Richard Lee, President of Elgin Technology Products, recently returned from a Technology

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Richard Lee, President of Elgin Technology Products, recently returned from a Technology

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Richard Lee, President of Elgin Technology Products, recently returned from a Technology Conference in downtown Chicago. As a result of talking with leaders of other companies, he is now considering establishing a tiered service system, an idea he shared with the manager of the Customer Service Department. Mr. Lee’s basic thought is to reward the customers who give Elgin Technology Products $100,000 worth of business with an end-of-year “thank you payment” that reflects a 5 percent discount on all yearly purchases. In addition, those customers would receive a commitment to next-day turnaround time on the resolution of all customer service problems. Moreover, the customers who purchase $500,000 or more annually would receive a 10 percent discount and a commitment to a four-hour resolution of customer service problems. Mr. Lee has requested that you and three other CSRs share your opinion and concerns regarding this decision.

1. Name some advantages of making the decision to use a tiered service approach at Elgin Technology
Products.
2. Name some disadvantages of making the decision to use a tiered service approach at Elgin Technology
Products.
3. Based upon your findings, would you endorse the decision to use a tiered service approach or not?

Explanation & AnswerSolution by a verified expert

1
Explanation
The benefits of tiered service approach are explained below:

According to the tiered service approach, when the customer purchases a specific amount of products or services (say worth $100,000 of products/services), that customer gets a five percent discount on annual purchases. In addition, that person may receive a turnaround time till the next day in resolving every kind of customer service issue. As a result, the customers get attracted and make more purchases of the products/services of Organization E, which eventually increases the sales of the organization. When sales increase, it results in maximization of profits of the firm along with guaranteed customer satisfaction.
The tired service approach introduced by Organization E also provides information regarding how to assign service time and other resources to different customers depending upon their special requirements. Information regarding allocating service time means that the approach provides information regarding which set of customers need to be served 24/7 and which customers need to be served on a weekly basis or daily basis depending upon their requirements. This service time allocation helps the organization in ensuring the smooth functioning of every operation within that organization.
Sample Response
Some of the benefits of using tiered service approach at Organization E are:

Increased sales and customer satisfaction.
Provide information on how to assign service time to different customers.

2
Explanation
The drawbacks of using the tiered service approach by Organization E can be explained as:

Under this approach, Organization E serves different customers according to their different needs and it becomes difficult for the organization to provide fair and encouraging services to all the customers in an equal manner. It means that, if a customer buys more of Organization E's products/services, that person will be rewarded accordingly for bringing in more money into the company and if another customer purchases fewer products/services of Organization E, that person may not be rewarded as per the tiered approach.
Organization E serves different customers based on different levels and at times it fails to develop different and specific guidelines for each level of customers in providing them with the required services. It means that, if organization E provides customer services to a customer 24/7, then it needs to create specific guidelines on what basis it serves that particular customer. If the organization serves the customers on a weekly basis, the guidelines for the same need to be mentioned in a separate manner to serve the customers effectively. Failure to develop such kind of criteria and parameters for different levels of customers can hinder the overall functioning of Organization E.
Another drawback of the tiered service approach is that it requires Organization E to retrain and re-educate all the employees to serve the customers effectively by using this new approach. As the employees are formally trained to serve the customers in a particular manner, it becomes difficult for the employees of Organization E to get used to the new skills and knowledge in utilizing the tire service approach to serve their customers. Some employees may be resistant to change and as a result, it hampers the overall operations of Organization E.
Sample Response
The drawbacks of using the tiered service approach by Organization E are:

The organization would have to differentiate its customer service based on customer purchases, which can restrict the organization from providing fair treatment to customers.
The organization needs to develop different guidelines to serve the different levels of customers and failure in making them can hamper organizational work.
The organization has to reskill customer service representatives for this new service approach and the representatives can be resistant to change.

3
Explanation
The evidence supporting the argument that an individual may affirm the decision to utilize a tiered service approach are:

The tiered service approach helps an individual to be loyal to that particular organization as it provides customer satisfaction to a greater extent by rewarding them for their huge purchases according to the standards set by the organization.
This service approach understands the potential value of the consumers and serves them accordingly under different levels. It identifies the unique needs of the customers and sets guidelines for serving the customers in a unique manner.
The evidence supporting the argument that an individual may not affirm the decision to utilize the tiered service approach are:

At times, the tiered service approach does not offer equal and supportive services to every customer at different levels because it emphasizes the volume of business purchased by the customers and rewards them accordingly.
The tiered service approach fails to develop specific parameters for different levels of customers in serving their unique needs. It also makes the customers feel like they are treated indifferently and do not acknowledge their needs in an effective manner.
Sample Response
The two sides of the argument are:

An individual may affirm the decision to utilize a tiered service approach because it helps the organization to satisfy the customer by rewarding them.
An individual may not affirm the decision to utilize a tiered service approach because by using this approach, the organization would have to differentiate its customer service for different customers as per their revenue generation.

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