Service in the Customers' Eyes:
What Works, What Doesn't and How It Contributes to High Performance
Companies are making significant investments in customer service technology, but it’s having little impact on the quality of the customer service.
Customer service long has been recognized as an area that has a significant
impact on a company's top and bottom lines. In fact, Accenture research has
found that one of the hallmarks of high-performance businesses is their ability
to create and exploit a set of distinctive, hard-to-replicate capabilities-which
include those related to customer service-that differentiate them from their
competitors.
Furthermore, recent Accenture research into the characteristics of high-performance marketing organizations has revealed that customer service is critical to developing and maintaining the branded customer experience which, in turn, is a fundamental contributor to strong customer loyalty and higher lifetime customer value. In short, service often spells the difference between mediocre companies, poor performers and market leaders.
Yet while service is absolutely critical,
it also is one of the most difficult
things for organizations to get right.
This dilemma is reflected in the fact
that what companies often believe is
"good" service may not be held in the
same regard by their customers. In
fact, it's not at all uncommon for
companies to invest in new customer
service technology solutions and
processes-believing they are improving
their capabilities in this critical area only
to see customer complaints and
defections rise.
To shed light on what customers
think about customer service,
and the impact that bad service can
have on a company's business,
Accenture recently conducted a survey
of a representative sample of more
than 2,000 people across the United
States and the United Kingdom.
The survey explored several key
issues, including:
● Satisfaction with different methods
of customer service
● Impact of technology on service
quality
● Most frustrating aspects of
dealing with customer service
representatives
● Actions taken in response to bad
service
● Most important aspects of a
satisfying customer service
experience
Responses from survey participants are illuminating, and suggest numerous opportunities for companies to improve the way they handle and resolve customer issues-and create some of the distinctive capabilities that are key factors in achieving high performance.
Customer Service Shortcomings Remain Pervasive
In general, responses from survey
participants reveal significant
opportunities for companies to improve
the way in which they serve customers.
For instance, customers in the United
States and the United Kingdom spend
an average of six minutes on hold when
seeking assistance via a telephone help
line. Twenty-seven percent of
respondents said they typically wait
between five and 10 minutes, while 14
percent said they wait for longer than
10 minutes before they can speak to a
live person. Furthermore, 87 percent of
participants said they speak to multiple
representatives when calling customer
service, with most speaking to two (37
percent) or three (32 percent)
representatives to resolve their issue.
Incredibly, 13 percent said they deal
with four or five representatives, and an
additional 2 percent actually must work through six to 10 people before
they
can declare victory.
Given this input, it shouldn't be
surprising that the two most
frustrating aspects of dealing with
customer service representatives cited
by survey participants (Figure 1) are
being kept on hold too long and being
asked to repeat information to multiple
representatives. Third on the
frustration list is representatives'
inability to answer customers'
questions, followed by representatives'
attempts to sell customers other
services or products.
The next tier of frustrating aspects
includes representatives' inflexibility,
slowness to respond and non personable
nature, as well as the lack
of customized solutions being offered
and the frequency of representatives'
computer systems being inoperable
when a customer calls.
Nearly half of respondents reported becoming so frustrated during the last year with customer service that they switched service providers.
Geographically, respondents in the United Kingdom are more likely than their U.S. counterparts to find it frustrating when they are kept on hold too long, representatives are inflexible and slow to respond, and representatives' computer systems are inoperable at the moment a customer contacts them. A greater percentage of respondents in the United States than the United Kingdom reported being turned off by representatives' cross selling or up-selling.
Frustration also differs among other
customer subgroups. For instance, a
higher percentage of women than men
reported being frustrated by nearly all
of the customer service shortcomings
just discussed. Younger people are
more likely than middle-aged and
older respondents to dislike cross selling
and up-selling. And high income
respondents are more likely
than mid- and low-income customers
to find representatives' inability to
answer questions and provide
customized solutions frustrating-but
are less likely to be turned off by
cross-selling or up-selling.
