Introduction and service Background of Home Depot
Home Depot Inc has grown immensely since its commencement back in the 1970’s when it was a small organization founded by three business executives who had left Handy Dan Stores to start their own home appliance service delivery company. Back then the company had only one store and annual earnings of $ 23M.
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But through good management and efficiency, the company has grown into one of the largest vendor and installer of home improvement appliances serving individuals and professional customers.
The company’s founders retired back in the year 2000 after opening the 1000th store and Bob Nardelli was appointed C.E.O. This move has contributed a lot to the success of the company because since then the company has even performed better.
The new C.E.O has overseen the opening of over 900 stores and currently the organization has over 2200 stores across the United States of America.
The home improvement retailer is now among the top 3 retailers in the world following Wal-Mart, but it is the America’s largest Home Improvement appliance and service selling company in the United States of America, the company is now a home appliance service company helping build beautiful homes across America, Canada and Mexico.
The company has experienced profit growth every year since 2000-2005; the profits have grown from $45.7B in 2000 to over $81B. Despite the value of its shares doing poorly in the NYSE, the company has improved its earnings per share from $1.10 to $2.75 therefore pleasing shareholders and currently the company has paid out close to $ 13B in cumulative earnings back to its shareholders.
Besides this, the company’s operating margin has also grown from 9.2 % to 11.5% thereby indicating that the company is quite healthy and is performing well. The company has over 300,000 employees on its payroll to ensure that the company is able to cater for its customers especially when it comes to superior service delivery.
The efforts of former C.E.O, Bob Nardelli, have to be appreciated since he has used all his experience and skills in his position to ensure that the company continues to operate on a path which allows it to grow in both size and revenue by catering for the needs of their customer base and offering a lot of competition to rivals such as Wal-Mart by building stores and Home depot centers that are spacious and well designed.
The decision to open the Home depot online business has also played a big role in ensuring dominance of the retailer.
Home Depot Inc is a well established company that aims to provide its customers with the highest quality home improvement products and high quality service (Home Depot Inc).
The slogan, “improve everything we touch,” is a clear indication of the customer experience that is part of the service delivery strategy that Home Depot wants its entire customers to experience as soon as they enter in the premises of the organization to purchase products from their retail centers all over America (Kotler, 167).
The company takes its customers seriously and hopes to offer solutions to their daily needs by providing services that will improve the homes and lives of their customers. This mission has been relevant to the current performance and the vision of the company is to become the best retail company of this millennium with superior service delivery.
Home Depot has most of its services rooted in the service industry; the organization desires to be one of the biggest participants in the retail industry in this millennium and also aims to realize a rise in its market share by acquiring other companies using an aggressive business strategy.
The company has ambitions to maintain an annual growth in sales of between 9-12% by the year 2012. Additionally, the company aims to increase its earnings per share for its equity owners to between 10-14% by the year 2012 by growing its service delivery to its target audience.
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The company believes that its survival is not the only objective but it is important for the company to grow and acquire other new companies such as Hughes Supplies to increase its dominance in the retail industry. Furthermore, the company intends to pen close to 400-500 stores in various regions of the world by the end of 2012 despite the indication that the market is saturating.
Other objectives of the company include increasing cumulative operating cash flow to $50b, cumulative capital expenditure to $17-20b and grow their supply sales to $23-27b (Home Depot Inc).The stores believe that their targets can be met if employees spend approximately 70% of their working hours on the selling floor and expanding their markets.
Home Depot uses an aggressive strategy which aims at sustaining the company’s growth. The strategy is known as the 3E’s strategy which involves extending business, expanding the market and enhancing the core. This strategy is effective as besides guaranteeing its growth it also ensures that the quality of service and value delivered to customers increase as the company expands (Home Depot Inc).
The company’s policy revolves around its clientele and the need to enhance the customer experience is fundamental to success and for that reason the company has a policy that instructs its staff to spend close to 70% of total work time on the selling floor and performing customer service activities because this way the needs of the current consumers and targeted consumers can be catered for and the customers are most likely to have the complete customer experience (Kotler, 239; Home Depot Inc).
Figure 1 A diagrammatic representation of the full elements included in a product
Services delivered by Home Depot are valuable to their clientele and this is why the organization has been able to get a lot of positive reviews from numerous quarters and their customers have grown in number (Home Depot Inc).
