A collection of articles written by Customer 1st

Why Should Organisations Invest in Service Excellence?

5th April 2011 | Posted in Service Excellence

More and more, organisations recognise that customers have a direct impact on customer loyalty. Service is now the differentiator, and it affects brand reputation and bottom-line performance. Yet many service leaders and managers still struggle to persuade their organisation to invest in customer service learning and training. In recent years, I have been asked the same question over and over again: “How do I obtain evidence to prove that there is a return on investing in service excellence?

I am pleased to say that the Institute of Customer Service decided to conduct its most comprehensive piece of research to date, “Return on Investment in Customer Service: The Bottom Line Report,” on this very topic.

The report focuses on service providers in the private, public, and third sectors and looks for evidence of the financial returns of customer service, including ROI, profit, revenue, business growth, business value, share-of-wallet, customer equity, and lifetime value of the customer.

Survey Findings

The study demonstrates conclusively that the relationships that organisations forge with customers are at the heart of customer service success and the ROI. The nature of this relationship varied significantly from one survey respondent to another. However, there was a remarkable consistency between respondents in the survey on the customer service activities that they believe lead to the highest return. Most significantly, 81 percent of the sample believe that gaining an understanding from the customer viewpoint is very likely to lead to a ROI; 74 percent said that gathering and acting on customer feedback is also very likely to produce a positive ROI.

The report identifies eight activities respondents believe are likely to result in the highest return on investment:

1. Gaining understanding of the customer viewpoint
2. Gathering and acting on customer feedback
3. Training and development of staff in soft skills
4. Developing processes from a customer point of view
5. Selecting the right staff
6. Being responsive in terms of quality
7. Empowering staff
8. Being responsive in terms of speed

Having the right staff with an “inborn” attitude to customer service and the freedom and capabilities to make customer-based decisions are seen as increasingly important contributors to ROI. The report points to the increasing use of new and more sophisticated methods for evaluating customer satisfaction or experience. These are often underpinned by innovative computer software, which is able to track patterns of feedback and other behavioural elements in order to evaluate qualitative data such as human emotions. Some organisations are also exploring alternative, more indirect sources of customer feedback—for example, via Twitter, Facebook, and other social networking sites. To me, all of this can only be going in the right direction. It is moving organisations into new territory in which they can begin to acquire comprehensive and up-to-date measurements of customer satisfaction, and this must surely be the key to gaining accurate ROI data.

Organisations believe they have real evidence of ROI from investing in customer satisfaction, the quality of customer-facing staff, and customer loyalty. The survey suggests, though, that ROI in the future will increasingly come from activities that are difficult to measure, such as trust, empathy, or emotional connection. For example, 53 percent of the survey respondents said that “soft” or “emotional” activities, such as treating customers as individuals, are very likely to lead to positive ROI, compared to just 38 percent for “hard” or measurable activities. More complex, people-driven concepts, such as the “culture of service quality” and the “whole customer experience” are seen as much more important in the future than at present. Today's outstanding organisations are now seeking new ways to measure these variables. In fact, according to the report, the trend points towards the behavioural aspects of customer service becoming the critical differentiators over the next five years, so in my opinion, these are the variables that we must find ways of measuring. There is a clear challenge here for chief financial officers and other board-level executives to develop new methods to quantify the value of hard-to-measure factors.

Most importantly, during difficult economic times, senior executives and customer service managers need to draw on and develop this sort of robust analysis to champion investment decisions and ring-fence essential customer service activities. So, let's see more comprehensive measurement of service quality and better, clearer information on exactly how spending to improve customer service does actually work, producing a healthy ROI.