Improving customer service while reducing costs-to-serve

Jack Springman of the UK firm Business & Decision outlines the key steps for firms seeking to increase customer satisfaction while reducing costs - with the end result that the costs-to-serve is optimised.

Reducing costs and growing revenue are seen as alternatives a business must choose between, perhaps not mutually exclusive but certainly opposing forces. In reality they are two sides of the same coin – businesses rarely have the funds to invest and grow if they have not sharply prioritised expenditure and cut to the bone that which adds little value to either the business or customers. Also initiatives which reduce cost can simultaneously improve customers’ experience, the business ability to generate revenue or both. Businesses looking to optimise their costs to serve should consider enacting the following, if they have not already.

The first potential action is transfer customers from field sales account managers to telephone account managers. This offers a number of savings - typically an office-based sales manager can handle three times as many customer accounts as someone in the field through not having to travel. Secondly, salary levels are typically lower. And thirdly, there is no need for a company car or other travel costs.

In addition this transfer can improve the customer’s experience – smaller customers who might have only been visited twice a year will get a regular monthly call. There is no need for any contact to last an hour just because the salesman has travelled an hour to get there. Equally office-based account managers are easier for customers to contact due to their not spending time in lengthy face-to-face meetings or driving. From the customers’ point of view, service is both more timely and time spent in conversations is more productive.

From the business point of view there are benefits arising from more direct supervision. Pricing corridors can be more strictly enforced, as can process adherence (such as making sure all interactions are captured in the CRM system, transforming information that would otherwise rest in salesmen’s heads into corporate assets). Also there is greater opportunity to identify reasons for below average performance then deliver the necessary coaching.

Not all customers can be transferred to office-based account managers. Larger customers may demand a regular field sales manager visit; and when customers’ needs are complex or there are multiple buying points, regular visits make sense for the business as well. Even in such circumstances there are typically opportunities to transfer sales support activities currently performed by field sales managers to office-based staff. For example, running reports to prepare for meetings, preparing proposals or quotes, dealing with administration tasks, ensuring queries are addressed by the customer service team in the first instance rather than sales managers. When analysed, the amount of time spent by sales managers doing the job they are supposed to – selling to new customers, growing existing accounts – can be scarily low. Relieving them of ancillary tasks, both ensures they serve their customers better and generate more revenue for the company.

Scope for win-wins?

If transferring customers and activities to office-based staff is the first stage, the second is the transfer of activities performed by office-based staff to self-service. Providing an additional channel increases choice for customers. They can perform routine activities – place repeat orders, submit requests – unconstrained by suppliers’ working hours (particularly relevant for owner-managed businesses where much administration is done during evenings or at weekends), in a time-efficient manner, without fear of being sold to. Self-service works particularly well with smaller customers where the opportunity for cross-selling is limited – size of customer and interaction complexity being the key determinants of what is transferred to the web channel. For the business it means information is directly entered into its systems by customers, so fewer people are required.

In addition to direct system entry, queries can be answered by staff in lower cost locations via email. And the next stage is the transfer of activities to lower cost locations – whether that be onshore (e.g. in development areas where staff costs are lower and grants are available), near-shore (Eastern Europe, North Africa) or traditional offshore locations such as India. Customer satisfaction ratings typically dip when activities are first transferred but rise again once the transition period is over, frequently surpassing previous levels. While accent and culture can cause communication issues, there are a number of positives. Those performing service roles are often better educated than those they have replaced. Secondly, they see customer service as a career. A number of Eastern European cities have specialised in customer service delivery, developing thriving service centre industries as a result and now see themselves as having surpassed traditional onshore locations in service centre management expertise.

Sitting across all these opportunities is process efficiency. Typically a distinction is made between increased efficiency (reducing costs) and increased effectiveness (improving service). But rectifying service breakdowns – typically when the service representative fielding a customer call needs to make internal calls (sales, supply chain and logistics) to resolve the query – improves both. The customer’s query is resolved quicker – ideally at first contact – and the employee costs incurred in resolution (both for customer service and other staff) are also reduced. Activities which consume a lot of time offer greatest scope for such win-wins.

Any business seeking to improve service effectiveness should start by looking at opportunities for improving service efficiency. Getting the basics right will not deliver a differentiated customer experience – there is asymmetry in what satisfies and what delights – but it does provide opportunities to increase customer satisfaction while reducing costs. And focusing on both together will help optimise costs-to-serve.