Satisfaction Is Not High
Companies have invested millions of
dollars during the past several years on
customer relationship management
(CRM) to improve the way they service
customers. For many of these
companies, the bulk of that investment
was directed toward new technologies
that, in the interest of cutting customer
service costs, largely removed human
interaction-at least of the "live" variety from
the service experience. While such
technologies generally achieved the
goal of saving the company money,
they often did little to improve the
service experience or quality (and in
some cases, they alienated customers
altogether). Responses from survey
participants support this notion (Figure
2). Just 5 percent strongly agree and 33
percent somewhat agree that the use of
technology has improved the level of
service quality significantly in the past
five years. A full 62 percent of
respondents either somewhat or
strongly disagree that technology has
helped the cause.
Yet not all customer groups viewed the
issue in the same way. Customers in
the United States (43 percent) were
more likely than those in the United
Kingdom (35 percent) to believe
technology has improved customer
service. Likewise, women were slightly
more positive than men about
technology's impact on service.
From an income perspective, it appears
that the more money one makes, the
less happy one is with customer service technology. Forty-two percent
of lower-income respondents somewhat
or strongly agreed that technology
has improved service, compared
with 39 percent of middle-income
customers and just 31 percent of high income
participants.
As might be expected, younger
participants in the survey expressed more
positive attitudes toward service
technology, with just under half (47
percent) concurring with the notion that
technology has improved the level of
customer service. This compares with 36
percent of respondents in the middle-age
group and just 29 percent of those 55
years of age or older.
Survey participants' negative views of
technology's impact on service are further
revealed by their responses to questions
about satisfaction with various types of
customer service (Figure 3). Overall,
customers are least satisfied with service
delivered via automated phone systems-one
of the more common results of
companies' focus on cost reduction. Just
fewer than 60 percent of respondents
said they are not at all satisfied with
how they're treated by such systems,
while only 10 percent said they are
satisfied or very satisfied.
Another type of service that relies
heavily on technology is e-mail-based
interactions. This method fared much
better in our survey than automated
phone systems, as 43 percent of
customers said they were either
satisfied or very satisfied with it and 38
percent noted being somewhat
satisfied. Similarly, the emerging
concept of service via a live online chat
function is beginning to gain favor with
customers, as just over half of survey
respondents reported being somewhat
satisfied, satisfied or very satisfied.
However, unlike other service options,
chat has yet to achieve widespread
penetration among most companies'
customers, especially those in the
United Kingdom. A full 40 percent of all
survey participants (47 percent in the
United Kingdom and 32 percent in the
United States) said they couldn't
comment on their satisfaction with
service via online chat because they had
yet to use it.
Based on our survey results, customers
clearly prefer interacting with
representatives live and through
traditional means-either on the phone
or in person.
Overall, 49 percent of respondents
said they were satisfied or very
satisfied with the level of service they
receive via the phone from a live
customer service representative. U.S.
respondents were definitely more
positive about their live phone
experiences than their U.K,
counterparts, as 58 percent of the former and just 40 percent of the
latter
reported high levels of satisfaction
with this mode of customer service.
Technology alone is not the answer: companies must strike the right balance between using technology to reduce costs and developing a satisfactory customer experience.
The big winner in
customers' eyes is still
being able to discuss their issues with a
representative face to face. Sixty percent
of all survey participants said they were
satisfied or very satisfied with in-person
customer service. Again, a larger
percentage of U.S. customers (64
percent) than U.K. respondents (56
percent) reported such satisfaction
levels, but there was little appreciable
difference in the responses when viewed
by respondents' gender, income or age.
Impact on Business Can Be Significant
If companies don't think that their
lackluster track record-at least in
customers' eyes-has an impact on
their business, they need to think
again. Nearly half of our survey
respondents said they have switched
providers in the past year because of
poor customer service (Figure 4). Of
those, the largest percentage switched
retailers, banks, home telephone
service providers, Internet service
providers and wireless/cell phone
service operators. Interestingly, two
industry segments that are well known
for their customer service
struggles-airlines and cable/satellite
television providers-were among
those switched least by participants in
our survey.
