The Association of Business Executives

QCF
Managing the Customer
Relationship
Suggested Answers

Unit Title: Managing the Customer Relationship

Unit Code: 5MCR

QCF Level: 5

Session: June 2013

STRUCTURE OF PAPER: Answer BOTH sections

SECTION A: Answer ALL FIVE questions Q1–Q5 8 marks

each
Maximum marks for Section A: 40 marks

SECTION B: Answer ANY THREE questions from Q6 to Q10 20 marks

each
Maximum marks for Section B: 60 marks

TOTAL MARKS AVAILABLE FOR THE PAPER 100 marks

SECTION A
Candidates must answer ALL FIVE questions in this section.
Each question carries 8 marks.
Section A is worth 40% of the total marks available for the paper.

Question 1

Q1 Describe two differences between the terms ‘customer’ and ‘user’.

(a)
‘Customers’ are people who pay for a product or service and also use the product
or service themselves.
‘Users’ are people who use a product or service without paying for it.

Maximum Marks for (a) 4 marks

Q1 With the world of toy retailing as the framework for your response, provide an
example that shows the differences between being a ‘customer’ and being a ‘user’.
(b)
A customer is a person who buys a toy for their personal use, e.g., a board game
or a train set.
A user is a child who is given a toy as a present and then plays with it.

Maximum Marks for (b) 4 marks

Total Maximum Marks for Q1 8 marks

Question 2

Q2 Outline two ways in which IT can make a significant contribution to efficient service
delivery. Use at least one example to support your answer.
(a)
 IT is chiefly an enabler.
 IT permits customer records to be retained in depth, including informal details.
 IT permits service to any individual customer to be delivered by a variety of staff
provided they have access to the IT information.
 IT is much faster than any other information system.

Maximum Marks for (a) 4 marks

Q2 People can be a major source of competitive advantage. Outline four

ways in which an organisation’s HRM policies can be used to help optimise the
(b)
performance and contribution of the workforce so far as customer service is concerned.

 Recruitment and selection: to identify people with appropriate attitudes and

capabilities for effective performance in service/support roles.
 Induction, learning, training, development schemes: to promote and further the
organisation’s service values and approaches.
 Reward and recognition systems: to acknowledge and celebrate success and
progress in the customer service arena.
 Performance management and appraisal: service priorities to be built into every
 aspect of these processes.

Maximum Marks for (b) 4 marks

Total Maximum Marks for Q2 8 marks

Question 3

Some authorities believe that customer power is increasing, whilst others suggest that it is
declining.

Q3 Identify and explain two factors in the macro-environment for customer service which
suggest that customer power is increasing.
(a)
Economic factors: increasing amounts of discretionary income.
Political influences: government legislation to promote competition and undermine
monopolies.
Social influences: higher levels of education, and impact of equal opportunities/diversity.
Technological influences: the Internet and e-commerce.
Legal influences: consumer protection, consumer ‘rights’, regulatory agencies.
Ethical and moral influences: media pressure on organisations that are thought to be
behaving badly (e.g., Ryanair).

Maximum Marks for (a) 4 marks

Q3 Identify and explain two factors in the macro-environment for customer service which
suggest that customer power is declining.
(b)
Economic influences: high unemployment and the recession.
Political influences: the impotence of the individual citizen.
Social influences: demographic developments reducing the power of older citizens.
Technological influences: undermining the independence of ‘technophobes’.
Legal influences: Health and Safety.
Ethical and moral influences: (some) customers increasingly act unethically and so do
(some) organisations.

Maximum Marks for (b) 4 marks

Total Maximum Marks for Q3 8 marks

Question 4

“Customer service is never going to be a priority for the public sector,” says the author of a recent
newspaper article, “because their ‘customers’ don’t have a choice: whether they like it or not, they
have to pay taxes. On the other hand, some argue that customer service in the private sector is no
better because companies are motivated by profit, not service.”

