E-Service: Strategies for Success in the Customer Age
Global competition is ferocious. Companies must work harder than ever before to gain and keep customers, and to do so at a competitive cost. Welcome to the age of empowered customers.
Thanks to investments in ERP systems and supply chain management, quality is up while costs and cycle times are squeezed to what were unthinkable levels just a few years ago. Trouble is, these optimized production methods and cost efficiencies are available to one and all. Advantage: None.
How about exploiting product superiority? That's also about as difficult as convincing a VC to fund a new dot-com. The Internet is partly to blame, as business strategy guru Michael Porter pointed out in a Fast Company interview: "It's incredibly arrogant for a company to believe it can deliver the same sort of product that its rivals do and actually do better for very long. That's especially true today, when the flow of information and capital is incredibly fast."
These global trends explain why customer relationship management — a business strategy to get, grow, and retain the right customers — is on the minds of most CEOs. And why analyst firms estimate that enterprises worldwide will spend about $20 billion on CRM and sell-side e-business applications by 2003.
Savvy executives have long realized the importance of service in building customer loyalty, the fuel for long-term profitable growth. Now customers are increasingly expecting service to be available anytime, anywhere. As Internet consultant and noted author Jim Sterne says, "The genie's out of the bottle. I call it customer expectation inflation and the demand dilemma. Customers simply demand better service, on the Web and in stores, and that's how it is."
Internet-based customer service, or e-service, enables smart businesses to improve service levels and increase loyalty, while saving money. Companies large and small are adopting innovative Internet-based technologies such as Web self-help, email response, live chat, and voice over IP. But technology is only part of the puzzle. To enhance your odds for success, define business objectives and expected returns before buying a solution, plan the e-service implementation thoroughly, and prepare to improve it constantly with ongoing customer feedback.
Wielded correctly, e-service is a powerful weapon in today's business jungle. It's your job to determine what service customers want, how they want it, and how youre going to deliver it. Before your competition beats you to the punch.
Why E-Service?
No matter what business youre in, youre really in the customer business. Are you doing a good job "manufacturing" customer relationships — your company's No. 1 asset? Although accountants don't put "relationships" on the balance sheet, they should. In the final analysis, the real value of any business is its supply of loyal and profitable customers.
Over the past decade CRM has evolved far beyond basic sales and service automation tools for employees. As online customer relationships became more important, the CRM industry responded with a proliferation of e-CRM solutions for online marketing, sales, and service.
The Bottom Line
The goal of e-service is to give customers around-the-clock access to easy, cost-effective online self-service. Moving routine interactions online saves Cisco Systems nearly $270 million annually — with increased customer satisfaction. Today over 80 percent of all Cisco customer support questions are answered by Web self-service, vaporizing an estimated 75,000 phone calls per month. Customers can even take delivery of software online.
This is effective CRM in action because value flows both ways: customers get what they want faster, and Cisco saves money as its people are freed up for more valuable activities. Result: a positive profit spiral that loyalty guru Frederick Reichheld explains in his landmark book The Loyalty Effect. High satisfaction leads to increased loyalty that, over time, pumps up the bottom line.
Shareholders can win, too, as the American Customer Satisfaction Index Web site suggests: "In the most recent year for which ACSI and MVA data are available, firms with the top 50 percent of ACSI scores generated an average $24 billion in shareholder wealth while firms with the bottom 50 percent of scores created only $14 billion."
While the cost benefits of e-service can be significant, the big win is in keeping customers loyal to your company. A January 2002 CRMGuru online survey found that business managers believe productivity and cost savings are important, but they see more value in customer relationships and improved competitiveness (Figure 1).
Business Realities Drive E-Service Growth
Is everyone else in your industry offering e-service? Nobody? In either case, youll probably need to invest in e-service to meet or beat the competition, save money, and fulfill customer expectations.
Gun manufacturer Remington Arms is pioneering e-service in the sporting arms industry. Why? E-business development manager Ned Moore says it's dictated by "the increasing adoption of Internet technology by our customers, and our attempts to better serve those customers. Our competitors were taking weeks and months to respond to customers, so e-service is an opportunity to create an advantage."
Figure 1 — Business managers find productivity and cost savings important, but see more value related to customer relationships and improved competitiveness.
