Companies are falling behind with digital customer service

Recently, Brand Embassy, the technology company I founded seven years ago, have won a $1M deal with one of the leading telecommunications companies in Europe. For over six years, we pitched the customer the idea of switching from old-fashioned phone customer service to modern digital and social customer care, but we were not successful. But suddenly that changed. Why? Recently, the company has faced serious financial difficulties and unless they fundamentally transform their business very soon, they might go under. Digital customer care is no longer priority number #99, but the key solution to multiply contact centers productivity while increasing revenues. Our customer is one of only few I have seen to fully embrace digital customer service, this post is for all company executives that wonder, whether they do enough in order to avoid facing similar difficulties like our customer.

Here’s the chicken and egg problem

Although highly intelligent digital technologies that improve both customer satisfaction and company bottom-lines are widely accessible on the market, they are not sufficiently used. Companies fail to implement them and customers do not use them enough either. Should companies wait for customers to motivate them strongly to innovate, or should customers wait on companies to give them more convenient means of shopping and being taken care of? 

It’s the opinion of the author that companies need to take the leap of faith and invest into providing better digital capabilities for their customers. Why? Because they know they should. Even the smallest startup company can easily collect direct customer feedback in real-time and analyze the optimal communication channels, desired customer use cases and the product offerings their consumers are asking for. Implementing them is a business responsibility. In many cases however, as you will learn in the upcoming pages, companies are failing to bring digital to life. 

While customers already use digital channels, as indicated in the previous chapter, companies are falling behind and still excessively rely on traditional channels. To take a look at mobile operators for example, generally well-established enterprises offer a variety of digital products to mass markets, but only 13% of all digital interactions processed by mobile operators are service-based, and customers do not generally use digital. Although consumers frequently use digital channels for day-to-day activities, with 69% reading online news and 59% using online banking, only 10-15% connect with their mobile operator by using digital channels in order to resolve their issues. Out of those, the largest group (30%) renew and purchase new services, and roughly one in four consumers pays their monthly bills online. Fewer than one in eight consumers uses digital channels to resolve customer service inquiries, as mentioned earlier. 

Is it because both customers and companies don’t actually want to use these channels? I don’t think so. Look at how we use digital gadgets and software in almost every part of our daily lives. Is it because the technologies would be too hard for the companies to implement or too costly? That might be partially true, because bringing change to large enterprises is generally quite time consuming, as every corporate manager will confirm. However, blaming slow corporate processes for a lack of business innovation would be too shortsighted. Technology vendors are also partially to blame, as some pretty smart niche technologies lack seamless integration into the wider technology stack, and large-scale technologies are sometimes clunky and not easy to implement. 

McKinsey, 2016

The problem with self-service

For many years, many people believed self-service was the answer to the ever-growing expense of customer service and the increasing impatience of customers. It apparently makes sense–as customers get smarter with their requests, they are not shy in seeking resolutions to their requests by themselves online. If companies published relevant, easy to search and digest information on their websites, why wouldn’t a consumer scared of being stuck on a consumer hotline take care of herself? Although it does make sense and many consumers use online self-service forums, publicly accessible web-based knowledge bases or self-service mobile apps, many find the self-service less helpful than they would wish. Recent research by Youbiquity shows that 72% of banking customers using self-service rated the process as “not easy.” 

In addition, 28% of complaining customers said that the online self-service process failed, and another 37% said they needed to contact the organization in other ways. Overall, 69% of customers contacted the company more than twice when trying to resolve a complaint. 

Clearly, self-service is actually making many customer service-related issues costly and inefficient while also making customers dissatisfied. Businesses should use self-service as an addition to human-based customer service and conversation-based bots that can use the same self-service resources. But they should be put into a more easily digestible form for the regular impatient customer and companies should always have a human advisor one click away to help a consumer whose emotions get too high. 

Digital self-service interactions often fail consumers. Youbiquity, 2016

The effects of new technology on customer service

When it comes to the future of customer service there are basically two competing opinions. Some experts say: “The days are numbered for human customer service agents! Robots will take all our jobs.” Others say: “Computers will never match the ever-growing expectations of customers! Humans will prevail.” Let’s take a look at both of these opinions and try to chart the way forward for companies, customers and service agents. 

First-level customer service will be automated

It’s no longer a question whether customer service will be automated, it’s only a question of how much and when. 

A recent Tata Consultancy Services survey shows that almost a third of major companies are now using AI in customer service. In the customer service industry, Merchant Bank, a leading credit card issuer in China, handles 1.5-2 million customer inquiries on a daily basis by using an automated chatbot, eliminating the need for hiring hundreds of customer service agents. And more banks across the world are launching their versions of intelligent bots or advisors: Erica was brought to life by Bank of America, providing account balance information, sending notifications and handling basic customer service requests. Ally Bank, another American consumer bank, was one of the first to offer virtual assistant support with its Ally Assist bot available in their mobile banking application. And you can go to the website of your own bank and most likely you’ll find their version of a virtual assistant.

Based on research, case studies of technology disrupters, and first-hand experience in the customer service technology market, I assume that all customer service activities will be automated at some point, excluding only two categories of requests: complex requests that require creativity or interpersonal skills, and those requiring empathy and a high degree of emotional intelligence. This is especially true for first-level customer service, or light customer service issues in which agents do not deal with a high level of technical expertise. 