Q4 Indicate, with reasons, how far you agree with the view that customer service in the
public sector is likely to be poor because public sector ‘customers’ don’t have a choice.
(a)
 There is some truth in the proposition that even if a public-sector organisation
tries to create a veneer of service focus, both it and its ‘customers’ know that in
reality they are a monopoly provider.
 However, at least in the UK there are some public-sector agencies which do
work hard to achieve a service culture, as named above, and this has made a
significant difference to public attitudes about these agencies.
 Much depends on the attitudes of public-sector employees: many appear to
have joined the public sector for reasons that have little to do with service,
whatever may be the claims of their employers.

Maximum Marks for (a) 4 marks

Q4 Indicate, with reasons, how far you agree with the view that customer service in the
private sector will be poor because private companies are motivated by profit rather
(b)
than by service excellence.

 In reality, profit depends on customer recruitment, customer retention and

customer loyalty; for some businesses such customer behaviours are strongly
determined by the level of service supplied and not just by the price.
 Of course, there will be some businesses that focus exclusively on short-term
profit, and so pay little or no attention to customer service – and they can find
sufficient numbers of customers who will share such views and priorities.
 In reality, virtually all the world-class service providers are in the private sector:
knowing that your customers can go elsewhere if they wish is a wonderful
incentive to make sure that your service performance is at least acceptable.

Maximum Marks for (b) 4 marks

Total Maximum Marks for Q4 8 marks

Question 5
“If people in front-line customer service jobs experience stress, it’s because they’ve been wrongly
selected,” says one of the finance managers in your organisation.

Q5 Give two arguments for and two arguments against this view.

In favour of the view that poor selection is the sole or principal cause of stress in
customer-service jobs
 Recruitment and selection systems often conceal or disguise the real nature of
the work involved, or downplay the likelihood that ‘difficult’ customers will be
encountered.
 Some applicants may believe (wrongly) that even if the possibility of stress is
mentioned, they will not succumb.
Against the view that poor selection is the sole or principal cause of stress in customer-
service jobs
 The selection process cannot encompass every difficult situation that customer-
service staff may have to confront.
 The demands of the role may have changed since the time when staff were
originally selected (e.g., they may not be required to act more discretionally).

Total Maximum Marks for Q5 8 marks

SECTION B
Candidates must answer ANY THREE questions from this section.
Each question carries 20 marks.
Section B is worth 60% of the total marks available for the paper.

Question 6

You are employed as the Customer Service Manager for a chain of supermarkets which has previously paid
little attention to customers, but which is now losing business, market share and profitability. A new Chief
Executive Officer (CEO) has been appointed but has yet to decide how the company can be turned round
and restored to commercial health.

Q6 Explain, to your CEO, two reasons why poor customer service is so dangerous for a
supermarket company.
(a)
 Customers receiving poor service will defect to other suppliers.
 Customers will refuse to purchase anything from any of your stores (not just the one
in which they received poor service).
 They will spread the word about poor service to their personal networks, and your
reputation will be eroded very widely – they may even use Facebook or other
electronic media to spread critical comments (these ‘stories’ may be exaggerated
through constant repetition).

Marks for (a) 4 marks

Q6 Identify and explain two reasons why your company should recognise the importance of the
lifetime customer.
(b)
 Someone who becomes a supermarket customer at the age of 20 and spends £100
a week for the next 50 years will over that time have spent at least £250,000 (this
takes no account of inflation).
 Lifetime customers will automatically shop in your stores and will not be diverted to
competing companies no matter how attractive their ‘offers’.
 Loyal customers will forgive you when you make mistakes because they will see
such mistakes as an aberration from your normally high service standards.

Maximum Marks for (b) 6 marks

Q6 Outline and justify three reasons why your company should aim to achieve a reputation for
world-class service excellence. Reinforce your answer with one example of a named
(c)
organisation which already enjoys the benefit of a reputation for world-class service
excellence.