The wide variety of the services is offered by the organization and these include mostly services which complement their product offering. Customers usually desire not only to purchase the core product but services accompanying the product is very important especially because home appliances require some level of expertise especially when it comes to installation.
When customers purchase home appliances such as tools, hardware, lumber, building materials, paint, plumbing, flooring and garden supplies, they may require expertise services from the staff before they gain the skills to use the appliances.
This is why home depot offers “ installation services, advice, clinics, contractor services, credit center, delivery services, design services, home services, import/export services, moving services, tool rental, and truck rental this way a holistic customer satisfaction dimension is achieved” (Kotler, 110).
Service process structure, structural alternatives, technology, standardization, co-production, High vs. Low contact
The corporate structure and the customer service process structure cannot be separated unlike long ago where the customer service delivery process structure of the Home Depot was reportedly chaotic before the arrival of Bob Nardelli, the former C.E.O who retired in 2007.
The current structure is managed according to regions such as south, south east, west, east, north and Midwest, whereby each store has its own overall manager and functional level managers. The regional managers serve as head of strategy and are responsible for customer service despite that fact that they have other customer service department managers and departments within their branches.
This structure has ensured efficiency unlike beforehand where management was fragmented and decentralized hence the current management system allows its managers to communicate directly with the top management team thus enabling the organization respond appropriately to the needs of the customers (Kotler, 229).
The former C.E.O, Bob Nardelli, did set expectations that up to date play a major role in encouraging every manager to achieve the optimal output and deliver results furthermore all employees are required to spend some time on the selling floor in order to ensure that the needs of customers are catered for in order to ensure that customer satisfaction ratings go up.
This policy put into in place by the C.E.O has fostered the culture of collective responsibility as far as issues of customer service are concerned it is not only the duty of regional managers, general managers and functional area managers within the stores but also a responsibility of the lowest level of staff within the organization.
Table1.The Service Process Structure of Home Depot
This referral system of customer service can take a long time and at times can consume a lot of time especially when low staff employees lack the capacity to solve problems and hence send customers to the next level of the hierarchy.
This can thereby be replaced by specialized customer care departments or booths that have fully trained customer care experts to respond to specific product needs of the customers (Kotler, 179; Porter, 17).
Illustration: Home depots superior customer service techniques are part of the key competencies that have contributed to the organization’s success
Home depot’s customer service policy aims to ensure that the needs and queries of customers are resolved in the shortest time frame possible. Service process structure of Home Depot aims to provide the maximum customer experience by providing services that are considered of high quality and at the same time affordable.
The entire sales service engineering process of Home Depot aims to respond to the needs of their customers by enabling them get high quality assistance as far as pre-purchase and post-purchase queries such as planning, installation, training, trouble shooting, repairs, product upgrading and discarding of products are concerned.
The management of Home Depot centre believes that their customer care policy offers them an opportunity to form relationships with their clients and therefore even improve thus empowering them.
Empowered customers are more likely to engage themselves in the process of co-production of services and this reduces the workload that the staffs of Home Depot are most likely to face if they were dealing with underpowered clients (Worthington & Britton 45).
The top management regularly organizes seminars, workshops and training opportunities which are very crucial to empowering employees and standardizing the delivery of service (Kourdi, 43).
The failure of offering standardized service delivery can at times be very costly and this is why employees of Home Depot care are given strict guidelines under which they can use to deal with both easy and hard clients.
The entire sales engineering process of Home Depot has enabled different employees to operate with a standardized approach which enables them to treat the needs and demands of all their clients within a reasonable time frame using high degrees of etiquette and friendliness (Kotler, 334).
This fact has contributed to the high rate of customer retention and repeated purchases due to the fact that some sort of intimacy has arisen between the customers of the organization and the organization itself (Worthington & Britton 57).
Illustration: A model representing careful planning that has been used to develop the Customer service policies at the Home Depot
Marketing Guru, Kotler, (44) insists that high quality customer care is never accidental but rather a product of vigorous and continuous planning programs that are initiated by top management and customer care staff within the organization.
The Home Depot has put in place the necessary Information Communication Technology (ICT) structure that has assisted the organization towards ensuring that they can gather all the necessary information which can be used to cater for their information needs.
Model customer care departments and procedures are a result of goods planning and good planning cannot occur if an organization does not have the necessary information. The use of Information technology in this case has played a big role in the process by assisting customers become better co producers (Kotler, 269; Worthington & Britton 164).