David Richard, corporate vice president and CIO with Rockford Corporation, a Tempe, Arizona-based B2B audio sound systems manufacturer, also cites competitive reasons for the company's e-service project. "Were in a mature industry domestically, so we need to be able to come up with something that offers a difference, and part of that is increased service levels."
Odds are youll find e-service savings in overall productivity gains rather than headcount reductions. In 1999, Remington Arms served 2,000 daily Web site visitors and received more than 100 emails. Today the company receives 35,000 site visitors but the email volume has increased to only 200 per day. That's because 10,000 to 15,000 people visit the online knowledge base each week, solving most of their problems without any human assistance.
Customer expectations also favor the self-service trend — consider gas stations and ATMs, says industry analyst Chris Selland, principal of Boston-based Reservoir Partners: "Frequently customers would rather serve themselves." So let them.
Room for Improvement
Gartner Group estimates that two-thirds of customers who defect do so because of poor service. This hits the bottom line because replacing those customers can cost up to 10 times as much as providing good service in the first place.
Despite the glowing success of Amazon.com, online customer service is a problem area for most businesses. "Industry observers have identified poor customer care as one of the major impediments to the growth of e-commerce," reports Customer Interaction Solutions in late 2001.
Even if your customers don't buy online, they want to research products before they buy and get fast answers to questions afterward. Selland advises not to force-fit self-service, but rather to present it as the first option. Thankfully, more customers are becoming comfortable using the Internet to help themselves. Two years ago 70 percent of contacts went through live agents and 30 percent used e-service. Last year it balanced out to 50-50.
The Tool Shop
The roots of e-service go back at least to the mid-1990s when Usenet newsgroups documented frequently asked questions (FAQs) to keep "newbies" from asking the same old questions. Cisco Connection Online started in the early 1990s with a dialup Telnet approach that provided an FAQ, bug reports, and technical tips. Today, of course, Cisco's online service is legendary for its quality and cost-savings. This win-win approach sets the example that other companies are following, albeit with less costly packaged e-service solutions.
Nowadays companies can choose from an ever-increasing array of technologies and packaged solutions. Here are some of the major options, in rough order of popularity:
- Online self-service — Puts information on the Web so customers can search a database and find their own answers, instead of calling your reps or sending emails for help. Works best when the interface is intuitive and the answers are easy to find. Some companies prefer to load as much as possible in the database when it goes live; others prefer to start with a few questions and let customer inquiries drive database growth.
- Email management — Lets customers ask questions via email, and either generates automatic responses or uses rules-based logic to route inquiries to appropriate service reps. Useful for routine, non-urgent inquiries. Inquiries should be at least acknowledged promptly, and answers promised within a reasonable time frame, generally one business day.
- Live chat — Allows a customer service representative to "chat" with several customers concurrently by typing questions and answers back and forth in real time. While growing in popularity, few customers today rate it as their preferred method of service. Like email, chat provides an audit trail of the customer interactions, which can be an asset, or liability, depending on how well the service is provided.
- Virtual reps — Basically an online database enhanced with an attractive simulated face "answering" your question. Seeks to be a low-cost form of live chat, but has found only limited acceptance. There isn't much more a virtual rep can say than can be found in a targeted database search, and the simulation of "live" interaction can evoke greater expectations than can be fulfilled, leading to frustrated customers calling anyway.
- Voice over IP — Converges voice and data onto an Internet protocol, allowing network companies to cut phone costs and simplify their telecommunications networks. For adoption rates to increase, however, costs need to come down and quality must be improved.
Crunching the Numbers
Remember, the raison detre for your e-service should be customer satisfaction, not simply cost savings. However, the cost economics are compelling since e-service is almost always a less expensive channel than human interaction. Just be careful that you don't force customers to e-service when they can't or don't want to use it, or you may save money while damaging valuable relationships. As the saying goes, that's "pennywise and pound-foolish."
Understanding your current service costs is a tricky but important exercise. Hewson Consulting's principal Wendy Hewson says a good rule of thumb is to figure a call center interaction costs $30, email handled by a human $25, email handled by a computer $3, and self-service on the Web next to nothing. Gartner Group says human-assisted phone, email, and text chat cost between $5 and $7 on average, while Web self-service costs just $0.24.
Figure 2 — For most companies, going online is a good investment, as the trend is clearly in favor of e-service.
CRMGuru's recent e-service study confirmed that business managers think electronic is much cheaper. According to survey responses, incidents handled by phone cost an average of $20, while email and chat cost about $5, and Web self-service about $1. See, here's something else you can get for "just a buck or two!"
Throwing around such estimates is tricky since youre rarely comparing apples with apples when you say one email costs $40 to handle and another costs $2.89. The key factor is how much labor is involved, and that will vary for each company. Still, anything automated is by definition less costly than human interaction.
Whatever the precise figure, going online is a good investment for most companies. The trend is clearly in favor of e-service, as the table below illustrates. Around 90 percent of respondents expect Web- and email-based e-service usage to increase within the next year. A Forrester study forecasts that from 2001 to 2002, voice contacts will decline to 60 percent of customer interactions, with Web and email splitting most of the balance (Figure 2).
Weighing the Tradeoffs
The point of e-service is to give the customers what they want. Give them the touch points they need to make it easier to do business with you, at a cost you can afford. "We look at voice, the Web, and personalized service, and looking at what were trying to achieve drives the method of delivery," Rockford's Richard says.
When asked to rate their personal satisfaction, CRMGuru members gave a 75 percent satisfaction rating to the plain old telephone, 65 percent for the Web, 62 percent for email, and only 23 percent for the rarely used chat. Clearly the newer technologies have room for improvement. Customers will also need to become more comfortable getting service online, just as they became accustomed to using ATMs for basic transactions (Figure 3).
Selland says that "good e-service is still needed, even if youre not conducting a transaction online," since most studies show customers use the Internet to research big ticket items they intend to purchase in person.
In general, highly repetitious factual questions — "Does it come in mauve? Can I get them for $24.95 apiece if I order three? Do you ship to Canada at this price?" — are handled best by e-service. The more complex the product or service, the more likely people are going to want a phone number to call. The business case for e-service is always a question of what's to be gained, and it's not a good idea to try to avoid all costs of customer service. Saving $3.28 on service isn't worth losing a $328 order.
That's why youll need to be fanatical about measuring customer satisfaction with e-service. Find out exactly who uses it and why as a guide to future investment. The last time we checked there wasn't any law — in California anyway — against calling customers to find out personally if they were satisfied with the level of e-service they received. Surveys work well too.
Planning for E-Service Success
When Vermont ice cream mavens Ben & Jerry's email volume reached a backlog of over 5,000 unanswered messages, the need was clear. They seeded an e-service support database with a dozen questions and expanded it to 100, resulting in a two-thirds decrease in Webmaster email and elimination of the backlog. Turner Broadcasting implemented e-service to support 20 million cable TV customers, and saw general inquiries drop 75 percent.
Done right, e-service benefits are compelling, but there's plenty of room for improvement. CRMGuru's study found one-third of companies are using some form of e-service, but most are homegrown efforts with cobbled together static HTML pages, manually maintained FAQs, and human-powered email service.
It's no wonder that a recent International Customer Service Association/e-Satisfy.com benchmarking study found half of all attempts by customers to find online service ended up in a phone call. You can avoid this by doing a thoughtful job of planning, building, and implementing your e-service solution.
Figure 3 — CRMGuru members rate their personal satisfaction; clearly the new technologies have room for improvement.
Assess Your Current Position
It's hard to chart a course when you don't know your starting point. Take the time to understand your current competitive position and customer satisfaction levels before launching an e-service project.
Call center expert Dr. Jon Anton of Purdue University recommends benchmarking because you need to use reference points outside of your business to determine what's good enough to be ahead of your competitors. In the process of benchmarking youll get a good "before" picture of your current operation. Set a target for the benefits you want, and then identify the metrics youll use to measure improvement.
Build the Business Case
Tangible goals might include increasing productivity or decreasing headcount. Your success justifying an e-service project will probably rely on the hard numbers that a CFO will believe. As Rockford's Richard says, "What are the real costs? Whose budget is going to get whacked?"
Look at cost avoidance as well. If you don't expand and offer these services, how will other costs be affected? Ned Moore says Remington Arms weighed the cost of an e-service system against the costs of hiring more customer service reps. It has worked out even better than expected because, he says, "Weve been able to serve more consumers through the knowledge base than we imagined."