On the other hand, customers did
recognize industry segments in which
they felt companies were providing
satisfactory and quality service (Figure
5). Banks led the way, followed by
Internet service providers, retailers,
airlines, cable/satellite television
providers and home telephone service
providers. Yet despite being among the
"least-switched" type of companies
due to poor customer service,
wireless/cell phone service operators
and hotels were named by only 29
percent and 35 percent of survey
participants, respectively, as having
satisfactory and quality service.
Improving the Experience
So what do customers really want from
a company's customer service function
(Figure 6)? Although respondents did
not reach a strong consensus on the
most important aspect of a satisfying
customer experience, one item-named
by 34 percent of all survey
participants-did stand out from the
others: the ability for a customer
service representative to assist with all
needs, rather than forwarding a request to different representatives for
help with each product or service.
In the second tier of aspects critical
to a good service experience are
the following:
● Ability to discuss problems with
representatives
● Amount of time it takes to resolve a
problem
● Quality of the response from the
representatives
● Customer service representatives'
manner and approach
Rounding out the list are aspects
named by less than 10 percent of
respondents, including speed of
response, convenient bill payment
options, benefits offered to
compensate customers for their
troubles, and bills that are easy to
understand.
These responses suggest a number of
steps that companies can take to
improve their own customer service
activities and provide the satisfying
service experience that customers seek.
The first step should be boosting
customer insight capabilities-with the
understanding that it is impossible for
a company to provide customers with
great service if it doesn't know
anything about them. To do so, a
company must create a single view of
the customer, which typically depends
on having a data warehouse into
which all relevant internal customer
data-often widely dispersed
throughout the organization-is fed.
This data includes customer contact
information, products or services
purchased, mode of purchases (Web,
store, call center, catalog) and
monetary value of purchases.
Importantly, this information must be
augmented by external demographic
data on customers. By combining a
customer's transaction history with
key data such as number and ages of
people in the customer's household,
median income of the customer's
neighborhood, and customer's ethnic
heritage, a company can transcend
the one-dimensional, internal picture
of a customer that purchase history
alone provides.
With a single view of the customer, a
company is positioned to interact with
customers on customers' terms and
provide them with the help and
information most relevant to
customers' situations. A complete
picture of customers' histories and
preferences enables a company to
develop an overall customer experience
blueprint: one that plans for the
optimal customer experience along the entire spectrum of customer segments
and value. Whether for a low-value
customer or a platinum account, the
blueprint designs the right customer
experience for each customer segment,
making the design truly actionable and
providing an underlying financial
model to track operational
improvements and bottom-line impact.
The blueprint makes sure companies
achieve the best possible balance
between customer satisfaction and
customer cost-to-serve.
For example, the customer experience
blueprint can help companies
determine which customers prefer
and merit service via automated,
technology-based channels-email,
online chat and automated phone
systems-and which should have their
issues handled by a live
representative. Such a determination
ultimately will boost customers'
satisfaction with the service and the
mode in which it was rendered.
For those issues that must be handled
by a live person, a single view of the
customer provides all customer service
representatives with complete
customer information (including
demographics and service and
purchase history). This information
reduces the number of questions
representatives must ask customers
and minimizes the amount of time it
takes to resolve customers' issues.
When access to an integrated
customer database is paired with new
desktop applications and workflow
management tools, agent productivity
and responsiveness to customers is
boosted even further. For instance,
agents at some leading organizations
are more effective at serving
customers because their tools give
them access, through natural language
query, to multiple knowledge sources
to find the information they need regardless
of the product or service
in question. Customers, thus, do not
have to be handed off to different
representatives-thus eliminating
one of the principal sources of
customers' frustrations.
To address the workforce-related
challenges that survey respondents
identified, a company can further
empower its service representatives by
providing them with more
sophisticated and relevant career
development programs. In fact, leading
companies are discovering that
investments in desktop tools will only
payoff in increased customer loyalty
and lower costs if they are
accompanied by better training and
performance support. Training and
performance simulation tools available
through the workers' own desktops can help instill the appropriate
"manner and approach" that
customers want in a service
representative. Such tools can, for
example, enable agents to review short
multimedia segments on new products
or services, or practice interactions
with customers in a lifelike but risk free
environment.
