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Incentive Pay Programs For Customer Service Representatives

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Quality of Customer Service becomes critical for company's success on the market. If planed properly, incentive pay plans may increase customer service representatives' interest to providing better service to the customer. Specifics of Customer Service brings its difficulties to setting standards for quantity and quality measuring of the Customer Service productivity, as basics of incentive pay determination.

Customer Service definition and role in the business.

Customer Service topic is both easy and hard to research. It looks easy because everyone can tell that they know what Customer Service is. It is also hard because there is no academic definition of Customer Service, but at the same time there is a number of different meanings of this term for different people. According to the Barron's Business Dictionary (n.d.), customer service is "department or function of an organization that responds to inquiries or complaints from customers of that organization." Customer Service is an important part of the business strategy, as it's goal is ensuring that customer will be satisfied with the service or product and will come back to obtain new product or service from the organization, that means new sales and revenue increase for organization. According to Business Encyclopedia (n.d.), "building long-term relationships with customers has been given a high priority by the majority of America's most successful enterprises". As technology continues to develop very fast and become available for greater number of product manufactures, better customer service helps to attract and keep customer. "Customer Service can be defined as those activities that enhance or facilitate the purchase and use of product." (, n.d.).

According to Reece (n.d.) well-conceived service strategy includes three important elements. First is market research, devoted to discover what customer needs and wants. This research will also include review of what competitors offer to customers on the same market, including quantity and quality of the offers. Second element is a clear vision of the firms "reason for being", and this element is directly related to the company strategic goals. Third element is a list of clearly stated rules of the company to follow in order to achieve strategic goals. It is extremely important for employees and especially for Customer Service Representatives to know company rules, policies and allowances in going towards customer requests.

Broadly known meaning of Customer Service is a provision of service to customers before (information), during (sales) and after (support) a purchase. The type of the service or product provided and type of customers reached often predetermines the ways customer may obtain customer service from the provider. Some of such ways are named by Customer Relationship Management Resources website in their Customer Service definition. "Customer service and support is the part of a company's customer relationship management department that interacts with a customer for their immediate benefit, including components such as the contact center, the help desk, and the call management system." (, 2007)

Though call centers are just the part of the company's customer service system; they are the ones most of the customers call Customer Service. Call center is a frontline of the business customer service, if one is provided over the phone. Customer Service representative become the face of the company, that creates first impression about the company in general. Customer-friendly system with properly trained employees may become a huge part of the professional look and customer satisfaction guarantee of the company. Unfortunately these front line employees very often are earning minimal salary and have little formal training. In most cases job requirements are limited by high school education and does not require any experience or professional training. Customer Service Call Center has to have special training as representatives have to work with people, and in many cases this people are dissatisfied customers, that already have some attitude to the company that representative has to change. "The best front line employees are both competent and caring. They have a certain level of maturity and possess the social skills needed to build the customer loyalty." (, n.d.) Remembering of importance of Customer Service in company's strategic plans and competitiveness on the market, it is critical to ensure that representatives are interested in providing the best possible service to the client. One of the best ways to do that is to link their productivity and quality of the work done to the compensation received. This may happened to be difficult because of the specifics of working with people and getting feedback from customers. Such feedback is very subjective and may not be countable or comparable with results of other representatives.

Incentive pay definition and types

Incentive pay is defined as "compensation other than base wages or salaries, that fluctuates according to employees' attainment of some standard, such as a preestablished formula, individual or group goals, or company earnings" (Martocchio, p.133 ). According to ERI (n.d.) "the reason of switching to incentive pay plans is contained in the payment for results or performance concept. If the company relates pay to the desired outcome then this will increase the probability of obtaining that outcome." This may be through the employee working smarter, faster, or longer. As companies have laid-off employees they have had to become leaner and more efficient. Getting more accomplished with fewer people makes the promise of incentive pay very attractive to companies today. There are different opinions about incentive pay programs and goals they are intended to achieve. Opponents of such programs claim that performance is a function of the organization of work and management practices rather than employee effort. Proponents believe that a fair day's work is not normally attainable without some proportion of pay being at risk because time based workers produce only about 50 to 60 percent of the output of incentive pay workers (ERI DLC, n.d.). There are three categories of incentive pay plans: company-wide, group and individual incentive plans.

Organization-wide plans differ significantly from individual plans by rewarding different things. As indicated, most individual and group plans attempt to increase effort. Most organization-wide plans, however, reward an



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