Customer Service and Customer Relationship Management
This domain tests whether you can define service quality, handle a complaint correctly, and use customer data to keep buyers rather than only recruit them. Retailers spend far more to win a new customer than to retain an existing one, so retention and lifetime value are exam favourites.
Core concepts
- SERVQUAL five dimensions: reliability (doing what was promised), responsiveness, assurance (knowledge and courtesy), empathy, tangibles (store look, uniforms, signage). Reliability is weighted highest by customers.
- Moments of truth: billing queue, trial room, delivery, return desk, after-sales call.
- Complaint handling sequence: listen without interrupting, acknowledge, apologise for the experience, resolve or escalate with a time commitment, follow up.
- Service recovery paradox: a well-handled failure can leave a customer more loyal than before, but only if recovery is fast and fair.
- CRM tools: customer database, RFM segmentation (recency, frequency, monetary value), loyalty points, feedback forms, NPS, app-based offers.
- Customer lifetime value (CLV) = average basket x visits per year x gross margin % x expected years of retention.
Worked example
A shopper spends Rs 900 per visit, visits 10 times a year, the store earns 22% gross margin, and average retention is 3 years. CLV = 900 x 10 x 0.22 x 3 = Rs 5,940. Using sales revenue (Rs 27,000) instead of margin overstates value nearly five times and loses the mark.
Traps
- Treating CLV as revenue rather than gross margin.
- Quoting ten SERVQUAL dimensions; the refined model has five.
- Debating with an angry customer instead of acknowledging and resolving.
- Assuming a loyalty card alone creates loyalty without service quality behind it.