customer service: achieving excellence through a company-wide approach
TRANSCRIPT
CUSTOMER SERVICE:ACHIEVING EXCELLENCE THROUGH A COMPANY-WIDE APPROACH
PERSPECTIVE APRIL 2014
Alberto Griselli, Charles Monteux
Customer Service: achieving excellence through a company-wide approach
Published byValue Partners Management Consulting Spavia Vespri Siciliani 920146 Milan, Italy
April 2014
Written by:Alberto Griselli, Charles Monteux
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PERSPECTIVE CUSTOMER SERVICE
INTRODUCTION 5
BEYOND THE BOUNDARIES OF CUSTOMER SERVICE 7
THE CHALLENGES TO ACHIEVE A NEW PARADIGM 8
GUIDING PRINCIPLES FOR CUSTOMER SERVICE EXCELLENCE 9
CONCLUSIONS 13
AUTHORS 14
CONTENTS
EXHIBIT 1Benchmarking matrix: cost-to-serve vs. customer satisfaction Players from the Telco sector; Latest available data (2011-2013)
Source: Value Partners analysis Note: Data has been normalized to make it comparable; (1) Customer satisfaction index refers to customer satisfaction surveys results; (2) Cost-to-serve index refers to average annual caring costs per subscriber
CUSTOMER SATISFACTION INDEX (1) LOW
LatAm 1
LatAm 4
Asia 3
Middle East 1
LatAm 3
Asia 2
Asia 1
Asia 4
LatAm 2
Europe 1
HIGH
CO
ST-
TO-S
ER
VE
IND
EX
(2)
LO
WH
IGH
4 – 5
PERSPECTIVE CUSTOMER SERVICE
INTRODUCTION
It is common knowledge that within al-most all industries, from financial services to telecoms providers and retailers, satis-fied customers generate more value to companies than their less happy counter-parts. High quality customer service is a key lever in driving this satisfaction and generating loyalty, and is thus criti-cal in safeguarding revenue growth. However, there are times when customer care gets overlooked, particularly during periods of rapid market expansion, yet as markets begin to approach maturity it becomes of paramount importance.
In recent years, successfully serving customer needs has presented greater challenges than ever before. Products and service offerings have rapidly increased, both in terms of number and complexity. Consumers are more demanding, in-formed and sophisticated, often expecting immediate, ‘on-demand’ support for their queries. This has been further compli-cated as traditional customer segments have been divided into sub-segments, each with their own unique particularities. Touch points have also proliferated, with consumers using multiple channels to complete their transactions. As a result, companies have tough decisions to make in order to find the right balance between the quality of service delivered and the corresponding ‘cost-to-serve’.
This balance is becoming particularly critical in emerging economies, such as those in Latin America, where a burgeoning middle class has recently gained access to a range of new serv-ices.
Between 2003 and 2009, the size of the middle class in Latin America and the Caribbean grew by 50% (World Bank1), and is expected to grow even further, from approximately 300 million in 2010 to 360 million by 2020 (BBVA Research2). Despite their interest and excitement in these newly available services, these customers have typically experienced low service levels, especially when compared to more developed markets. In Brazil, for instance, the ratio of com-plaints by customers in PROCON3, a con-sumer protection agency, grew 15% per year between 2009 and 2012 for a group of leading companies in the telecoms and banking industry sectors.
In these markets, whilst the quality of service may be low, the cost-to-serve is relatively high, exposing how companies are struggling to address this trade-off (Exhibit 1).
Over the past few years, Value Partners has supported a wide range of companies from different industries to evolve their customer care models in order to achieve excellence. This paper provides insights on the required steps to deliver this trans-formation journey.
1 Economic mobility and the rise of Latin American middle class, World Bank Latin American and Caribbean Studies, 2013.2 Emerging middle class in “fast track” mode, BBVA Research, 2013. 3 Boletim Sindec, Sistema Nacional de Informações de Defesa do Consumidor, 2012.
EXHIBIT 2A well-defined customer care lifecycle exists, with clear expectations for clients and companies Customer Care Lifecycle Framework
Source: Value Partners analysis
2
CONTACT CHANNEL
CUSTOMER CARE LIFECYCLE
CUSTOMER EXPERIENCE
MULTICHANNEL / CROSS-CHANNEL
INFRASTRUCTURE / SYSTEMSCROSS-FUNCTIONAL
COORDINATION
PROCESSES / PEOPLE PRODUCT CONCEPT
......
...