This is because the use of Email, websites and customer care call centers has made it possible for the organization to interact with its clients at arm’s length. The technological environment in North America is becoming more advanced daily and Home Depot Inc has not been left behind. The organization has installed various technologies to cater for their business needs.
The corporation has installed the most modern bar-coding technologies and UNIX servers and in this way, the organization is able to take care of inventory, financial accounting and also record customer needs accurately.
Previously, when technology was an obstacle to corporations poor inventory management increased companies costs by interfering especially with customer care processes within the organization. The Home Depot management has put in place an additional I.T department in Texas to guarantee that the corporation runs efficiently and avoid extra costs due to poor business practices.
This center has played a big role towards ensuring that their client’s needs are recorded and appropriate strategic responses are formulated hence improving customer care within the organization. Moreover, the corporation has installed back end scanning technology and upgraded call centre technology in order to support various processes within the organization (Worthington & Britton 143).
These actions have made sure that all transactions are recorded and that customer queries are recorded and queued so that customer care personnel can respond to them in the shortest time frame possible (Campbell et al 142).
Unlike long ago where all service delivery programs were characterized by high levels of contact this has drastically changed and now when customers have queries it is not a must for them to be physically present at the premises of the Home Depot to raise their queries or even conduct business but they can do this at the comfort of their homes by ordering online and asking for more specified customized services.
This way if there are more low contact services transactions then queuing and overcrowding at the stores are consequentially reduced saving costs in the long run for the organization (Porter, 88).
Service blueprint, lines of visibility, interaction, on-stage and back-stage interaction failure points and poka-yokes
Home Depot understands that it deals with heterogeneous clientele and every client has his/her own needs, wants and desires but the overall aim of their customer service charter is to offer lasting solutions to their clientele in the shortest time frame possible (Kotler, 156). The customer service strategy of the Home Depot aims to foster loyalty and repeated purchase through ensuring high levels of satisfaction within customers.
The staff are rigorously trained and given operational policies to deal with both simple and difficult clientele with the aim of enhancing customer satisfaction.
The customer service department has adopted a flat structure and incorporated the use of information communication technology in order to ensure that the organization is able to communicate efficiently and effectively at high speeds to resolve customer needs as soon as they arise (Worthington & Britton 77).
The organization has made it mandatory for every individual within the organization to spend some time on the retail floor and interact with customers and hence this has contributed a lot towards developing an organization that is holistic when it comes to customer service matters.
The main pillars of the strategy that is used by the Home depot include staying in touch with the needs and demands of customers and this is achieved by strategic gathering of data which is stored in data warehouses. This data is used by strategy formulation experts who are specialists in customer service to understand and predict customer behavior.
Consumer behavior is a discipline anchored in understanding the needs, perceptions, tastes, preferences, attitudes and other forms of consumer behavior (Wheelen & Hunger, 411). The output of this process is used to develop the most appropriate training programs of the employees which in turn empower employees once they interact with customers during the moment of truth.
Home depots customer service policy is hence developed from predictions that emanate from their information communication technology department and therefore the staff have undergone various simulations that enable them enter into most probable question and answer scenario sessions that may involve potential customers (Home Depot Inc).
The customer service strategy blue print demands that all organizational employees aim to create great service delivery priorities.
Therefore, the staff is required to be smart, smiling and polite when dealing with clients. Dealing with clients with the highest level of etiquette enables staff to avoid confrontational instances that may pose a bad image on the organization. Moreover, when customer service and clientele argue or conflict negatively then a lot of time is more likely to be lost.
Illustration: The customer relationship management process that is part of the customer service blue print
Home Depot Inc values all of its customers and it uses a sales engineering process to develop the most appropriate customer relationship management program that allows the organization to get closer and more personal with some of its most important clients.
Customer relationship management is the backbone of The Home Depot center’s customer service strategy because it aims to reduce order processing/transaction time, this way the problem of long queue that arises in the process of service delivery can be reduced easily hence improving the customer experience.
In order to shorten the time frame of the customer and organization interaction the Home depot center has automated some processes by encouraging customers to carry out their orders online and hence reduce instances of long queues thereby hastening the process of service delivery.
The customer care call centre belonging to the Home depot center allows the organization to be able to interact with its clients in real time (on stage) or take down their details search for their solutions and contact them at later times in order to offer them solutions. The web angle and internet of customer care also offers a venue under which the organization can offer long lasting solutions to complex customer problems.
