Customer Service: An Investment, Not a Cost

Guest Blog Post by Kyle David, president & CEO, KDG 

Outsourced call centers. Representatives who constantly say “no.” Hold times of over an hour. Are we seeing the downfall of customer service?
 
Since the 1980s and the publication of Competitive Advantage by Michael Porter, we have seen one important facet of business disappear: the customer. The very individual who keeps a business in business has practically been eliminated from the supply chain in favor of inbound logistics and operations. In his book, Porter delegates service to the far corner of his supply chain, yet never even mentions the word “customer” in its definition.
 
What’s resulted has been over thirty years of Porter’s theory being put into practice: thirty years of outsourced call centers and of business schools teaching students that the customer is only a cost to be fit into the supply chain. When will customers stop being looked at as an operational cost and start being looked at as an investment?
 
Saving Expenses at the Customer’s Expense
In a chain consisting of inbound and outbound logistics, operations, procurement, and technology development, it’s all too easy to decide that “service” is the step to cut back on.
 
Starting in the 1980s, businesses started to look for ways to make customer interactions as cost-effective as possible. Gone were the days of one-on-one service, of customers interacting with shopkeepers over a narrow counter. Instead, there were call centers staffed with hundreds of individuals who recited a trained routine practically impossible to stray from. Conversations were kept brief and robotic. Interactions with customers were no longer defined by satisfaction, but by numbers: minutes on the call, cost of their interaction, revenue of their purchase.
 
Adding Value to the Chain
Improving customer experience may require a change in perspective on the part of executives. Customer interactions aren’t a cost. In fact, they have the potential to add an immense value to the company.
 
Improving customer service develops goodwill between companies and their customers. Interactions don’t become something customers come to dread, but something they come to look forward to. Hence, there are more of them, which means sales and profitability increase.
 
But that’s not all that improves. Customers start to trust the business. Look at L.L. Bean. Call centers aren’t outsourced, customers are connected with human representatives, shipping is free, and returns are accepted with no questions asked. While some business owners may see these features as added expenses, L.L. Bean sees them as the key to its $1.6 billion in annual net sales. They’ve offered a customer experience that’s hard to find at other retailers and have seen trust and profit skyrocket as a result.
 
Your Return on Investment
Return on Investment, or ROI, is everywhere in business and one of the most important metrics you measure. You measure the ROI of your marketing campaigns, of your new technology, of your employee training. But what about the ROI of your customer service? The results may surprise you.
 
Look at European airline Ryanair. Its cheap flights didn’t stop it from being named one of the “most hated airlines” and worst brands in the world. Stewards were rude. Space was limited. Claiming refunds was hard. Finding out about accessibility for disabled passengers was harder. Ryanair was fined over a half a million pounds and, in 2013, issued two profit warnings. Not investing in its customers wasn’t saving Ryanair money. It was threatening to put to the company out of business.
 
This all changed in 2016. Ryanair employed a new customer service team, increased cabin baggage sizes, and introduced the personalization tool MyRyanair. Seat occupancy rose to 92% and the company was named “the best-performing airline on virtually every measure of margin.”
 
Costco is another company that has been lauded for its customer service and has seen profits increase as a result. The store has a multi-year return policy, retains employees who then build relationships with customers, and hasn’t raised its popular fast food prices in over three decades. By investing in their customers and their needs, Costco is seeing customers return the favor and continue to invest in them. In the spring of 2018, Costco saw a sales increase of 10.8% and a profit increase of 36%.
 
 
Treating Customers as Humans, Not as Costs
It’s time for a change of thinking in business. Gone should be the days of seeing customer service as another link in the supply chain or another cost to figure into the budget. Customers aren’t “buyers,” they’re human beings. Become an experience-based company: respect customers’ time, listen to them, talk to them, and surprise them.
 
When you treat customers how they want to be treated, they’ll return the favor. Customers hold the future of your business in their hands. Isn’t that worth a little investment?
 
 
Featured blog post by KDG, Kyle David Group