CONVENIENCE
EFFICIENCY
CLIENTCOMPANY
SOLVE PROBLEM
ACCESS
NO CALL
REDUCE DEMAND
1 3
NEED ISSUERESOLUTION
6 – 7
CLIENT
Expectation Improvement Levers
PERSPECTIVE CUSTOMER SERVICE
From a customer’s perspective, a well-defined customer care lifecycle exists that can be classified into three sepa-rate steps, ‘need’, ‘contact channel’ and ‘issue resolution’. The customer’s need is generated from an enquiry, request or issue that they may face during the exchange of goods/services. The process then advances to the contact channel phase. This may be a single, multiple or cross-channel interac-tion, either determined by the cus-tomer’s convenience requirements or influenced by the company’s desire to maximize efficiency. It is the customer expectation that the process then concludes with the successful and timely resolution of the request (Exhibit 2).
Traditionally, the primary focus of cus-tomer service has been the efficient and appropriate resolution of client queries. Major attention has thus been given to indicators such as average call handling time, abandon rate, IVR retention, con-tact unit costs and satisfaction indices which are all designed to improve the operational performance of the contact center, while reducing costs and manag-ing customer satisfaction.
The proliferation of touch points and ongoing changes in customer prefer-ences have raised many questions surrounding channel management. While the initial approach was to simply move customers to low cost channels and thus improve profitability, there has been an increasing focus on the optimal use of multiple channels which lead to an improved customer experience. As a result, new digital methods of communication are considered more and more as complementary channels instead of replacements to traditional ones (multichannel approach).
However, although the above are all important measures, it is necessary to go beyond the boundaries of the cus-tomer service department to achieve excellence in customer care. A key aspect of this is for companies take a more holistic end-to-end approach to delivering customer service. In doing so, companies would begin to better understand the genesis of customer queries and thus proactively address, and hence reduce, the number that must be dealt with.
BEYOND THE BOUNDARIES OF CUSTOMER SERVICE
8 – 9
Whilst the benefits of this holistic ap-proach may be clear, Value Partners believes there are a number of chal-lenges that companies typically face in embracing this new approach to customer service:
The task is perceived as monumental: accountability for customer service needs to widen to include the entire company rather than a few select func-tions within the organization. However, the required mobilization to achieve this appears too large - people, organi-zational structure, governance model, processes and technologies - and potentially distracting from short-term priorities and objectives.
Solutions require end-to-end coherence: when a client makes a specific query, its solution typically involves multiple functions or departments within the organization. Effective solutions require alignment across all of the building blocks within a company. It is therefore common to set-up ad-hoc multifunc-tional working teams to address the most critical occurrences (in terms of customer satisfaction or volumes/costs). Nonetheless this approach is limited in scope and time, often tactical in nature and without proper empowerment, is limited in its effectiveness and sustain-ability.
It is difficult to quantify impact: organizations struggle to link internal performance and quality metrics to customer satisfaction. As a result, it may be difficult to quantify the con-nection between the large short term costs of deploying organization-wide change and the corresponding long term influence on customer loyalty, attractiveness and, ultimately, revenue growth.
As a consequence, commitment from top levels of management is not certain: whilst awareness of the importance of developing customer service from a different perspective undoubtedly exists, it is not necessarily matched by the willingness to embark on the required long-term journey.
It is our view, however, that the afore-mentioned barriers can, and should, be broken so that companies in emerg-ing markets could achieve a new para-digm in customer service, both in terms of improved customer satisfaction and a reduced cost-to-serve. In order to do this successfully, Value Partners believes that companies willing to embark on such a journey and reap the benefits of such actions will need to abide by a set of guiding principles.
THE CHALLENGES TO ACHIEVEA NEW PARADIGM
PERSPECTIVE CUSTOMER SERVICE
a) Priorities and actions should be determined by a complete rethink of customer contact reasons
It is our experience that many compa-nies devote the majority of their effort to figure out how to manage and opti-mize the treatment of any given custom-er contact, though may often neglect the root-cause of the query itself.
This effect is often exacerbated by the fact that companies often classify customer requests using an inappropri-ate system or taxonomy, as such the true nature of the issue may be lost as the request is processed. In order to address the limitations of this approach, it is critical to completely “rethink” and redesign customer contact codes in order to ensure:
• a clear link between the contact code and the reason for the contact
• ownership and accountability within the organization to address the root-cause of the contact
This point is illustrated well with an example from Latin America where it is relatively common among service com-panies to receive a large number of en-quiries that “request a second invoice”. However, such a generic contact code can hide the true cause of the issue and makes it difficult to assign ownership of the problem’s solution.
Once the motivations for the calls are analysed, it becomes clear that the causes of these requests can vary greatly between customers. Some are related to a “change in address”, others to a “late invoice arrival” and yet others to “incorrect charges”. From a simple root-cause analysis it is thus clear that a range of solutions are required to solve this problem. However, these solutions would only be made possible through the introduction of new clas sification systems which would enable the deliv-ery of clear accountability to different parts of the organization.
