Serving for the Match

Most people would agree that there is some value in providing good service. An abundance of literature exists that state great customer service makes a company more profitable. However, there are also many examples of companies with excellent service that suffer from poor financial performance.
The reality that we all need to accept is that good service costs money and because it costs so much, companies struggle with the question of what their return on investment should be. Some even ask whether the investment is worth making at all.
The question is a good one and one that all companies should ask because simply assuming that good service is a good investment is flawed thinking. Unfortunately, few companies have had success calculating the ROI of customer service, making it difficult for them to determine whether their money will be, or has been, well spent.
For some it is simple – they believe unequivocally that good service always leads to higher profits. Companies launch service crusades, making grand promises to their customers as they whip their staff into a frenzy of friendly service activity. They intone ritual phrases, like, “We’re dedicated to excellence,” and “The customer is number one.”
In the end though they are frustrated as the miracle that they had hoped for seldom appears. Customers may be more satisfied, but the expected rise in profitability rarely occurs. At this point many companies experience a crisis in faith and revert to their old practices: cost-cutting, reductions in staff, new ad campaigns.
In our view a company needs to start asking itself some questions like “What, specifically, do we want customers to do more of or less of?” Attitudes (such as satisfaction) and feelings (such as delight) aren’t included – only measurable, observable behaviors, such as, “use our service more often,” “call our support line less often,” “purchase more items on an average visit to the store,” and “return merchandise less frequently.”
The company should next make a second list composed of specific, measurable service activities that are likely to affect desired customer behaviors. The company asks itself, “What can employees (or machines or web sites) do more of or less of, or do differently, to influence how customers act?” If it can’t be measured, if it can’t be trained (or programmed) or if it has no likely effect on measurable customer behaviors that effect profit, it is removed it from the list.
The company needs to determine next what competencies, knowledge, skills and abilities are needed to provide the service that will affect the aforementioned desired customer behaviors? Then, incentives and measurement: What rewards will be most effective at reinforcing the use of those skills? What metrics need to be gathered to trigger rewards?
Finally the organization needs to link the first list (customer behaviors) to costs and revenues. For example, what would be the effect on revenue of increasing the average customer purchase by one dollar? What would be effect on costs if the volume of complaints to call centers were reduced by five percentage points? It quickly becomes clear that even a small change in some customer behaviors can have a substantial financial impact. It also becomes clear which service changes will have the biggest effect.
The only way to answer these questions is to experiment. The company must identify the most promising service investments and test them on a small scale. And the testing is not a one off but is iterative, allowing the company to fine-tune its tactics and find the optimal mix of service activities that result in the highest return on investment.
Many enlightened companies are transforming their business and operations to align with customers. New tools, processes, and operations can make a number of ROI connections related to financials, customer satisfaction, or operational efficiency. Leaders just need make the decision to try them…..