Why Customer Services isn’t always that important!

When reading “the web” one could be lead to think that a company’s poor Customer Services is the worst that could happen. Any mistake in this area would easily set off negative word-of-mouth. Armed with Social Media the “crowds” will seriously harm the brand(ed) reputation, seriously damaging a company’s growth opportunity. Some even consider Customer Services the new Marketing. The importance of Customer Services though, which in lots of cases is considered to be the same as the importance of a company’s (multi channel) customer services contact center, can easily be overrated.

Operational Excellence is often a zero-sum game

I’ve worked for several companies that invested significantly in operational excellence of the Customer Services Contact Center. Convinced that this would provide them with competitive advantage and high Customer retention in the end. At the same time competition did the same, resulting in a zero-sum game with regard to market shares.

For one of these companies, increasing retention of (B2C) Customers became even more important than before, because it was for sale. They had been loosing Customers to a new Competitor for a little over a year (like most other competitors, yet this specific company was hurt most). In combination with not meeting market share growth plans for several years and a shareholder short of cash, this was to be expected.

The company’s strategy continued its focus on improvement of the Customer Experience through improvement of Customer Services and processes, at the same time trying to increase operational efficiencies to reduce costs. Whilst their Customer Services satisfaction rates improved as did their overall CSAT (the numbers were decent, not great, much like competition), churn rates continued at (too) high levels, market share eroded as did the company’s potential sales price.

Who is Calling? And Who is Not?

An analysis of the company’s Customer data revealed that their strategy of Customer Services Operational Excellence did not work out, because it was only 20 % of the customers that contacted Customer Services. At the same time churn rates were caused for less than 15 % by Customers who contacted Customer Services. From this perspective Customer Services did a good job.

It is not difficult to understand that a strategy that focuses on only 20 % of Customers (and their direct need for Customer Services) is not the best strategy. This example also shows that doing a good or great Customer Services job is not necessarily the sweet spot. Valuable resources can easily be wasted for years.

Understand where your Customer’s Sweet-Spot is

Understanding your Customers, their needs and wants, the jobs they are trying to do, the experiences they have with your Company (not the ones you think or assume they have), the relative importance of each part of the total Customer Experience, how well you perform against desired outcomes of the jobs and Experiences etc etc.. All of these are important to understand where your Customer’s sweet spot is. Customer Services might be it. It might also not be.

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10 thoughts on “Why Customer Services isn’t always that important!

  1. Pingback: Resolutions 2010: Mandarin Oriental customer service philosophy: treat your employees right and they will do the same for your customers. « Fredzimny's Blog

  2. Hi Wim – nice post, good advice.

    There are several points I think are interesting to explore further in re why the focus on Customer Service?

    1 – it obviosuly depends on the business. In a commodity price-driven business, or one where contact with customers in the “Customer Service” department is limited and should be given the nature of the business, you’re right. Not all businesses work that way – there are some where “Customer Service” actually represents 70% of all sales and a similar percentage of all service interactions and may be the only contact the customer ever has with the company – yet many businesses with this model continue to treat “Customer Service” as a cost center.

    2 – To Esteban’s point of the need to fix something, “Customer Service” is its own worst enemy. It is perhaps the most easily and most heavily measured area in many businesses, and it’s where a lot of symptoms are found – so the urge to treat symptoms is often overwhelming. I talked about this in a post about wrestling alligators vs draining the swamp – businesses spend millions trying to trim handle time on calls or convert calls to self-service that instead should simply never happen at all , while the root cause of the call, which lies in another department, is ignored. What better way to cut handle time on a call than to make the need for the call go away? Unfortunately, the Customer Service department is rarely positioned with enough clout to drive these discussions because they are a “cost center”.

    3 – We can probably trace some of the fascination with “Customer Service” to HBR and TARP studies along with others that have cited comprehensive studies showing that most customers leave not because of price or product but because of customer service. By the transitive property of business logic, if customers leave due to customer service, and customer service is provided by the “Customer Service” department, customers leave because of the Customer Service department.

    In these more enlightened times we might realise that customer service might have included any aspect of the customer experience, and also that customers who reported customer service as the problem might have been including in the problem the inability of “Customer Service” to either fix their problem (due to a product defect) or redress their grievance (due to a sales or marketing policy). Regardless, management focused, and continues to focus on, Customer Service because the industry experts told them too!

    Good thing I’m not an expert – just a guy with a lot of t-shirts.