GUIDING PRINCIPLES FOR CUSTOMER SERVICE EXCELLENCE
CUSTOMER CONTACT RATE CUSTOMER CARE COSTS
EXHIBIT 3Case study: Latam player results
Source: Value Partners analysis
POSITIVE EBITDA CONTRIBUTION IN THE RANGE OF 20-60 BPS
-40%
Q1 Q4
-30%
Q1 Q4
SATISFACTION
Q1 Q4Q3Q2
1 0 %
10 – 11
PERSPECTIVE CUSTOMER SERVICE
c) Accountability needs to be re-allocated to include all functions and external partners that contribute to the generation of customer queries
Last but not least, the responsibility for reducing the number of customer queries should be held by the relevant parts of the organization where these claims originate (including third parties covering activities within the value-chain). As part of this, the directors, who are responsible for specific contact categories, should be held accountable for the reduction of query rates within their control.
Whilst the “tight” activity of the Cus-tomer Service Committee should be sufficient to ensure the relevant transi-tion in accountability, the ‘stickiness’ and compliance of these changes may need to be further reinforced through the review of management incentives, including potential charge-back of customer service costs to responsible functions and/or third parties.
b) A company-wide governance model is required, with strong commitment from top-level management
As previously mentioned, company-wide engagement is critical to address the root-cause of client requests. Grouping queries by ownership is the first step to build quantitative aware-ness of the origin of customer service requests, yet widespread engagement needs to be ensured for systematic solu-tions to be designed and implemented.
One effective possibility is to set-up a permanent “Customer Service Com-mittee” (e.g. CEO/managing director and first line of directors) to define the program’s ambition, its targets and priorities, and to monitor its progress on a regular basis. The Committee should also steer the change management program required to promote the wider participation of the organization in the reduction of query rates.
Whilst working for a leading mobile operator in Latam, the results of this approach were very impressive: a 40% reduction in customer contact rate, a 30% reduction in customer care costs and a 10% improvement in customer satisfaction during a nine month period (Exhibit 3).
Amazon.com, the omnipresent online retailer, consistently strives for customer services excellence, aiming “to be Earth’s most customer-centric company”. As such, Amazon does not simply focus on resolving customer issues, the company takes a more proactive approach by seeking to avoid the need for customer queries in the first instance (and as part of this strategy, Amazon also educates customers in the use of self-service channels).
In short, Amazon has created an organizational culture which drives the company to drill-down to the root causes of customer issues, thereby reducing their occurrence in the first instance. Amazon achieved a staggering 85% reduction in contact per order rate, whilst simultaneously handling a 12-fold increase in revenues.
AMAZON.COM CASE
Amazon contact per order index
YEAR 0 YEAR 4 YEAR 8
1 5 12
Revenues index 100
45
15
12 – 13
Source: The Best Service is No Service – How to Liberate Your Customers from Customer Service, Keep Them Happy and Control Costs, Bill Price and David Jaffe; Value Partners analysis
PERSPECTIVE CUSTOMER SERVICE
It is our view that the aforementioned barriers can, and should be broken in order for companies in emerging markets to achieve customer care excellence
CONCLUSIONS
The approach described within this perspective is one that has been tried, tested and proven in markets with high expectations for customer service around the world.
As such, its implementation will al-low companies in the Latam region to achieve a new paradigm in customer satisfaction and cost-to-serve.
Whilst the journey to implementation requires commitment, discipline and hard work, the potential rewards are significant and include double-digit reductions in query rates per year, con-current increase in customer satisfac-tion and positive EBITDA contribution in the range of 20-60 basis points.
Bibliography
Anton, J., Belfiore, B., 2010, BenchmarkPortal, LLC. & Purdue Research Foundation. “Banking industry benchmark report: Best-in-class call center performance”
Duncan, E., Jones, C., Rawson, A., 2013, Harvard Business Review. “The truth about customer experience”
Echo Research, prepared for American Express, 2012. “Global Customer Service Barometer”
Gitomer, J., 2010. “Customer satisfaction is worthless, customer loyalty is priceless”
Price, B., Jaffe, D., 2008. “The best service is no service: how to liberate your customers from customer service, keep them happy, and control costs”
Tess, D., Parry, M., 2010, Value Partners Perspective. “Customer care for Telecom operators: from management headache to source of competitive advantage”
14 – 15
AUTHORS
ALBERTO GRISELLIDirector, São Paulo Office
CHARLES MONTEUXSenior Engagement Manager, São Paulo Office
PERSPECTIVE CUSTOMER SERVICE
High quality customer service is a key lever in driving this satisfaction and generating loyalty, and is thus critical in safeguarding revenue growth.
Copyright © Value PartnersManagement Consulting SpaAll rights reserved
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