Less tangible but vitally important benefits might include improving customer satisfaction or being more innovative than your competition. You might not be able to measure the negative impact of a huge backlog of unanswered emails, but the damage will be done to your company's reputation nonetheless.
Link E-Service Requirements to Business Needs
Use business priorities and a realistic budget to drive product requirements and vendor selection. Sure, there's a lot you could do with e-service technology, but the questions is: What should you do? Avoid the "kid in the candy store" problem by focusing on the top two or three requirements that will deliver the most value.
And remember, while the tools are important, the content you decide to include in your e-service system is equally important. Pareto's Law applies — 80 percent of all site traffic is after 20 percent of the content. Therefore, a relatively small amount of well-targeted information can take care of a tremendous amount of business.
Online information also must be presented in an easy-to-use, consistent format. "You want to give a consistent look and feel to the information people are getting," says Hugh Thomas the technical marketing engineer for Carrier Voice Group of Cisco Systems. "For an FAQ page, you don't want 4,000 responses, you want the best one you can get, and you want the information in the same format every time."
Implement in Phases, Use Feedback Loops
Like any IT project, e-service is a change that must be absorbed by both your organization and your customers. Implement e-service in bite-sized chunks, get feedback, and make mid-course corrections as needed. Online surveys can help, but if you really want to impress your customers, call them! A few targeted interviews will help identify problem areas before they get out of hand. Above all, act on your customers feedback.
Cultural change must be managed too, says Christine Talbert of AAA Carolinas. "You have to ensure the front-line staff using the product understands what the positives are if they use the product effectively." Don't treat this as just a technology project.
Get Real
Don't swing e-service like a cost-cutting machete, because it won't replace your call center. Rather, think of it as a tool to draw off all queries that can be answered with an FAQ page, online database, or automated email response. Complicated questions will still need human help.
A Doculabs study, for example, found that in some cases online service could stimulate more complex phone calls. One financial services firm found e-service increased call volumes because the simple questions were answered online, but they stimulated customers to call with more complex situations to discuss. If this results in more business, it's a good thing. If not, go back to the e-service drawing board.
CRMGuru's study found one-third of companies are using some form of e-service, but most are homegrown efforts with cobbled together static HTML pages, manually maintained FAQs, and human-powered email service. |
What's Next?
You can't have high quality and affordable products, right? Wrong. Japanese automakers taught the Americans this painful lesson. Now with e-service, companies can provide high quality customer service at much lower costs. Follow the lead of Cisco Systems and your business can increase customer satisfaction while boosting the bottom line.
What are the key e-service trends in the next few years? Since the core technologies are not "bleeding edge" any more, the focus will shift toward improved access, usability, and collaboration.
M-Service with Natural Language Processing
Any way you want service, you got it! As wireless infrastructure improves worldwide, e-service will become m-service — delivered on mobile platforms ranging from wireless phones and PDAs to notebook PCs. Enhanced voice and text natural language processing will help keyboard-phobic customers get the right answers.
Real Cross-Channel Integration
Regardless of the channel, customers expect companies to remember their interactions, account history, and open issues. For example, if you made an ATM deposit and then walked immediately into a bank, youd expect the bank to know the whereabouts of your money. A CRMGuru study found that more than 90 percent agreed multichannel integration was important, but industry researchers estimate that less than 10 percent of companies actually provide it today.
Collaborative Knowledge Sharing
Currently customer service is the province of, well, customer service reps. They get the tools to take care of customers, or the customers help themselves online. But thorny problems still require other departments or trading partners to collaborate on service incidents. Increasingly, systems will be linked together to make this an efficient process. And casual users will be dynamically included in service processes using easy-to-use email and Web-based applications.
E-Service Meets E-sales
The lines will continue to blur between electronic sales and service technologies. After all, the underlying knowledge bases can be deployed in either sales or service scenarios. And service incidents can be golden opportunities not only to increase customer satisfaction and loyalty, but also to present targeted sales offers. Beats cold-calling anytime.
Conclusion
The days when you could make a better mousetrap and the world would beat a path to your door are gone. Loyal relationships based on responsive service may be the only sustainable competitive edge left. Your customers future will include e-service. The only question is: Will your business be a part of that future, or not?