 A reputation for world-class service excellence creates an enormously valuable

competitive advantage.
 The attraction of being world-class is that it is not easy for competitors to follow you
by simply imitating your ingredients.
 Such a reputation means that new customers are attracted and existing customers
continue to give you their business, perhaps without considering the options
available to them elsewhere.
 Being ‘world-class’ almost certainly enables you to be viewed as well as an
employer brand or an employer of choice, thus easing recruitment problems and
encouraging employee retention.
  Relevant instances could be: Singapore Airlines, Shangri-La Hotels, Tesco, First
Direct, The John Lewis Partnership, Timpson, or perhaps some local business
(known to the student).

Maximum Marks for (c) 10 marks

Total Maximum Marks for Q6 20 marks

Question 7

There are five major ways in which an organisation’s strategy can influence its customer service
performance:
 The degree to which there is positive service leadership from the top down.
 There is a culture founded on continuous improvement and relentless dissatisfaction with current
levels of performance.
 The organisation is structured in a way which encourages service excellence.
 The organisation promotes continuous technological innovation.
 There is a willingness to segment customers into separate groups and supply each group with
appropriate service support.

Q7 Select any four of the above and discuss what each means in practice. Support your
answer with examples.

Positive service leadership

 Presence of a Big Idea, a mission, vision and core values.
 Examples: Nationwide, John Lewis, Tesco (balanced scorecard)
Continuous improvement culture
 No matter how successful the business, a constant desire to do better and to sustain
a momentum for improvement
 Often illustrated by moves to stay one step ahead of the customer (e.g., Steve Jobs
when asked what market research he had undertaken prior to introducing a new
product: “None – it’s not the job of the customer to know what he wants next”)
 Examples: SmithKline Beecham (“Simply Better”), Tesco
Organisation structure encouraging service excellence
 Flatter, decentralised and devolved hierarchies, with maximum room for autonomy
discretionary behaviour and organisational citizenship
 Existence of a ‘no blame’ philosophy which encourages risk-taking
Recognition of need for change and transformation (e.g., through e-service)
 Constant restlessness, search for new ideas and transformational innovation; not
complacent as a result of business success and profitability
 Challenges resulting from e-service technology (Amazon)
 Examples: Asda, John Lewis, Tesco
Segmentation of customers
 Recognition that not all customer are the same, and so different groups of customers
may want different things
 Examples: NatWest/RBS (different personal accounts); Tesco

Total Maximum Marks for Q7 20 marks

Question 8

“Many organisations are moving towards devolving responsibility and decision-making powers to front-line
staff who are responsible for dealing with customer complaints.” [Sarah Cook, 2011]

Q8 Identify and explain two advantages of devolving responsibility for handling customer
complaints to front-line staff.
(a)
 Apologising and owning the problem is what customers want – they don’t want to be
passed from pillar to post or made to feel guilty for complaining.
 If the complaint is dealt with by a front-line member of staff, it can be resolved
quickly – and again that is something the customer normally appreciates.
 Empowering front-line staff in this way is motivating for them – provided they are
sufficiently familiar with the organisation, its products and services.
 Example: AA staff are empowered to commit the organisation to pay the member up
to £100 where service has been poor.

Maximum Marks for (a) 4 marks

Q8 Identify two dangers of devolving responsibility for handling customer complaints directly to
front-line staff.
(b)
 Some front-line staff may make too many concessions to dissatisfied customers.
 Some front-line staff may befriend the customer to the point where they are disloyal
to the organisation (can be prevented or minimised by constant training and
performance review, including analysis of phone conversations).
 Some decisions made at this level can become precedents (can be prevented by the
use of ‘without prejudice’ clauses
 Not all front-line staff want to be empowered (can be prevented by suitable
recruitment, selection and training systems).

