Estimates of the cost of poor customer service range from $75 billion to $1.6 trillion per year. This astounding figure is the result of a myriad of problems including not understanding what the customer desires, cost-cutting strategies, sacrificing customer satisfaction for growth, the dehumanizing (computerization) of customer service, and multiple other reasons.
Organizations can create a significant competitive advantage by investing in offering customers superior customer service. This can be achieved through:
- Enhanced understanding of the voice of the customer
- Designing processes, products, and services that take into account the voice of the customer and customer service
- Ensuring processes that are customer-facing are robust and repeatable
- Not focusing exclusively on metrics that drive poor customer service
- Focusing on the most profitable customers and turning them into advocates for your organization
- Investing in customer service personnel and infrastructure
- Plus other possible solutions
Providing high-quality customer service can provide organizations a significant competitive advantage. What is required is that leaders recognize the potential to differentiate their organizations and make the investments necessary to leverage this competitive advantage and make their organizations more profitable and more valuable.
Why is customer service so poor?
There are several reasons that customer service in the United States is so poor. It is more than just the disconnect between customers and the executive offices noted above.
- Companies don’t understand what the customer wants. In other words, they don’t understand the voice of the customer (customer needs and wants). In some large organizations, such as consumer products firms, much effort and cost is expended to understand market segments, the voice of the customer, and their value propositions. Even then, they often rely on surveys and focus on aggregated numbers rather than directly talking to customers or observing them.
- Organizations sometimes sacrifice customer service for growth. For-profit organizations face a challenging dilemma of having high customer satisfaction and loyalty and growing revenue and profits. For example, to support revenue growth, businesses often increase fees (for example, baggage fees with many airlines, ATM transaction fees) which simultaneously decrease customer satisfaction and loyalty.
- Organizations often sacrifice customer service for cost savings. When was the last time you called customer service and did not have to fight through a computer system to get to a human being? Yes, this results in lower costs, but it also dramatically increases customer frustration and decreases satisfaction. Over 80% of consumers prefer to talk to a person rather than deal with a computer and they report a reduction in customer satisfaction when forced to use a computerized system.
- Customer-facing processes are not repeatable and robust. For firms to be able to consistently offer high levels of customer service, they must have processes that are designed to do so in a repeatable fashion. All too often, organizations do not value or invest in the customer-facing processes. For example, call center employees are often viewed as a necessary evil (cost) and are given minimal training, and even viewed as disposable. Likewise, supporting infrastructure such as IT systems may be inadequate due to underfunding.
Why is the cost of poor customer service so high?
The cost of poor customer service is estimated to be at least $75 billion per year and is increasing rapidly. What are some of the elements that are causing the cost to increase far more rapidly than the rate of growth in the economy?
- Today as always, customers remember and communicate bad experiences far more than they communicate good. It is bad enough that approximately 50% of customers will never do business with a company again based on a single bad experience. However, the research shows that roughly 95% of unhappy customers will tell at least one person about their experience.
- Moreover, the advent of social media has changed the landscape with regard to customer service and an organization’s reputation. Even a single bad review can reach hundreds, thousands, or tens of thousands of actual or potential customers. And research shows that even a single bad review seen by a potential customer is sufficient for over 30% of people to consider not using a business’ product or service.
- There are an increasing number of options for customers due both to globalization and technology. This makes it increasingly difficult to retain customers for many types of businesses.
What can be done to improve customer service?
- Talk to customers and let them tell you what they want. Don’t assume. Possible avenues include one-on-one interviews, focus groups, and surveys. Also, it is best when leaders engage with customers on a periodic basis and don’t delegate the “burdensome task” of talking with customers to lower-level employees.
- React to the voice of the customer. Keep the customer in mind when designing new processes, products, and services. Using design methodologies such as design for six sigma (DFSS) and Agile helps to ensure that the voice of the customer is captured and integrated into process, service, and product design.
- Treat the most profitable customers with exceptional service. Spend the money in enhancing their experience so you retain their loyalty and their business. You want them to function as advocates for your business to those that they come into contact with.
- Don’t just focus on the core product or service. Also, focus on what could be called non-core processes/services. A key non-core process is customer service, technical service, and other customer-related functions.
- Organizations need to operate as a synergistic whole (a value stream) to serve customers. This requires breaking down the barriers that exist between departments in many organizations, particularly large ones.
- Create robust, repeatable customer-facing processes. Value, train, and empower the employees that are customer-facing. Equip them with the tools to provide exemplary customer service and differentiate your organization.
- Provide human interaction when serving a customer or dealing with a customer issue.
- Ensure key metrics don’t encourage behavior that negatively impacts customer satisfaction.
Providing high-quality customer service can provide the organization’s a significant competitive advantage. What is required is that leaders recognize the potential to differentiate their organizations and make the investments necessary to leverage this competitive advantage and make their organizations more profitable and more valuable.
FAQs
Q: Why is customer service important for businesses?
A: Customer service is crucial for businesses as it directly impacts customer satisfaction and loyalty. Providing excellent customer service can help businesses gain a competitive advantage, retain profitable customers, and turn them into advocates.
Q: How can companies improve customer service?
A: Companies can improve customer service by actively listening to customers, reacting to their feedback, treating the most profitable customers with exceptional service, focusing on both the core product/service and non-core processes/services, fostering synergy between departments, creating robust and repeatable customer-facing processes, providing human interaction when serving customers, and ensuring key metrics align with customer satisfaction goals.
Q: How can Midlands Technical College support customer service experts?
A: Midlands Technical College offers a wide array of consulting and training services to organizations of all types and sizes. Their team has extensive experience working with various organizations and can provide tailored solutions to reduce the cost of poor customer service. For more information on how Midlands Technical College can help, please visit their Corporate Training page or contact them at corporatetraining@midlandstech.edu or 803-691-3907.
Conclusion
Investing in offering superior customer service is essential for businesses to gain a competitive advantage. The cost of poor customer service is significant, and organizations should focus on understanding the voice of the customer, reacting to their needs, treating profitable customers exceptionally, and creating robust customer-facing processes. By prioritizing customer service, businesses can enhance customer satisfaction, loyalty, and ultimately, their profitability.