The current problem with the customer service department is the problem of queuing. The Home Depot has a large number of customers who have problems ranging from simple to very complex problems and this therefore increases the processing time of the customer service department (Wheelen & Hunger, 304).
The high level of queuing especially during peak season ends up annoying some customers who assume that the organization is ignoring their needs/queries and complaints. Therefore the Home Dept should aim to open a more efficient and effective customer care centre that can dedicate all its efforts exclusively towards responding to the needs of clients.
The customer care complex can be seasonal but it will serve as a failsafe method for which the organization can be able to ensure that incase of overloading customer service tasks run smoothly.
The strategy taken by Home Depot to manage their, delivery systems, facility design, location selection, capacity planning, service encounter, quality management, information management
The Home Depot centre occupies over 105,000 ft² (9,755 m²) in warehouse floor space with its megastores operating in larger facilities with its largest store in New Jersey occupying over 200,000 square feet (Home Depot Inc). Every store/warehouse chosen by the company is not accidentally chosen but careful planning is usually common in all location decisions.
Key location decisions are made by marketers and population statistics experts who chose areas which are most likely to choose locations that are considered highly attractive in terms of security, consumer traffic and economic parameters.
This technique of choosing locations has enabled the organization open stores at very strategic locations within the United States, Mexico and Canada and this has assisted the organization maximize revenues and grow their business portfolio and expand their business (Home Depot Inc).
Basically, the location decision has enable Home Depot move closer to their prospective clients and address their needs adequately. Using particular traffic forecasts that are linked to their location decisions has enabled the organization to perform adequate capacity planning.
This has enabled the organization match consumer needs with their provisions through this has not been easy due to higher levels of customers which has increased their demand and led to long queues often.
But in order to deliver services the organization in conjunction with their information technology department has been able to adequately develop delivery systems that enable service delivery be queued appropriately in order to deliver services in good time and condition.
The organization has over time increased the number of suppliers that it has and this has enabled the organization to be able to be able to maintain high levels of quality supplies at relatively lower pricing.
The high variety of brands in the shelves of Home Depot enables customers to choose products from wide variety of product and suppliers are hence forced to produce products that are considered of high quality this way the suppliers are forced to produce highly attractive products that are of high quality.
Moreover the Home Depot use a last in first out inventory system which ensures that products that are on the shelves follow a queue that is directly related to the time which they arrived at their stores.
When dealing with obsolescence and redundancy of stock the organization has a quality control department that is charged with the responsibility inspecting and verifying the quality of goods right before they reach the shelves for customers to purchase (Wheelen & Hunger, 338).
Every piece of inventory is bar-coded and stored at the organization n data base this way the organization is able to account for all items which are defective or considered as unsuitable following customer complaints.
By keeping accurate records and supplying information to all employees within the organization a total quality management system is used to ensure that employees communicate the message of quality management especially when interacting with customers on the floor of the retail centers (Wheelen & Hunger 122).
Suggestions for improving and redesigning the services/ interface
Home Depot is a home appliance retail and interacts with customers to ensure that they are able to understand their products and if necessary install or even know how to use them. Home Depot Inc serves millions of customers across the Americas. The organization serves the do-it-yourself market, do-it-for-me market and the professional customers (Kotler 244).
All this clients have different needs and are considered important to the organization and thus the organization has customized service delivery in order to fit the needs and desires of each customer segment.
The organization should therefore aim to expand their existing customer services department by dedicating more resources to this business department this way the organization will be able to deliver services efficiently and effectively without delay or compromise in quality (Wheelen & Hunger 78).
The service delivery process should be upgraded to encourage customers to carry out business transactions over the net and having their goods delivered to their door steps upon agreement. Additionally the organization should improve their capacity planning in order to ensure that the retail center can be able to respond to the needs of their customers as soon as they arise.
The customer service practices of Home Depot Inc are good but a lot can be done in order to ensure that the organization is able get closer and to respond to the needs of their clients as soon as they occur. Delivery of high quality services is very important and Home Depot has ensured that it makes good lasting impressions on their customers by enhancing good customer experiences.
The company should initiate programs that will incorporate the opinions of the lowest level of employees, customers and aim to improve service delivery within the organization. Good customer service is an ingredient of creating intimacy with customers and thereby cultivating customer loyalty which is very important to organizations.
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