Maximum Marks for (b) 4 marks

Q8 A phrase frequently appearing in the customer service literature is the claim that “Every
complaint is a gift.” Explain and evaluate this statement, using relevant examples.
(c)
Explanation
 Dissatisfied customers may simply go somewhere else (defect) without the
organisation being able to put right their complaint – if they don’t actually complain.
 The act of complaining can tie the customer even more closely to the organisation –
certainly research shows that customers who’ve complained are more ‘loyal’ than
customers who receive first-rate service and therefore have no cause for complaint.
Examples
 British Airways has found that over 20% of its customers were dissatisfied with the
service they received, but did not complain.
 BA estimates that for every 1% of additional dissatisfied customers that the company
could get to complain, it could win back between £200,000 and £400,000 of
revenue.

Maximum Marks for (c) 12 marks

Total Maximum Marks for Q8 20 marks

Question 9

You are employed by a bookseller that has around 50 shops. Until now the company has relied upon customers
visiting its bookshops, but now the possibility of a transactional website is being discussed (that is, a
website enabling customers to order books direct).

Q9 Explain four arguments in favour of this suggestion.

(a)
 Books can be sold at lower prices because there are no overheads.
 Books can be purchased at any time of the day or night.
 The company will conceivably attract new customers.
 Some Internet customers will visit the shops and make purchases there as well.

Maximum Marks for (a) 8 marks

Q9 Explain four arguments against the suggestion.

(b)
 It will be difficult to establish a market position, given the dominance of Amazon
(however, some books sold through Amazon are actually marketed from other
bookshops).
 If books are sold at special Internet prices, the sales at the bookshops will be diluted.
Perhaps that will be acceptable, if it is the company’s ultimate intention to become
an Internet-only firm.
 Price becomes the dominant element in customer purchase decisions.
 Service levels have to be immaculate because the competition is only a click away
(and email is a very easy route to complaining).

Maximum Marks for (b) 8 marks

Q9 Indicate, with reasons, which view you will support when this proposal is discussed at a
management meeting.
(c)
Candidates should clearly indicate which view has been chosen and give reasons
supporting this view.

Maximum Marks for (c) 4 marks

Total Maximum Marks for Q9 20 marks

Question 10

“Experience shows that in order to engender a culture of customer care excellence managers must also
demonstrate leadership qualities.” [Sarah Cook, 2011]

Q10 Outline and justify five ways in which a customer service manager, acting as a manager,
can properly control his/her customer service staff team.
(a)
1. Planning: the organisation of work is systematically planned so that each member of
staff has enough to keep them occupied without being over-loaded.
2. Organising: staff are allocated to their roles in accordance with their experience,
training and capabilities.
3. Controlling: suitable supervision and monitoring programmes are created, with more
frequent interventions for less well-qualified staff and relatively infrequent interventions for
 those who have shown they can be trusted.
4. Directing: the manager makes it clear to everyone what is required from them.
5. Co-ordinating: the organisation of the function makes it possible for everyone to
understand what their contribution is supposed to be.
6. Reporting: the manager institutes regular appraisals and also reports upwards (typically
on a management-by-exception basis) to ensure that senior managers are fully aware of
what is going on.

Maximum Marks for (a) 10 marks

Q10 Outline and justify five ways in which a customer service manager, acting as a leader, can
inspire his/her customer service staff to deliver superb levels of service.
(b)
1. As far as possible, the manager uses the ‘AMO’ model (Ability, Motivation,
Opportunity) to create higher levels of employee commitment through job design.
2. There is a strong focus on ‘one-stop’ customer service, i.e., front-line staff resolve
customer problems and queries themselves – with the application of discretionary
action and organisational citizenship behaviours.
3. The manager regularly and frequently consults with his ‘team’ (and he/she uses the
word ‘team’ a great deal).
4. All changes are discussed and agreed.
5. The manager “walks the talk” and gets to know all members of staff individually so
that he/she can address them by name and make discreet enquiries about their
private lives (without becoming ‘nosey’).
6. The manager sets challenging and transformational goals for the function.
7. The manager regularly and frequently praises staff and rewards them informally for
their successes and progress.

Maximum Marks for (b) 10 marks

Total Maximum Marks for Q10 20 marks