Finally, access to integrated customer
data, more robust tools and better
training can improve representatives'
ability to customize solutions to
specific customers-as well as
recognize and maximize an
opportunity to cross- or up-sell. A
large percentage of survey
respondents noted being frustrated by
representatives' attempts to sell them
other products and services. So does
that mean companies should not
cross-sell or up-sell? No, because a
high percentage of respondents also
said they're frustrated by the lack of
customized solutions offered to them.
Organizations need to choose carefully
the situations in which their
representatives offer other products
and services to customers, and to
make sure that what's offered is
relevant to each customer. It shouldn't
be surprising that a customer calling
with a complaint about a company is
not in the best frame of mind to be
asked to buy more. And, nothing
frustrates a customer more than being
asked to buy something he or she
already has, feeling-rightly so-that the
company should know who buys what.
To be sure, customer service is a
critical factor in a company's ability to
compete in its market and grow
profitably. By understanding what
customers expect when dealing with
service representatives, and making
the changes necessary to
accommodate customer needs and
preferences, companies will be better
positioned to enable high
performance by providing the branded
customer experience that is
fundamental to building strong
customer loyalty and higher lifetime
customer value.
As customer acquisition costs continue to rise, customer retention continues to be one of the most important, yet misunderstood, areas of customer strategy. Of all the things that C-level execs need to know about retention, this is the most important: Any strategy you undertake to keep customers must be done under the heading of creating value for your enterprise and your customers.
One of the best examples of applying this reality is happening in the wireless telecom business. Here's an industry where it can easily cost more than $300 to acquire a new retail customer, and perhaps $60,000 or more to secure a new enterprise customer. As a result, many mobile firms have placed a great deal of emphasis on customer retention. Of course, retention is only one of the variables that figure in the overall value that customers create, but in mobile telecom, it is certainly one of the most important.
The Good
Best practices in retention can be classified into three categories:
differentiated offers aimed at particular types of customers, additional
offerings that deepen a customer's relationship, and self-service options
that entangle the customer with the firm.
Arguably, the wireless industry's strong suit has been the differentiated offerings and services aimed at specific customers. Nextel, for instance, has staked out a strong claim to serve the needs of mobile sales forces. Among other things, Nextel offers these customers a uniquely appealing suite of "Group Connect" services designed to meet their needs better than routine mobile phone service would.
Virgin Mobile, on the other hand, has appealed to the youth market for the same purpose. Its latest service is called "Rescue Ring." If a customer is headed out on a date or other meeting that may not go well, he or she can arrange for an automated call to arrive 20 minutes into it, which can then either be ignored or used as an excuse to bail out. Among the 3 million users it has acquired in its first two years, Virgin Mobile says more than 60 percent of them use Rescue Ring or other features, such as Comedy Central's Joke of the Day. More than half downloaded ringtones last year at $3.49 a pop.
Self-service is also a top-performing retention tactic. Customers who go online are likely to implement some aspect of their service that they have partly built themselves. Such customer "collaborations" are guaranteed to improve retention. It is probably no coincidence that Verizon Wireless, a company with one of the lowest wireless churn rates, reports one of the highest self-service usage rates.
Room for Improvement
One thing that some telecoms probably aren't doing as well as they could,
however, is gleaning insight from their data to engage customers before they
become churn risks. For instance, telecoms have a Call Detail Record (CDR)
of each call made, listing where it originated, where it went, how long it
lasted, and whether it was cut off or not. Telecoms also know how often
network outages occur in a geographical area. It's up to telecoms to
aggregate these and other forms of data, use them to anticipate churn risks
among high-value customers and then take action. If a customer calls you
with a problem, it's probably already too late.
