Customer service is core to strategy, but it’s under threat

Citation

Grossberg, K.A. (2015), "Customer service is core to strategy, but it’s under threat", Strategy & Leadership, Vol. 43 No. 4. https://doi.org/10.1108/SL-05-2015-0035

Customer service is core to strategy, but it’s under threat

Article Type: CEO advisory From: Strategy & Leadership, Volume 43, Issue 4

Kenneth Alan Grossberg

Kenneth Alan Grossberg is Professor of Marketing & Strategy and Director of the Waseda Marketing Forum, Waseda University, Tokyo (kengross@waseda.jp) and a contributing editor of Strategy & Leadership.

“Customer service has truly become the new advertising, marketing and public relations. Creating Zombie Loyalists are what will take you to the top of your category.” – Peter Shankman, Zombie Loyalists: Using Great Service to Create Rabid Fans (Palgrave, 2015).

“The new services landscape is unlocking innovation opportunities in nearly every industry. Yet for many companies, managing day-to-day operations is all-consuming. Even the most forward-looking incumbents find that implementing an innovation mind-set can be daunting. Institutionalizing service innovation, for example, requires more than setting up a new R&D lab; the lab’s efforts must be hardwired into the company’s services strategy, investment cycles, sales, and operations. Similarly, personalizing the customer experience is about not only mining data and applying the latest analytic techniques but also marrying those capabilities with insights from service representatives, third parties and customers.” – Tony D’Emidio, David Dorton, and Ewan Duncan, “Service innovation in a digital world,” McKinsey Quarterly, February 2015.

The problem is an opportunity

The technology revolution in modern consumer culture has created a crisis of opportunity in customer service. The erosion of service many customers have experienced in recent years is the direct result of organizations practicing a few outmoded 20th Century marketing principles while desperately trying to adapt to the technological innovations of the 21st century. The four problematic management practices that are most responsible for the erosion of service that characterizes our current transition period are: 1) Assuming that productivity, as measured in cost per unit sold, should outweigh the values inherent in customer relationships; 2) Adopting technology to promote operational efficiency instead of as a way of continuously improving the customer experience through innovation; 3) Making outsourcing decisions based only on cost; 4) Presuming that “You get what you pay for” is a sufficient justification for downgrading the levels of service given to customers who are paying less.

With the global shift from an economy of goods to an economy of services, upper management needs to take another look at their customer service rationale and standards. Improvements in mobile technology – the advances in sorting big data and the refinements in delivery of information to frontline employees – in theory offers companies the opportunity to implement a connected, intelligent mobile network, one dedicated to customer service and relationship building. However, too often such productivity gains now come with reduced service and a diminished quality of life. We welcome the automation of customer service when it enables us to get what we want with less hassle, as when buying e-tickets for flights at an airport kiosk, doing simple bank transactions on the Internet, or waving our mobile phone at a vending machine to purchase a drink.[1] But will a purchase that requires service prove to be efficient or painfully time-consuming? Unease has crept into the transactional interface between customer and service-provider as more and more companies are coming to view the investments needed to empower their employees to offer courteous, responsive customer service as too expensive and are attempting to transfer to automated or robot-aided customer fulfillment.

The service declines we experience may not even be noticed immediately because they are slight or not immediately obvious to purchasers – longer queuing times on toll-free customer service phone lines, or the elimination of toll-free phone lines entirely, as has been the practice at Amazon.com – or because they are considered a reasonable trade-off for more efficient on-screen tools.

Industries in the cross-hairs of customer service dissatisfaction

What is obvious from the most recent American Customer Satisfaction Index is the wide range of satisfaction benchmarks earned by different sectors. At the bottom of the 2014 list are a “dirty dozen” industries or parts of industries that have the worst customer satisfaction rating. There are the usual suspects among them, like airlines, phone services and hotels, and some which are less conspicuous but nevertheless irksome, like cable TV, health insurance and the post office.

Customers who use the telephone to communicate with some of these companies are being penalized for not jumping on the networked bandwagon and are even charged extra for doing transactions like buying airline tickets over the phone rather than at a computer terminal.[2]

Many companies keep trying to use layers of technological barriers to impose a self-service regime on their customers. The most obvious means they use is via concealment of the simplest route: the telephone number. Once upon a time it was fairly easy for a customer to get to some sort of responsible party by being transferred from one company extension to another until finally arriving where the buck stopped. That is no longer the case. Savor the irony: companies now assume that their interactions with consumers constitute a relationship rather than a series of discrete transactions, while at the same time they increasingly block real communication except via email. A company that forces its clients to wade through a phone tree with a long list of options when they need service is damaging its brand equity.[3] The mental state we enter when we get caught in the telephone-loop-from-hell too many times or become baffled by the web page site map that does not tell us where our problem can be solved is “learned helplessness” – not at all like the cheery telephone directory ad, “Let your fingers do the walking,” of 40 years ago.

Disgruntled customers often cease to communicate candidly because they feel it is a waste of effort, in other words, learned helplessness. For a seller, that is a dangerous situation to promote. When consumers dial up a toll-free number and are greeted with computer-generated voices exclusively, they begin to wonder if anybody out there is listening. When the company tries to conceal its “real” phone numbers from the public, and its service email address generates cheery but irrelevant automated responses, then customers may become convinced that nobody at the firm wants to listen. An Amazon.com spokesman admitted that his firm does not intend to apologize for not putting a customer service phone number on its Web site, emphasizing that the customers “appreciate the self-service features” they find at Amazon’s site.[3]

Richard Shapiro, president of the Center for Client Retention in Springfield, New Jersey, a business that contacts customers who have dialed into a toll-free call center in order to evaluate their experiences, argued that customers who interact with human beings are more likely to provide useful information, try a new product or develop a strong sense of loyalty. In other words, these positive outcomes are eliminated when companies rely on excessive automation in their telephone communications with customers.[4]

Outsourcing the customer – risky business

American marketing thrived on the idea of learning to give customers what they want, so why do so many USA companies that previously took their customers’ opinions seriously now adopt practices that are likely to alienate them from their customers in the long run? Part of the problem is the excruciating pressure in contemporary business to cut costs and raise profit margins, which serves to justify service-eliminating policies. By outsourcing the call centers and fulfillment operations of customer service, the so-called “front-office revolution,”[5] American companies have stumbled into a sort of prisoner’s dilemma: the more they rely on the low-cost outsourcing of customer service, the more they become indistinguishable from their lowest cost competitors and the more vulnerable they become.

Exceptions rule!

There are still some beacons of customer-orientation left – companies that win markets because of what they still do for their clients. Starbucks, for example, despite the slippage that inevitably comes when a service business grows gargantuan, has continued to delight its customers with the earnestness with which its staff tries to please. Starbucks is still surprising critics by the spirit of personalization and pampering that it upholds in the face of bigness. This tenacious courting of customers stems from the desire to keep them from defecting, and is the only rational strategic response in a world inhabited by many imitators and cutthroat competitors.

The strategic horizon

Courting customers as they take their customer journey is certainly good practice. But the big strategic opportunity is to use technology to increase engagement with customers and other external stakeholders. To do this companies will need to connect more effectively with their customers across various channels– websites, mobile devices, social media, call centers, retail outlets, online communities and after-sale service. The challenge facing IT leaders is how to redesign customer-facing activities to learn from the interaction so that innovation teams can design ways to deliver better experiences. A company’s most creative employees need to be able to gain real-time insights from customers while they are using the product or service. The goal of this customer closeness: to promote creative thinking inside the enterprise about new ways to grow value. That’s why customer service is at the core of strategy.

Notes

1. Over two-thirds of U.S. consumers under 50 say they would be happy if shopping evolved into a mobile-only experience. Cited in Design Matters: Creating An Optimal Mobile Shopping Experience. ©Mobify 2015.

2. Paul English created a cottage industry by posting on his blog a “cheat sheet” offering advice on how to penetrate different companies’ electronic armor in order to reach a human being. He named the companies and published their confidential codes for reaching an operator. William C. Taylor, “Your call should be important to us, but it’s not,” The New York Times, February 26, 2006.

3. Steven S. Ramsey, “Strategy first, then CRM,” in John G. Freeland, Ed., The Ultimate CRM Handbook: Strategies and Concepts for Building Enduring Customer Loyalty and Profitability, NY: McGraw-Hill, 2003, p. 16.

4. Katie Hafner, “Customer Service: The Hunt for a Human,” The New York Times, December 30, 2004.

5. Jeffrey F. Rayport & Bernard J. Jaworski, Best Face Forward: Why Companies Must Improve Their Service Interfaces with Customers, Boston: Harvard Business School Press, 2005