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Customer service organizations (CSOs) are under pressure. Resource constraints dictate that CSOs support more customers and more products with less manpower. At the same time, customer expectations are being driven higher by companies whose customer service processes and technologies are relatively advanced.

Executive summary

Just as important, C-level executives are now demanding that CSOs contribute to top-line revenue. As sales teams struggle to make their numbers, these executives are looking to their CSOs to pick up the slack. After all, CSOs have the most frequent—and, in some cases, the only—direct contact with buyers. They are therefore ideally positioned to pinpoint and capitalize on up- and cross-sell opportunities.

These pressures force CSOs to evolve. This evolution is characterized by four stages:

Rudimentary service
In this stage, the CSO uses a limited number of communication channels— primarily the phone—to answer customers’ questions. Knowledge management is typically limited to an internally authored manual or employee brain trust. Contribution to the business is limited to keeping the number of unhappy customers to a minimum.

Responsive service
In this stage, the CSO utilizes more communication channels—including phone, email, the web and chat. Optimally, the CSO applies common case management and a common knowledge base across these channels. The contribution of the CSO to the business in this stage is increased customer satisfaction and reduced per service incident costs.

Proactive service
In this stage, CSOs anticipate customer needs and pre-empt service inquiries. This is accomplished through the mining of customer histories, outbound email communications, automated “notify-on-change” mechanisms, customer satisfaction monitoring systems and other techniques. By exceeding customer expectations, proactive service delivers a significant competitive advantage. It also helps to further lower service costs.

Top-line service
In this stage, the CSO understands customers well enough to pinpoint and act upon sales opportunities. This is accomplished through up- and cross-sell “advisor” tools, call scripting and intelligent opportunity routing/ management. In addition to ensuring high levels of customer satisfaction and reduced per incident costs, top-line service grows revenue and maximizes the value of customer relationships.

This white paper describes these stages in detail and explains how CSOs can accelerate their evolution. The changes now taking place in customer service present an extraordinary opportunity to enhance business performance and transform CSOs from a cost center to a profit center. Companies that act aggressively on this opportunity will gain significant competitive advantages and see the results on their P&L statements.

Why Customer Service Can’t Stand Still

When the economy is tight, every department feels the pressure. Sales teams have to work harder to make their numbers. Manufacturing managers push harder to reduce costs and eliminate defects. Marketing departments look for new ways to stretch their budgets.

Lately, customer service organizations have really been feeling the pinch. Specifically, CSOs are being pressured to:

Do more with less
Even when markets aren’t booming, most companies still continue to acquire new customers, albeit at a slower pace then they like. They also continue to roll out new products and services. CSOs have to support a growing number of customers who are using a wider range of products and services. CSO budgets, however, are rarely increased in proportion to this growing workload—if they’re even increased at all. So CSO managers must continually find ways to improve their teams’ operational efficiency.

Generate revenue
As sales teams struggle to meet their revenue goals, many executives are turning to their CSOs to pick up the slack. CSOs often have the most frequent—and, in the case of many companies that sell through distribution, the only—direct contact with buyers. From these interactions, they generate a gold mine of information about customers’ issues and needs. They are therefore ideally positioned to pinpoint and capitalize on various types of up- and cross-sell opportunities. In addition, premium-level customer service can itself become a new revenue opportunity in appropriate cases.

Optimize customer satisfaction and retention
Everyone knows that it’s more profitable to keep existing customers than to find new ones. This is particularly true in markets where the cost of sales is high in comparison to per-account margins. CSOs are therefore being held accountable for “churn” rates and other indicators of customer satisfaction.

Provide competitive differentiation
In many mature markets—where there is minimal competitive advantage to be gained by product features or pricing—the quality of customer service is one of the few potential differentiators available. Companies in these markets are therefore looking to deliver demonstrably superior service as critical element of their market leadership strategies.

Keep pace with rising customer expectations
Customers do not just compare a company’s service with that of its competitors. Their perception is influenced by every other service experience they have ever had. So, as they come in contact with companies whose customer service experience is exceptional, they judge the next company by that standard. The success of customer service leaders therefore puts pressure on every company in every market to improve CSO performance.

These market pressures actually present a tremendous opportunity for CSOs and CSO managers. CSOs can now play a critical role in business success. Rather than remaining a cost center whose job is to simply prevent customers’ problems from disrupting the business, CSOs can proactively help grow corporate revenues, profitability and marketshare. CSOs and CSO managers that are able to rise to this challenge will achieve “hero” status, which was rarely available to them before. But to do so, they will have to implement significant cultural, operational and technological change.

The Four Stages of Customer Service

The changes that CSOs must implement to evolve from customer-appeasing cost centers to revenue-generating differentiators can be characterized by four stages.

Stage 1: Rudimentary service
At its most basic stage, customer service consists of little more than answering the phones and manually replying to emails. CSOs at this stage typically can’t effectively glean information from service interactions to improve performance, refine knowledge resources or enhance products and services based on customer feedback.

Operational/technical characteristics:

• Limited channels: phone, along with minimal use of email and web
• Static, internally authored reference manuals
• Limited performance metrics (hold-times, first-call resolution, etc.)

Business impact:

• Cost center
• Negligible added value

It’s not unusual for a company’s CSO to remain stuck in rudimentary mode. Because such CSOs are cost centers, executive management doesn’t see much reason to invest in them. Without that investment, these CSOs are doomed to remain cost centers.

Stage 2: Responsive service
At this next stage in their evolution, CSOs begin to respond to their customers’ needs by adding channels, automating processes and implementing better metrics. Most CSOs also attempt to bring some unity to these channels through the use of common event histories and a common knowledge base. As they do a better job of tracking and analyzing customer interactions, these responsive CSOs can react more intelligently to chronic support issues and move quickly to remedy inefficiencies in service processes.

Operational/technical characteristics:

• Effective web self-service resources
• Second-generation email response management
• Use of common knowledge base across all channels
• Cross-channel customer histories

Business impact:

• Increased customer satisfaction and retention
• Substantially reduced costs
• Efficient scalability supports profitable business growth
• Good feedback for marketing and product management teams

As responsive CSOs chalk-up performance and productivity gains, they are also more likely to implement leading-edge customer service technologies such as chat and voice self-service. Quantifiable improvements in business impact give responsive CSOs the boardroom credibility and resource allocation necessary to facilitate migration to the next stage of their service evolution.

Stage 3: Proactive service
CSOs in this stage of development are able to anticipate and pre-empt a growing percentage of customer inquiries. By capturing interactions across all channels, these CSOs have built an extremely rich repository of information about both individual customers and customer segments. Now they are ready to capitalize on this information by using outbound email communications to proactively address service and support issues. Since it’s obviously less expensive to send an email than to take a phone call, proactive CSOs can improve service at a lower cost-per-customer.

Operational/technical characteristics:

• Mining of cross-channel customer service histories
• Targeted outbound email
• Notify-on-change mechanisms
• Service level metrics and alerting

Business impact:

• Significant competitive differentiation
• Support for higher price-points
• Highly bonded customer relationships
• Further cost reductions

Proactive CSOs leave no doubt that service can be a potent value-add. This added value sets the stage for the ultimate transformation of the CSO from a cost center to a profit center.

Stage 4: Top-line service
The evolution of the CSO culminates in direct contribution to the top line. Top-line CSOs add revenue by pinpointing and acting upon opportunities such as cross-sells, up-sells and renewals discovered by intelligent analysis of customer service histories—for example, offering technical training to a customer who places a large number of support calls or suggesting the purchase of a newer product to a customer who is still using an older one. Top-line CSOs may write orders while they have the customer on the phone, use their proactive email tools to make offers, and/or generate fully prepared leads for the sales department. Regardless of the specific process appropriate to each individual company and industry, CSOs that reach this stage of development play a significant role in optimizing business growth and profitability.

Operational/technical characteristics:

• Opportunity-focused mining of service histories
• Business rules “advisor” for CSO staff
• Opportunity-focused call scripting
• Opportunity routing and management

Business impact:

• Revenue growth
• Deeper customer relationships
• Self-funding investment in CSO improvements

The elevation of its role in the business to that of a revenue producer has a major impact on the culture of the CSO itself, too. Top-line CSO staffers do not spend all their time trying to make unhappy customers a little less unhappy—a thankless activity that leads to high burnout and turnover. Instead, they can achieve “hero” status similar to their peers in marketing and sales. Higher morale and motivation in the CSO raises the quality of the customer’s experience even further. This cultural transformation is an added bonus on top of the additional revenue and strengthened customer relationships that top-line CSOs deliver.

It is important to note that while government agencies and non-profit organizations do not share this focus on revenue development, they can still benefit significantly from the implementation of top-line service practices. After all, they are also charged with ensuring that their services and resources are fully utilized by their constituencies—and they also seek to optimize the depth of their relationships with the “customers” they serve. Top-line service empowers such agencies and organizations to more effectively promote connected constituencies and resources, while keeping operational costs low.

While most companies today are well into Stage 2 of this model, many leading-edge practitioners are already well on their way to Stage 3 and have even begun to set their sights on Stage 4. However, progress through these stages does not happen by itself. CSO managers need to act aggressively to advance towards true top-line service. Without action, CSOs will stay stuck in reactive mode and remain consigned to cost-center status.

A CSO Action Plan

So how do CSOs get from point A to point B? Based on the experiences of top customer service innovators, several key success factors are evident. These factors include:

Clarity of vision
It’s hard to get somewhere—or lead others in the right direction—if you do not know your destination. To create top-line service, managers need to fully comprehend the potential role their CSOs can play in generating revenue and optimizing customer relationships. They must have a strong sense of how customer interaction histories can be leveraged to discover revenue opportunities. They also need a clear understanding of how to build and equip a top-line CSO.

Executive support
Because top-line service requires such a tremendous change in how CSOs operate and how they are perceived, executive-level support is a must. This is especially true if a strong working relationship and seamless business processes are to be created between the CSO and other departments, such as sales and/or marketing.

Process innovation
For CSOs to gain top-level status, entirely new business processes must be implemented. These processes must often cross departmental boundaries. Marketing departments, for example may be called upon to define new customer-opportunity profiles and collaborate with the CSO on the development of corresponding business rules and call scripts. Companies that want to achieve top-line service must have the ability and commitment necessary to design and implement these innovative business processes.

Enabling technologies
Few if any CSOs can deliver top-line service with their existing technical infrastructure. Those, for example, that are still treating their various communication channels as separate “stovepipes” and/or do not have customer-driven knowledge bases available online have to first address those shortcomings. Once those capabilities are established, CSOs can then move ahead with the deployment of key enabling technologies for top-line service— such as intelligent outbound email communication and real-time opportunity analytics.

Best-practices consulting
CSOs that attempt to make the transition to top-line service on their own are likely to make many of the same mistakes as their predecessors. With the right partner, however, these mistakes can be avoided. Such a partner can make sure that the CSO learns from the experiences and problems of topline service pioneers. This reduces costly missteps and ensures optimized CSO performance.

With a clear vision, an executive champion, a willingness to re-design business processes, the right technology and the right partner, CSOs can successfully make the transition to top-line service. While these requirements are significant, they are within reach for most organizations. In fact, companies that are already well into the proactive service stage can realistically have top-line service in place within 12-18 months. If they succeed in doing so, they will be in a position to significantly out-perform their competitors and take full advantage of any renewed economic expansion that occurs during this timeframe.

Conclusion

The challenges currently facing CSOs actually represent an extraordinary opportunity. CSOs are uniquely positioned to transform themselves from low-value cost centers to powerful agents for business transformation. This makes the prospects for CSO managers particularly interesting. CSO managers that catch the vision of top-line service and take the steps necessary to make that vision a reality will reap significant rewards for themselves, their departments and their companies over the next two years. In the corporate caste system, customer service no longer has to rank somewhere between facilities management and purchasing. With the advent of top-line service, CSOs can now secure a place for themselves side-by-side with sales, marketing and finance.