Protected revenues through omnichannel experience

The omnichannel mantra has been a part of the discussions of virtually every customer service expert around the world for many years. Use the keyword “omnichannel” in response to any random customer service-related question and chances are, you are going to impress your colleagues. A little harder follow-up question might be, what do you actually mean by omnichannel, as the word can have so many different meanings for day-to-day business. Most experts would generally agree that omnichannel customer experience means that customers get the same level, scope and quality of experience regardless of the communication channel they have used. For those readers bored by theoretical definitions I offer you a simple explanation: “Thank you for your question, this channel is not used for customer service, contact us at 800-234-123” means bad customer service. “Thank your for your questions sent to our email, our assistant will call your telephone shortly” is slightly better, and is often called multichannel customer service. And “Thank your for your question, let me help you here and now…” is omnichannel customer service. You can easily judge which makes you feel most appreciated. 

Now, let’s talk about the effects of omnichannel for business. The link between poor customer service and churn is clear. How clear? Well, Oracle’s Customer Experience Impact Report reveals that the two central reasons customers leave a company are rude, incompetent staff, and slow service. In addition, according to Forum Cooperation, poor service is the reason for 70% of customer churn. 

In addition, McKinsey shows that across industries, successful projects for optimizing customer experience typically achieve revenue growth of 5% to 10% and cost reductions of 15% to 25% within just two or three years. Moreover, companies offering an exceptional customer experience can exceed the gross margins of their competitors by more than 26% while they make their employees happier and simplify their end-to-end operations. 

Research from Gartner suggests that the right omnichannel approach can reduce customer frustration and improve loyalty. According to a study by Forrester, digital touchpoints affect approximately 49% of total U.S. retail sales. Additionally, a Nielsen consumer survey found that stores with digital signs near checkout lines, for example, have witnessed increases in sales of up to 33%.  

Although implementing omnichannel customer experience can be a painful process for a business of any size (and generally more painful as the business grows), the positives are clear. With the increasing use of AI and machine learning technologies the financial benefits of omnichannel are growing steadily. 

New revenues through service-to-sales 

Now, let’s talk money. And I mean real business. As customers move from traditional to digital channels, companies risk losing revenues that have been traditionally generated on upsells and cross sales via voice calls. “And now, Frank, since we just fixed your problem, why don’t you take a look at our newest iPhone?” For a telecommunications company in Europe with 10 million phone calls in the call center each year, this risk is as high as $148 million (€128 million), according to recent research by McKinsey. For many companies, that’s the difference between staying profitable or going under. Moreover, as customers increasingly use digital channels more frequently than phones, it is estimated that an additional $83 million (€72 million) can be generated through the efficient use of digital channels for so-called Service to Sales opportunities. 

What is Service to Sales? Ask any financial director in any big company what customer service means to her, and she’ll respond “Cost!” Ask startup founders or small company owners what customer service means to them and many will respond “An opportunity! To build loyalty, to build trust, to sell more.” Not that some smart people in enterprises wouldn't get it, but contact center departments in enterprises are to be found in Cost of Sales lines on balance sheets. That means heads of finance, as explained earlier, are doing everything they can to cut the customer service cost as much as they can, so they can invest more into sales and marketing. Moreover, customer service agents are not hired with the expectation of building value for the company, but rather of causing the smallest harm by staying low, not costing too much and picking up and hanging up phones quickly so they can deal with as many customers as possible. That's a traditional view of customer service. 

Service to Sales, on the contrary, is a concept where customer service is considered as a revenue-generating business unit. Selling through caring. The idea is simple: Since customers now spend less and less time with brands, the opportunity to build long-lasting relationships is very limited. Customers who have an issue, however, don’t hesitate to contact the brand and have a discussion. This is an amazing opportunity for the company to not only turn a dissatisfied customer into a loyal supporter, but also to recommend relevant products and sell more. 

Service to Sales can be more efficient in generating sales than marketing. Unlike an online banner that has been displayed to a customer based on her previous product interest during her last website visit (in the best-case scenario), a customer service agent has the opportunity to actually speak with the customer. They can ask follow-up questions, identify real interests and desires and drive the conversation to the most relevant product or service offered on the most relevant terms for the customer. That’s CRM on steroids. 

Legend: Assumptions: 20 months of contract lifetime assumed, operator with 10 million call center calls/year, ARPU €20/month, 1% conversion rate for digital, 4% for call center, SOURCE: McKinsey iService/eCare tool, team analysis

Customer service agents can leverage their access to detailed customer service profiles and previously purchased products, and get automatically advised what “Next best product to buy,” or they can determine on their own what are the best product matches for the customer. All this can be done easily within a few seconds while the customer is being assigned within a live chat conversation, a video call or a messaging session. 

Moreover, with the rapidly growing capabilities of AI and Natural Language Processing, many of these conversations can be proactively initiated by chatbots while a customer is browsing the website, and relevant recommendations and questions can initiate a valuable discussion. Service to Sales is an opportunity for companies to generate revenue through customer service. It's an opportunity currently overlooked by many companies. Next time you deal with customer service, ask yourself: “Has the company used this unique opportunity for building a relationship with me? Have they offered me something I can’t wait to have?”

Chapter summary: Service businesses are gradually becoming commodities, with customer experience as the competitive differentiator. Timely and empathetic customer service can provide long-lasting positive experiences that lead to higher revenues and customer retention. Businesses should focus on the effective use of currently available technologies to build omnichannel customer service that helps to automate light customer service inquiries and leverage Service to Sales opportunities. 

This was an excerpt from a book “Customer Service in the Transhuman Age”, you can purchase it on Amazon right now.

Don’t have time for reading? See this exhaustive Slideshare presentation with the key book findings: