The Financial Imperative of Best in Class Service

Financial impact of customer service

Creating self-improving customer service operations that drive long-term revenue through customer retention and repeat business.

It’s around twenty years since businesses began to think seriously about customer service as a means of growing competitive advantage. Prior to this the focus fell heavily on product and price, yet in industries where there was little room to compete on one or either of these, companies struggled to stand out from the crowd.

What could they offer over and above their competitors? How could they steal market share? The answer, of course, was great customer service.

But how do we prove this? What evidence do we have to back up our case?

The journey to customer and revenue retention

In recent years, increasing competition and the advent of new technologies have given rise to growing customer expectations, meaning the importance of customer service in business is more important than ever. Most business leaders acknowledge the potential for customer service to drive long-term revenue through improving customer retention and repeat business.

Customer loyalty opinion leader, Fred Reicheld, proved the significance of this in customer retention terms some years ago and it still holds strong today. He showed that when a customer complaint is made, if companies actively listen to their customers, then take corrective action and reach a quick resolution, the customer actually becomes more loyal than before the complaint.

CS to CX

A majority of companies are facing challenges achieving the changes needed as they are organised in an archaic way. A recent shift in terminology – and thinking – from ‘customer service’ (CS) to ‘customer experience’ (CX) is however promising. This is prompting company leaders to think from the outside in.

With it follows the tearing down of business silos that previously saw several different managers in charge of different parts of the customer journey – many of whom rarely spoke to one another. The customer, of course, doesn’t care that branches are run by someone other than the manager in charge of websites or the call centre, to them it is the same company and they expect the same service across all touch points.

When getting this right, there are significant revenue increases as a direct result. Bright research shows that this can be as much as a +30% increase in annual customer spend, making it a business no-brainer.

Convincing the C-suite

This all provides further compelling evidence for the customer service business case, and encouragingly, most CEOs now understand and accept the bottom line significance of delivering consistently strong customer experiences. With business leaders paying more and more attention to the customer experience, eradicating weak links will be a key focus for the new wave of ‘Customer Service Officers’ and ‘Chief Customer Officers’ that are entering boardrooms around the world. The fact that we are now seeing such appointments is another sign that things are improving, but they are far and few between.

New technology such as text analytics is also supporting these customer-centric people in their challenge. This enables vast amounts of customer feedback to be segmented near real-time, allowing Chief Customer Officers to have their fingers on the pulse and quickly identify when things are going wrong. And, businesses need this not just in customer service departments, but across organisations, giving them the holistic view needed.

The impact of service on share price

What is not as well documented, is that share analysts are now linking customer service to company share price – quite possibly the greatest, and most positive, leap forward our industry has seen so far. In doing this, the value of optimising the customer experience is validated amongst those who ultimately matter most, shareholders.

In order to successfully make the 4-point journey from customer service to increased revenue and retention, to profit and then to increased share price, the importance of continually measuring performance cannot be underestimated.

The most commonly used customer service scoring systems include combining a Net Promoter Score (NPS) with a Customer Service Effort (CES) measurement to assess customer input versus output. These respective scores can then be tracked against revenue, retention, profit and share price, allowing for patterns and trends to be identified and acted upon as appropriate.

To learn more about creating self-improving customer service operations, download Bright’s ‘Best in Class Customer Service’ guide.

About the Author

Mats Rennstam is MD at Bright UK and has more than 20 years’ experience in the customer service and research industries. Prior to founding Bright UK in 2006, Mats previously worked in director roles at companies including Teleperformance, OneSource and Frost & Sullivan.

CX EX Nordics



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