Let's take it a step further. Wireless firms track and report monthly churn rates, as well as monthly average revenue per user (ARPU). When combined with operating margin, these figures can help investment analysts determine how much actual value a company has created with its marketing efforts – including not just current earnings, but also any value created from increasing its customers' lifetime value (LTV). In other words, is the wireless company maximizing the value of its customers – its scarcest and most valuable assets? Are its marketing decisions for combating churn and retaining customers creating or destroying enterprise value? To answer these questions, executives require a new form of measurement. We call it Return on CustomerSM.
Calculating Return on CustomerSM for Sprint
As an example, we examined the wireless division of Sprint. According to the
company's most recent quarterly report, its "Fair and Flexible" spending plans,
which allow customers to avoid overage charges for exceeding their plan minutes,
"represented the majority of Sprint's direct gross adds in the quarter"
(translation: it was this marketing initiative that drove customer acquisition).
One result is that over the last four quarters, Sprint's wireless customer base
increased by 22 percent, and the division's first-quarter operating income rose
64 percent, to $455 million.
Dig a bit deeper, however, and you'll find that Sprint's marketing efforts actually created a great deal more value for its shareholders over the last year than may be immediately apparent. Its monthly customer churn rate declined significantly, from 2.9 percent to 2.5 percent, year over year. So while its marketing program is successfully acquiring customers, it appears to us that it is also improving customer retention. This decline in the churn rate has substantially increased the lifetime values of all its customers.
When we did the math, we discovered that, in addition to the $2 billion in operating income Sprint Wireless recorded during its most recent four quarters, its customer acquisition success and its improved retention rates have created roughly the same amount of additional value (about $2 billion) in the form of increased lifetime values within its customer base. About two thirds of that extra $2 billion was created by adding new customers, while a third of it stemmed from the increased retention rate.
We calculated a Return on Customer for Sprint, over its most recent four quarters, of nearly 70 percent, a phenomenally good rate of value creation. The challenge now will be maintaining that retention rate, to keep from "giving back" the extra value that Sprint created with this year's marketing effort.
It's important to note that we are only using publicly reported information for this analysis. There are many ways companies can decrease churn, other than earning the trust of customers. In fact, if companies undermine the trust of customers to reduce churn (by locking customers into contracts, for example), they will have difficulty hanging onto the value they had created.
Additional Information:
Don Peppers and Martha Rogers, Ph.D. are co-founders of Peppers & Rogers
Group, a management consulting firm recognized as the leading authority on
customer-based business strategy. Together, they’ve co-authored five
best-selling books on the subject. Their firm helps its clients worldwide create
and execute customer-based initiatives that make a bottom-line impact.
Reprinted with permission from sas com magazine and Peppers & Rogers Group.
Most of us probably know by now that it costs us five times more to win a new customer than it does to keep an existing one. Nobody understands this better than USAA, a small little insurance and financial services company based in San Antonio, Texas—a small little $73 billion company that has 95 percent of its market! USAA specializes in serving military officers and the their families, a few years back the company included the enlisted folks as well.
Ask Bob Davis, chairman and chief executive officer, "Why does USAA deserve 95 percent of its market?" The response will go something like this, "We are committed to maintaining a sacred trust with our members and every single day is yet another opportunity to earn that trust over and over again."
Create a Sacred Bond with Customers
We realized quickly that what Bob Davis means by "sacred trust" is, in fact, the
company's love for members of the collective military family. When the first
Gulf War broke out, USAA generated a list of all members who were on duty in the
Middle East. When the troops came home, it sent a letter to them all, expressing
the company's pride and appreciation for everything they did for our country,
and welcoming them home safe. Attached was a premium refund for the entire time
they were serving in the Gulf because, as the letter essentially said, "We
figured you weren't driving your car too much."
After a presentation in which Kevin extolled the virtues of USAA, a man came up after the program and explained that eight months earlier he had lost his 20-year-old son. The father, a USAA member, explained that he was trying to figure out how to appropriately retire some minor debt his boy had on a USAA credit card. When he got on the phone with USAA, the representative told him they could deal with the boy's credit card later and then asked how the family was doing and if she could send him a couple of books on grieving. During a very emotional exchange the gentleman told Kevin that while other banks had already started sending collection notices, USAA was more concerned about the family's emotional wellbeing.
