In 1776, Adam Smith published his seminal work, The Wealth of Nations, in which he called "division of labor" a "brilliant, good idea" that fueled the Industrial Revolution and led to today's global economy. Smith was focused on one key outcome: productivity. Pin-making was the example Smith used. Such was the book's impact on the world that we celebrate its publication on the reverse of £20 notes here in the United Kingdom.
It's 232 years later and organizations still apply this thinking. We have functions called sales, marketing, customer service, finance and IT—and then all manner of specialized tasks within each function. The silos have silos, and the pace and fractured nature of organization design have led to gaps and inconsistencies appearing at a much lower level, often between groups in the same department.
This has always been bad news for customers. But now it's bad news for companies because we've moved from a supply economy to a demand economy where customers are in control. Customer churn is the anathema of customer life cycle or service-based organizations like telcoms and financial services. High customer attrition can devastate even the most robust profit and loss statement. Having to reacquire the equivalent of 30 percent of your customer base just to stand still doesn't make financial sense.
So why are companies still more focused on customer acquisition than on retention or development?
Loyalty weapon
In my experience, it's because they are ignoring their most powerful loyalty weapon: customer service. To engender customer loyalty and retention, we first need to join up the dots across the silos. Any gaps in processes, policies or execution among functions or departments will damage the customer experience and loyalty, as well as create internal frustrations.
‘It's tough enough to integrate customer service within the same organization, but when it's outsourced, you have little or no chance.’
What typically happens, though, is that while marketing, sales and IT are developing smarter ways to attract customers and provide products, customer service is moving in the opposite direction, driven by cost. As a result, it's often outsourced to distant parts of the world. It's tough enough to integrate customer service within the same organization, but when it's outsourced, you have little or no chance.
So what should the role of customer service be in this battle for customers? First, consider why customers call the contact center. It's usually because something has gone wrong. The more we outsource services or acquire products and components from remote parts of the planet to offset falling margins, the more we strain already over-stretched processes and communications across the internal silos and the extended supply chain. The more we do that, the more problems we create. And where do all those problems end up? That's right: in customer service. Customer service is not really a silo; it's the organization's drip tray into which every error and inconsistency falls. That makes customer service the ideal place to gather all the issues created by the organization and feed these back to the operating departments so that they can prioritize which ones to fix.
In reality, very few contact centers institutionally listen to their customers and their customer service people. And when customer service has been outsourced to another organization in a remote part of the world, that feedback loop is virtually impossible. Most organizations wind up asking marketing to analyze what's going on with their own customers, when the customer service teams already know.
Those companies that do review feedback from customer service teams to identify issues are "learning organizations," and they have several competitive advantages:
- Their market responsiveness (time required to identify and fix issues) is significantly faster than those that wait for things to filter back into marketing from customer perceptions.
- Customers become engaged in the feedback process and often look for other issues once they believe their feedback is valued.
- Feedback soon trips over into advanced insight required to fully tailor products and services.
- Customers become not just loyal advocates but also raving fans and tell everyone about their experience. They are also less likely to change suppliers because they have invested so much energy into optimizing the service for them.
- Employees are inspired and feel that they are improving the company's performance by working with customers to identify and resolve issues.
- The company's cost base is significantly lower than its competitors.
Adding value
The contact center is not just a source of errors and inconsistencies, but also it is an opportunity to "add value" when your reps are engaged with the customer. I'm talking about much more than cross-selling, which people in contact centers are not generally comfortable with. This is about "helping" customers get more value or usage from your products or services and giving them the right advice based on their knowledge of the customer's individual needs—not as the result of marketing's analysis. The result is higher revenue and higher loyalty.
I really wish there were more good examples of this. But I have seen several bad examples. One company was a classic, promoting people who shaved off a quarter of a percent off operating expenses; yet I calculated that 23 percent of its controllable operating expenses was self-inflicted, created by disconnects between the silos. Not only was it incurring massive unnecessary costs, but also the fractured processes were irritating customers, damaging customer satisfaction and loyalty and frustrating employees. It's a simple calculation: Just look at the call reason codes and defection codes and analyze which ones were created by errors and inconsistencies, then multiply these by the unit costs. Forum Corp. has repeatedly found that 70 percent of defections are caused by errors or attitude.
Poor operational metrics do not help. A team manager at a tech support center I was working with told me that one of his reps got more customer compliments than the rest of his team put together. The rep took a lot of time with customers and even stayed behind after his shift to call customers from the previous day to see if they had any recurrence of the problems. But based on the metrics, which measured call-handling time, he was a poor performer! Be careful what you measure, too. The same company introduced customer satisfaction metrics by emailing customers after service calls. The agents very quickly worked out that if they had a very difficult customer, it was best to report that the person would not provide an email address!
Customer satisfaction and loyalty are outcomes, largely the result of the way the organization is designed and managed. Generally no one person is responsible for that; it's a collective effort. I've always found that creating team-based customer satisfaction performance is the best way to break down the barriers between the silos and get customer service working with sales and marketing to drive down costs and increase both customer loyalty and revenue. That's a win for customers and a win for the company. It's a win for employees, too.