the fastest growing bank in the US…
Funding
Mechanism
Commerce Bank: Hard-Coded Tradeoffs Service Employee

Customer
Mgmt System
Convenient
service
Better customer
interactions
Funding
Mechanism

Customer
Mgmt System
Spending money creates

permits on service features
Lower deposit Convenient

rates service
Better customer
interactions
Funding
Mechanism

Customer
Mgmt System


rates service
Hire for attitude

& creates
permits
Train for service
Limited product Better customer

set interactions
Labor Reality
High $ $$
Aptitude
Low $
Low High
Attitude
Funding
Mechanism

Customer
Mgmt System
High $ $$
Aptitude
Low $
Low High
Attitude
Hire for attitude

& creates
permits
Train for service

set interactions
Funding
Mechanism

Customer
Mgmt System


rates service
Hire for attitude

& creates
permits
Train for service

set interactions
Funding
Mechanism
Commerce Bank Attribute Map Service Employee

Customer
Mgmt System
Most important Convenience


to target market
Customer
interactions 
…
Product range 
Least important
to target market Price 
1 2 3 4 5
Relative Performance of Firm
Funding
Mechanism
Southwest Attribute Map Service Employee

Customer
Most important Low prices Mgmt System
Full-
to SWA target service SWA
market Friendly service airline
Frequent
departures
On-time arrival
The bus
Fast transport
Convenient airports
Extensive network
Least important
to SWA target On-board
amenities
market
1 2 3 4 5
Funding
Mechanism
Wal-Mart Attribute Map Service Employee

Customer
Most important Low prices Mgmt System
Wal-Mart
to Wal-Mart
target market Selection across
categories
Rural convenience
Reliable prices
Merchandise
quality
Suburban
Sears
convenience
Selection within
categories
Least important Mom & Pop
to Wal-Mart Sales help
target market
Ambiance
1 2 3 4 5
Funding
Mechanism
Organizations Have a Choice to Make Service Employee

Customer
Mgmt System
 
 

versus


1 2 3 4 5 1 2 3 4 5
Funding
Mechanism
Tradeoffs Service Employee

Customer
Mgmt System
Funding
Mechanism
Some key questions Service Employee

Customer
Mgmt System
• What do my customers value most?
• What would it take to reliably give them

those things?
• What would we need to give up in

return?
Funding
Mechanism
Identify Funding Mechanism Service Employee

Customer
Mgmt System
Charge customers extra for it - in a palatable way
Spending money
on creates
permits
service features

rates service
Funding
Mechanism
Progressive Insurance Service Employee

Customer
Mgmt System
Insurance Economics
• Firms lose money on insurance - make money investing pre-paid
premiums
• Customers are extremely price sensitive

Progressive Insurance
• Progressive spends more on service features, yet the company
makes more on insurance.
Framing: operational savings framed as value-added service

Funding
Mechanism
Progressive: Targeted Investments Service Employee

Customer
Mgmt System
Comparison Quote
• When consumers call Progressive, the company provides its quote
AND competitor quotes.
• Progressive is the lowest quote only half the time – when it is not
lowest, customers go elsewhere.
A if priced perfectly
True Risk
Competitor Premium
Leveraging Operations: value-added service layered on operational expertise
Funding
Mechanism

Customer
Mgmt System
Make cost reductions that also improve service
• Framing Operations: operational savings framed as value-
added service
• Leveraging Operations: value-added service layered on

operational expertise
Funding
Mechanism

Customer
Mgmt System
Make service improvements that also reduce cost
creates
permits Spending MORE
on Service
A BETTER
Spending LESS Service
on Marketing Experience
Customers RAVE
permits about Service results
Funding
Mechanism

Customer
Mgmt System
added service

Funding
Mechanism

Customer
Mgmt System
added service


Get customers to perform the work for you
Funding
Mechanism
Funding Mechanism Service Employee

Customer
Mgmt System
Can self-service lead to service excellence?
Yes, if…
readily available
Self-service full service
alternative
Funding
Mechanism

Customer
Mgmt System
• Can we make pricing more “palatable” for

customers?
• Can we reduce cost and improve service?
• Can we get clients to serve themselves

effectively?
Funding
Mechanism
Employee Management System Service Employee

Customer
Mgmt System
Hire for attitude

& creates
permits
Train for service

set interactions
Design a system where typical employees have a reasonable

chance of success
System = selection, training, job design, performance management
Diagnostic Questions:
Q: What makes employees reasonably able to achieve excellence?
Q: What makes employees reasonably motivated to achieve excellence?
Funding
Mechanism
Job Design at Large International Bank Service Employee

Customer
Mgmt System
A senior manager complained that no matter how the incentives
or training were changed, the customer experience in the branch
would not improve.
We suggested that the manager spend time working as a front-
line employee in the branch.
She reported back after her first day of work…
• “From the time the doors opened, customers were yelling at me.”
• “By the end of the day, I was yelling back.”
Funding
Mechanism
Job Design Common Culprit Service Employee

Customer
Mgmt System
Marketing Operations
Funding
Mechanism
Job Design Common Culprit Service Employee

Customer
Mgmt System
Operational
Complexity
level
Employee
Sophistication
time
Funding
Mechanism
The Operational Complexity Gap Service Employee

Customer
Mgmt System
Start here! Do not start here!
High
Operational
Complexity
Low
Low High
Direct Value-Add to Customers
Funding
Some key questions

Mechanism
Service Employee
Customer
Mgmt System
• Are my people set up to excel casually, as an

everyday routine?
• Are the promises we are making to customers

realistic of our operating abilities?
• Are there opportunities to reduce

unproductive complexity?
Funding
Mechanism
Customer Management System Service Employee

Customer
Mgmt System
Funding
Mechanism
Influence in Action Service Employee

Customer
Mgmt System
Funding
Mechanism
Influence in Action Service Employee

Customer
Mgmt System
Funding
Mechanism

Customer
Mgmt System
• How can customers help us to create more

value?
• How can we influence customers in a way

that enhances their experience?
Uncommon Service
Service Offering Workshop
Workshop Assignment
For an important target market…

• Diagnostic. Create an Attribute Map.
Service Offering Diagnostic
Brainstorm which attributes are important from the customer’s

perspective.
Convert the attribute cloud into prioritized list from the

customer’s perspective
1. Pleasant interaction
2. Quality
3. Access
4. Speed
5. Low Price
6. Ease of use
Step 1
Most important to Wal- Low prices

Mart target market
Selection across
categories
Rural
convenience
Reliable prices
Merchandise
quality
Suburban
convenience
Selection within
categories
Sales help
Least important to Wal-
Mart target market Ambiance 1 2 3 4 5

Step 1 Step 2

Mart target market
Wal-Mart
Selection across
categories
Rural
convenience
Reliable prices
Merchandise
quality
Suburban
convenience
Selection within
categories
Sales help

Step 1 Step 3 Step 2

Mart target market
Wal-Mart
Selection across
categories
Rural
convenience
Reliable prices
Merchandise
quality
Suburban Sears
convenience
Selection within
categories
Mom & Pop
Sales help

Workshop Assignment

• Improvement. Identify an improvement
opportunity through shifting resources or
influencing preferences.
Operational Improvement: Shifting Resources
Low prices
Selection across
… to more highly categories
appreciated attributes Rural
convenience
Reliable prices
Merchandise
quality
Suburban Sears
convenience
Where possible… Selection within
… shift resources from categories
underappreciated Mom & Pop
attributes… Sales help
Ambiance 1 2 3 4 5

Furniture Attribute Map
IKEA Traditional
Most important to Durability Retailers
furniture buyers
Assembly
Sales assistance
Location
Least important to
furniture buyers
1 2 3 4 5
IKEA Attribute Map
Most important to
IKEA target
market
Durability IKEA Traditional

Retailers
Assembly
Sales assistance
Least important to
IKEA target Location
market
1 2 3 4 5
IKEA Attribute Map
Most important to Traditional IKEA

Ability to change!
IKEA target Retailers
market
Fun project!
Independence!
A destination!
Durability IKEA Traditional

Retailers
Assembly
Sales assistance
Least important to
IKEA target Location
market
1 2 3 4 5
Improvement Type #1: Shifting Resources
Target Market: _______________ Team: _______________
Low prices
Wal-Mart
Selection across
categories
Rural
convenience
Reliable prices
Merchandise
quality
Suburban Sears
convenience
Selection within
categories
Mom & Pop
Sales help
Ambiance 1 2 3 4 5

Improvement Type #2: Influencing Preferences
Target Market: _______________ Team: _______________
Low prices
Wal-Mart
Selection across
categories
Rural
convenience
Reliable prices
Merchandise
quality
Suburban Sears
convenience
Selection within
categories
Mom & Pop
Sales help
Ambiance 1 2 3 4 5

Workshop Assignment

• Improvement. Identify an improvement
opportunity through shifting resources or
influencing preferences.
Classic Map #1. Need a Wedge
Quality of
Most important installation
 *
to target market
Low Price * 
…
Responsiveness  *
…
Courteous &
Professional *
Least important Pro-active

to target market follow-up
*
1 2 3 4 5
Classic Map #2. Wasted Wedge
Quality of
Most important installation
 *
to target market
Low Price * 
…
…
Courteous &
Professional *

* 
1 2 3 4 5
Classic Map #3. Wasted Profit
Quality of
Most important installation * 
to target market
Low Price * 
…
…
Courteous &
Professional * 

* 
1 2 3 4 5
Excellence = Design * Culture
Steinway Pianos
Too late…
Quality
“Ouch! Let’s get serious”
“It’s ok, we’re a segmented market”
© Frances X. Frei Volume 54

Focus on Rate of Improvement
Company A
At any point in time,
benchmarks of absolute difference
can be very misleading for
Company A
Company B
Quality
Time
Yamaha and Steinway pianos

Toyota and GM autos
Honda/Suzuki and Triumph motorcycles
Swiss and Hamitar watches
Korean and Japanese shipbuilders
Rock and Pond (A)
Point Point
A B
Rock and Pond (A)
Point Point
A B
Rock and Pond (A)
Point Point
A B
Rock and Pond (A)
Point Point
A B
Continue to add water, and crossings will be possible. Or…
Rock and Pond (B)
Point Point
A B
Rock and Pond (B)
Point Point
A B
Rock and Pond (B)
Point Point
A B
Rock and Pond (B)
Point Point
A B
Rock and Pond (B)
Point Point
A B
Rock and Pond (B)
Point Point
A B
Remove as much water as possible and then cross.
Further Explanation
Contact Information
My Contact info
• Morgan Hall 411, Harvard Business School
• 617.495.7968
• ffrei@hbs.edu
For Advisory Services

• Lori Trahan: ltrahan@concire.com, 978.771.8994
Root Cause Analysis
We’re
having quality problems. Why are we having quality
problems?
• Because people are not performing well. Why?
• Because they’re not being trained. Why?
• Because we’re hiring them too fast to keep up with the training.
Why?
• Because we didn’t forecast demand well.
Lessons from Steinway and Yamaha
Focus on rate of improvement

Relentless pursuit of surfacing problems
Incredible humility in addressing problems
Multi-Focused Organization
Funding Funding
Mechanism Mechanism
Service Employee Service Employee

Offering Mgmt System Offering Mgmt System
Customer Customer
Mgmt System Mgmt System
Human resource processing

Service model Executive training
Finance
Purchasing
Shared services
IT
…
{economies of scale}
{economies of experience}
Responding to Focus
Customers
Employees
Products
Specific things to specific people All things to all people
Incumbent Response: 4 Stages of Strategic Grief
Dismissal of new entrant as non-threat