Courtship After Marriage
What USAA is doing could be referred to as "Courtship After Marriage." When
Jackie and I first started dating I was very careful to plan and choreograph
every date because I wanted to impress her and communicate just how much I liked
her. Before the date I would wash and wax the car. When I picked her up—exactly
on time—I was "Mr. Attention to Detail." I would compliment the way she looked
and the way she carried herself, I walked her out to the car and opened the door
for her and we'd go off on a perfectly executed date. At least that’s the way I
remember it.
Two and a half years after we were married I lost some of that romance and attention to detail. When I asked her out it was usually at 7:00 a.m. in the morning in front of the bathroom mirror with a mouth full of toothpaste. If she said yes, I'd say, "Be ready at 6:30 p.m." I’d come home that evening—often 15 minutes late—grab a clean shirt, jump in the car and wait for her in the driveway. If she didn't come out right away I figured that I would encourage her a little bit by honking the horn. She would finally come out, obviously not happy with me, open her own car door and my response was, "Hi honey, what do you want to do?" Now I was a jerk, what a lousy way to start a date! I stopped doing the little things I used to do to say, "You are incredibly important to me. I cherish you!"
Again, ask the people at USAA why they get 95 percent of the market and they will tell you that while the rest of the industry is out there honking the horn, they are still washing and waxing the car—courtship after marriage. What does that look like?
During some heavy ice storms in upstate New York, Stephanie Valdez, a representative of USAA, the financial-services company, received a call from a Mrs. Lawless, the elderly widow of a deceased military officer. Mrs. Lawless told Valdez that she was sick, without her medicine, and, as if that weren't enough, she had no heat and was nearly freezing. She explained that her husband had a USAA insurance policy and had instructed her that if she ever had a problem and didn't know where else to turn, she should call USAA. "He said you would take care of me," she concluded.
When Valdez retrieved the records, she discovered that the policy hadn't been maintained since the officer's death. But that didn't stop Valdez, who put her former client on hold and called the Red Cross. That afternoon, Mrs. Lawless got her medicine, and the heat was restored in her home. Mr. Lawless had told his wife that USAA would take care of her when no one else could, and Valdez was determined to make good on that promise, whether the premiums were paid or not.
Does anyone have a prayer of stealing their business with courtship after marriage like that? When we ask members of our audiences all over the world, how many are insured with USAA, there are always raised hands. When we ask, if any would be willing to switch insurance companies, the response is always an emphatic "No!"
The bond between USAA and its members reflects trust in a military culture, in which the stakes are literally life and death. General Bill Cooney, USAA's legendary former vice chairman, gave this simple example: "If you tell me you're going to be over Bosnia at a certain time and place, you had better be there, because I'm counting on you. If you're not there, I could be dead." What Cooney expressed is the exquisitely heightened expectation that people will look out for each other. And USAA has shown itself worthy of such trust more than once.
For example, Jim Middleton, president and chief executive of USAA Life Insurance Company, told us that, in July 2001, Deborah Patterson, an employee in USAA's property-and-casualty business, suggested to a member who worked at the World Trade Center in New York that he consider life insurance. The member agreed. He began the application process, and by September, the contract, including blood tests and medical examinations, had been completed. All he had to do was pay his first month's premium. Then, on September 11, 2001, two planes crashed into the World Trade Center and the member was killed. USAA immediately sent a crisis response team to Ground Zero.
Among the first people the USAA team encountered at the crisis operations center was this member's widow. In the mayhem of the tragedy, she remembered that her husband had a life-insurance policy pending with USAA. Reminiscent of how Stephanie Valdez handled Mrs. Lawless and due to the tragic and highly unusual circumstances, USAA accepted the first month's payment from the member's wife, and paid off the $125,000 policy. Jim Middleton told us that he "would do it again in a minute."
Customers Reciprocate the Loyalty they Receive
With five million members in four million households, USAA's member retention
rate is more than 96 percent, its customer satisfaction is over 98 percent and
much of its business comes from word of mouth. What does courtship after
marriage look like in your business?
Additional Information: