Customer Service Management at Johnson and Johnson - Report Example

CUSTOMER SERVICE MANAGEMENT

Johnson and Johnson

1. Introduction: Organization Background and Context

Johnson & Johnson Inc (J&J) is recognized to be one of the leading global companies, manufacturing and distributing consumer health products, medical devices and pharmaceuticals. The company’s headquarter is located in New Jersey, USA. The company has extensive geographical presence worldwide, while the major regional involvement is concentrated in North America, Western Europe and Asia Pacific region (Schmidt, 2015).

he industry/industries in which J&J competes

J&J simultaneously competes in several consumer packaged goods industries, including beauty and personal care, retail hygiene, eyewear and consumer health products. Consumer health segment accounted for about one fifth of the total company’s revenue in 2014, generating US$ 74 billion in total (Schmidt, 2015). Competition in the industry is highly fragmented and competitive. One of the major competitors of J&J is Bayer. Recently Bayer acquired Merck & Co’s consumer health division and thus gained immediate access to the industry and consumers (Schmidt, 2015). In fact, the strategy of acquisitions and alliances is pursued by many other competitors. Thus, for instance, Novartis and the GSK entered into a joint venture, increasing thus its overall power on the market and putting significant pressure on J&J in key markets (Schmidt, 2015).

Products and/or services

Johnson & Johnson operates in several major segments, including beauty and personal care and consumer health segment. Beauty and personal care product line is the largest product line of J&J and includes different subcategories, namely: baby and child-specific, bath and shower, color cosmetics, deodorants, fragrances, hair care, men’s grooming, oral care, skin care and sun care products (Euromonitor International, 2015). Skin care and baby products generate about 30% of the total sales in BPC category, while child specific products generate about 26% of total sales (Euromonitor International, 2015).

The consumer health product line generated US$216, 2 billion in FY 2014 (Schmidt, 2015). The key product subcategories include: OTC healthcare, Vitamins and Dietary Supplements, Weight Management, and Sports Nutrition products (Schmidt, 2015).

The distribution channels

In order to get its products and services to its customers, J&J operates via diverse retail agreements. The company has developed strong relationships with local retailers including drugstore, supermarkets, hypermarkets, beauty/cosmetics retail stores, etc. Due to a decentralized operating strategy the company is capable to be flexible and to adapt/change quickly to the local needs and expectations. This aspect has also contributed to development of stronger relationships with broad range or retailers and distributors (Euromonitor International, 2015). Moreover, cooperation with numerous small and large retailers enabled the company to reduce its reliance on single/few distributors and achieve extensive geographical coverage.

Competition overview

In consumer health industry, the company faces with fierce competition on behalf of major players such as Bayer AG, Herbalife, Pfizer, Sanofi, Novartis AG, GlaxoSmithKline Plc, etc. While Johnson & Johnson Inc. maintains a leading position of #2 in the top 10 with a total market share of 3,9% (as of 2014), this position has been lowered significantly over the past few years (Schmidt, 2015). In beauty and personal care segment, the company has weaker position compared to its key competitors. As of 2014, J&J was ranked #7 in the top 10 list with a total market share of 4,9% (Euromonitor International, 2015).

Below is presented a competition breakdown in terms of market share distribution among key players in consumer health segment and in beauty and personal care industries.

(Source: Schmidt, 2015: 9). (Source: Euromonitor International, 2015:11).

• Analysis of Customer Service Behaviors

2.1 Analysis of Organizational Systems, Policies &Culture

The company claims that it is a customer centric organization, whereas the overall philosophy of J&J is built on the customer service. J&J has formulated its values in “Our Credo”, whereas the company claims “to put the needs and well-being of the people it serves first” (Johnson & Johnson, 2016, n.p.). This statement implies that the first and primary responsibility of the company is to customers, which include not only consumers, but also doctors, patients, nurses and employees (Johnson & Johnson, 2004). With such a credo as a basic value of the company it is possible to assume that the company sets the needs of its customers first, compromising thus some of economic aspects that might have potential of conflict. In order to ensure the health and well-being of customers, the company strives to offer innovative products and solutions to people.

The company continuously modifies and improve its organizational systems, policies and culture in order to reinforce its commitment to customers. Thus, for example, while opening the official corporate website of J&J, visitors are instantly offered to complete the survey and leave their feedback about their experience with the company. Those who want to skip the survey, may just refuse and enter the main page. By collecting thus the data on consumer’s completed surveys, J&J is capable to measure the customer experience and to develop initiatives in order to improve customer satisfaction and experience with the company.

Even though the company claims to be a company with a strong customer centric organization culture, its main weakness lies in lack of sufficient human resources for customer service. Over the period from 2013-2015, J&J consumer division has undergone a series of high-profile changes in personnel (Schmidt, 2015). Continuous changes in consumer division are more likely to shake and destabilize the corporate environment, threatening thus ensuring of high quality customer service and achievement of long-term growth objectives.

Quality control system

In order to continuously improve the quality of its products and develop new solutions to the customers, J&J heavily invests in research and development (R&D) activities. Thus, for example, in 2014, the total company’s budget for R&D was increased by 4%. The company owns its own research facilities in the US, Belgium, Canada, France, Germany, Brazil, China, Japan, the UK, the Netherlands, Israel and India (Euromonitor International, 2015). Such an extensive development of R&D facilities enables the company to develop innovative products and solutions for the customers. Due to the J&J’s involvement into health consumer segment, the company benefit from its strong health and clinical credibility in Beauty and Personal care segment (Euromonitor International, 2015). However, despite its efforts in R&D, the quality control system of J&J has been greatly compromised in the light of recent scandals.

J&J has been involved in numerous cases of devastating plant sanctions and product recalls in 2009. Some experts claim it was “one of the most damaging series of recalls in industry history” (Schmidt, 2015: 8). Because of production quality issues the company had to close its plants in the North America, which lead not only to huge financial losses but also reputational losses. In result of these scandals, the company’s reputation has been negatively affected, which has been directly reflected in the firm’s sales and profitability. According to the estimates, the industry sales declined by more than US$1.5 billion during the period from 2009 to 2012 (Schmidt, 2015). However, the company has managed to regain customers trust and loyalty since 2012, retaining thus a strong market position.

More recently, J&J once again has become a subject to legal prosecutions and negative publicity associated with its product quality. More specifically, in February 2016, J&J was agreed to pay out $72 million to a family of women according to whom the use of J&J talcum powder products for feminine hygiene purposes caused ovarian cancer (Hopping, 2016). This woman used this product for decades not being aware of potential risks and health threats. Despite the reports of medical studies dating back to 1971, and revealing the connection of use of powdered talk to ovarian cancer risks, J&J failed to put any warning signs/labels on product. Thus, the company failed to inform timely and properly its customers about these risks, which is a serious issue in the overall J&J’s customer service strategy and product quality management. Increasing number of families and young mothers in particular are concerned about quality and safety of J&J’s products designed for children (Hopping, 2016).

2.2 Analysis of Individual Actions

The company sells consumer packaged products to its customers via retailers and distributors. It means that the company does not have direct sales staff or front-line people who serve the customers in stores. Therefore, involvement of front-line employees at serving end-consumers is minimal. However, as the company declares, the employees of Johnson & Johnson work closely with the company’s partners in health care industry, aiming thus to “touch the lives of over a billion people every day, throughout the world” (Johnson & Johnson, 2016, n.p.). Thus, the company engages its employees and promotes customer-centric culture at all levels of the organization.

J&J has a decentralized structure with numerous franchises and operating companies (Johnson & Johnson, 2004). Each operating company has its own management board, which is responsible for managing key operational aspects. However, the company provides its operating companies with support functions, such as human resource management (Johnson & Johnson, 2004). J&J also provides its operating companies with corporate education and development organization programs. While initially these programs were not mandatory, gradually they have been institutionalized across the J&J group (Johnson & Johnson, 2004). These training and development programs provide participants with “valuable knowledge specific to Johnson & Johnson’ s culture and internal practices and procedures that cannot be obtained from external programs” (Johnson & Johnson, 2004: 140). In order to provide accessible training to all operating businesses, the company has launched Johnson & Johnson’s e-University that offers various online multimedia materials, training courses and lectures (Johnson & Johnson, 2004).

The company also has introduced an ongoing customer satisfaction survey system, which allows the operating companies to gain better understanding of customer’s needs (Johnson & Johnson, 2004). As part of its customer relationship strategy, the company also initiates many different socially oriented and community-focused programs (Johnson & Johnson, 2016).

• Analysis of the Use of Data and Technology for Customer Service

In the light of recent scandals of product recalls and lawsuits associated with potential health risks of J&J products, the amount of online discussions and conversations about J&J and its brands have significantly increased. Many consumers use social media and other online platforms such as blogs and forums in order to read user’s stories, product reviews, and other related information (Hopping, 2016). The company has recognized this trend and promised to its customers to remove parabens, phthalates, formaldehyde, and triclosan from all of the Johnson’s Baby products (Elani, 2014). Furthermore, in 2014, J&J launched a social media campaign called “Our Safety Promise” (Elani, 2014). In this social media campaign, the company promised to its customers to “remove all of the harmful chemicals and ingredients from Johnson’s Baby products” (Elani, 2014, n.p.). The promise of removing harmful ingredients such as phthalates and triclosan also related to the adult personal care products. The video featured employees of Johnson and Johnson as well as Johnson’s baby brand employees who were making origami from the paper with written safety commitments on its (Elani, 2014). The cranes after were hung in the headquarter of the company with a purpose of reminding the employees about the company’s given promise. In the video the company also reinforces the message that J&J is listening to customer concerns, by claiming “We’ always listen and be here for you” (cited in Elani, 2014). In addition to the video posted, the company posted email and Facebook page feedback that J&J received.

All these initiatives demonstrate that J&J has used social media to better understand the customer’s concerns and expectations about its products. Furthermore, the company has managed to inform its customers about new commitment in very creative way using online media for this purpose. By involving employees and their children to the campaign, the J&J also made a step forward to managing customer relationships with both customers and employees.

Moreover, the company greatly utilises social media channels such as Facebook and YouTube in order to “maintain” the conversation with its customers. Recently, the company launched a series of YouTube videos whereas dads play with their children and do some routines together in easy and playful manner. These videos were posted by ordinary people who agreed to share their family life in the Daddy Diaries campaign (Mintel, 2016). It is possible to assume that via such dialogue the company generates and collects data, reviews feedback and comments of customers and later utilises this information for improving its customer service management approach.

• Analysis of Customer Turn offs

The company operates in hundreds of markets via franchises and operating businesses. J&J serves mass market, which implies large and diversified poop of customers. As customers become increasingly aware of the products and are offered a great assortment, they can easily switch to other suppliers. Real customer turnoffs are closely related with the cases when J&J products were recalled. The company handles these recalls by active PR campaigns and promises to address customers’ concerns. As it has been already mentioned the company uses customer surveys in order to better understand customer’s expectations and to minimize customer turnoffs.

However, in fact, J&J should strive not just to respond to the product recall scandals when they occur but rather to prevent it, focusing on product quality and safety. Safety and product quality are two key factors that the customers expect from organization. Until recently, the company pretended to meet those expectations but failed. Numerous product recalls support this claim.

• Recommendations

Johnson & Johnson is a global company with decentralized organizational structure. While this structure provides the company with greater flexibility and capacity to adapt to the needs of local customers, it also implies more lax control over customer service management. The company sells products, not services to its customers. Therefore, the quality and safety of product is crucial element of the overall customer experience. Johnson & Johnson claims that it sets its customer first. However, this claim (which is a pillar of J&J’s credo) has proved to be illusionary and misleading to certain extent. In fact, many customers have been misinformed or not effectively informed about the potential health risks of specific products. Therefore, the company is recommended to strengthen its overall product quality system, developing more sustainable, safe, and organic products to its customers. By utilizing its R&D activities and improving its products, J&J will be able to address raising customer concerns about safety and health risks of baby and pharmaceutical products. Transparency and openness are crucial to communicating with the customers. This strategy will help the company to increase customer loyalty and trust and thus to ensure sustainable long-term profitability.