Sadness at defection of profitable customers
Relief at realization that only one segment is attacked
Dread as larger threat reveals itself
Customers
Employees
Products
Specific things to specific people All things to all people
What Happens When Focused Firms Enter?
Customers
Employees
Products
Successful Incumbent Response
Multi-Focused Firm
Human resource processing

Service model Executive training
Finance
Shared services Purchasing
IT
…
{economies of scale}
{economies of experience}
Multi-Focused Examples
Yum! Brands Omnicom
Service model Service model
Shared services Shared services

General Electric
… …
Service model
Shared services
Multi-Focused Organization
Funding Funding
Mechanism Mechanism
Service Employee Service Employee

Offering Mgmt System Offering Mgmt System
Customer Customer
Mgmt System Mgmt System
Service model
Shared services
Funding
Mechanism
Zappos Attribute Map Service Employee

Other online retailer Customer
Most important Available in-stock Mgmt System
Zappos
to Zappos target
market Overnight delivery
Free returns 365d

Size selection
24/7 call center
Reliable inventory
Look and feel

Physical shoe store
Ability to try on
and help with fit
Least important Ability to wear

to Zappos target same day
market
Low Prices
1 2 3 4 5
Funding
Mechanism

Customer
Mgmt System
creates
permits Spending MORE
on Service
A BETTER
Spending LESS Service
on Marketing Experience
Customers RAVE
permits about Service results
Funding
Mechanism

Customer
Mgmt System
added service


Get customers to perform the work for you
Kiva Attribute Map
Transparency and
Most important control for donors 
to target market
Decisions rights for 
clients
…
Performance 
Management
…

Donor education
Least important
to target market Gestures of gratitude 
towards donors
1 2 3 4 5

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Uncommon Service

How to Win by Putting Customers at the Core of

Create value for customers, employees, and shareholders.

Funding Someone has to pay

Service Employee It’s not your

You can’t be good at

Service Offering Service Employee

Commerce Bank: Hard-Coded Tradeoffs Service Employee

Commerce Bank: Hard-Coded Tradeoffs Service Employee

Spending money creates

Lower deposit Convenient

Commerce Bank: Hard-Coded Tradeoffs Service Employee

Spending money creates

Lower deposit Convenient

Hire for attitude

Limited product Better customer

Commerce Bank: Hard-Coded Tradeoffs Service Employee

Hire for attitude

Limited product Better customer

Commerce Bank: Hard-Coded Tradeoffs Service Employee

Spending money creates

Lower deposit Convenient

Hire for attitude

Limited product Better customer

Commerce Bank Attribute Map Service Employee

Most important Convenience

Southwest Attribute Map Service Employee

Wal-Mart Attribute Map Service Employee

Most important Low prices Mgmt System

Organizations Have a Choice to Make Service Employee

Tradeoffs Service Employee

Some key questions Service Employee

• What do my customers value most?

• What would it take to reliably give them

• What would we need to give up in

Identify Funding Mechanism Service Employee

Lower deposit Convenient

Progressive Insurance Service Employee

• Customers are extremely price sensitive

Framing: operational savings framed as value-added service

Progressive: Targeted Investments Service Employee

Identify Funding Mechanism Service Employee

• Leveraging Operations: value-added service layered on

Identify Funding Mechanism Service Employee

Identify Funding Mechanism Service Employee

• Leveraging Operations: value-added service layered on

Make service improvements that also reduce cost

Identify Funding Mechanism Service Employee

• Leveraging Operations: value-added service layered on

Make service improvements that also reduce cost

Funding Mechanism Service Employee

Can self-service lead to service excellence?

Some key questions Service Employee

• Can we make pricing more “palatable” for

• Can we reduce cost and improve service?

• Can we get clients to serve themselves

Employee Management System Service Employee

Hire for attitude

Limited product Better customer