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    • Hi Mark,

      Thx for stopping by and taking the time to write some good stuff down here.

      Unfortunately nothing we do not agree about (I should probably write more controversial posts..). I love the debate ;-)

      Thx again sharing your T-shirts!

      Wim

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  3. Wim,

    This is a typical reaction that happens in most B2C companies (and this is the same type of reaction that led to recent calls to give SM control to Customer Service): If something is not working, it has to be Customer Service because that is where most of the interactions with customers happen. Fix customer service and we can fix the company.

    Then the witch-hunt begins: what is not working in Customer Service? I am sure you will agree with me that you can always find something or another not working, and thus we begin to “fix” customer service. We monitor customer experience, or loyalty, or NPS, or a similar metric that will defiintely tell us how we are doing. And the metric improves – heck, any managed metric will improve over time, there is not science there. But the problems are not fixed because no one ever wants to take a look at the bigger picture — where the problem really is.

    Worse, we are about to repeat the mistake with SCRM, but focusing the company’s problems in the lack of engagement and discussion with customers, we just throw SCRM as a solution (of course, in Customer Service since that is where most of the interactions happen) and we will solve those problems.

    What is incredible is that no one yet stopped (ok, very few) to look at what has worked in the past and correlated coming up with a business-wide strategy as the solution — not a knee-jerk reaction in one department.

    The failure lies in two areas, in my experience: always first, management with the culture of fixing “something” — no matter what. And second, with business stakeholders in the organization too scared to counter management initiatives.

    Final part of this rant, and I will get off the soapbox. This is the situation we have to counsel our clients against if we are to succeed in adopting SCRM and SM in the organization. No matter what we do, making clients aware of our failures (as SCMR will do) is not the right move.

    Stop, smell the problem, devise a strategy, implement the solution.

    Thanks for the platform for the rant :)

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  4. Wim,

    Great post as always. I agree with you that customer service is not always the most important thing. However, it is always an important aspect of the business that too many companies do a great job with.
    I too have seen companies go TOO far… It’s rare in my experience but it does happen. As with any investment you will reach a point of diminishing returns, find that out for your business and do not over-invest in any aspect of your business. For my money, this is where the power of the social web is of critical importance. Companies can lessen their overall spend while increasing the overall effectiveness of their customer service program.

    John

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    • Thx John,

      I highly appreciate the compliment and your comment!

      You make a very good statement on the point of diminishing returns. In this case that point was probably more in the past than they would like.

      I think it is likely that senior management felt that withdrawing from their flawed strategy was not an option because of sentimental reasons (most hate to admit they made a mistake or misjudgment). That is when the point of diminishing returns actually becomes the point of no return, with all the nasty consequences attached.

      Thx for stopping by and the shout on Twitter!

      Wim

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  6. Hi Mitch,

    Good to be back. And thx for the good question.

    In this specific case the market was relatively transparent with a commodity product/service. Only a few players in there, with 3 to 4 leading and a few smaller challengers. It was not difficult to assess that most Customers that left, found there new “home” at the newest challenger on the block.

    The new challenger was a price fighter, much like the company I’m referring to was before. Price was the main reason for churn, which can be expected if price has been the main reason for Customers to join in the first place.

    Different benchmarks on CSAT (and alike) showed no significant differences between the players in the market. Better Customer Services could have been a differentiator possibly, yet no company succeeded in making it so.

    Combining this market knowledge with the customer data available makes it not difficult to assess that the company could better increase efforts on 80 % of Customers not contacting Customer Services than on the 20 % who do. For example by providing a “loyalty” price reduction to reduce the price gap with the newest challenger on the market for their most valuable (and vulnerable) customers.

    It is never a good position to be in, if one needs to reduce prices. In this case, where the company’s main asset is the number of Customers (contracts) in the base, reducing churn should be the main focus. Any potential buyer will calculate the companies value by this number times the future value they expect from each Customer.

    In answer to your question: no way to be 100 % sure. From my perspective also not needed, taking the above into consideration.

    Let me know what you think. Did I answer sufficiently?

    Wim

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  7. Wim,

    Welcome back from summer holiday!

    I have some questions, which I hope you can share some additional insights. There could be lots of reasons for churn, not the least of which is product and/or value (in addition to experience). With so many competing forces, and a number of variables, how can you be sure that the customer service issues were, or were not a success?

    Thanks for the post, I do appreciate you sharing the experiences, it is how we all learn!

    Mitch

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