As we all know, service leaders are faced with unrelenting pressure to drive costs out of the system through the use of self-service channels that “eliminate” expensive agent-assisted contacts. At the same time, they are tasked with improving, or at least maintaining, customer satisfaction. We call this “walking the razor’s edge” and it essentially frames up the question we all must answer: “How can I maximize self-service adoption without sacrificing customer satisfaction?”
The key to solving this is having the business discipline to play the long game and be committed to “winning the war” which means being profitability-focused. This is opposed to being “battle oriented” where success is measured by reducing costs in the immediate term. We recognize that this is not easy, but we think that a compelling business case exists to take this profitability-centered approach.
Job One: Paradigm Shift
Brands that look at their service organization as merely a cost center naturally gravitate to towards cost-consciousness and “efficiency.” Efficiency is good in its purest form where a brand delivers services at the level aligned with its brand promise as inexpensively as possible. We can all agree that if everything remains equal, it is better to deliver service for less money rather than more money. The reality, however, and what we see in our studies, is that delivering service at a lower absolute cost is often not better than delivering service at a higher cost, since doing so often means that you have much lower customer satisfaction and risk losing customers.
To further this point, a simple math exercise illustrates the futility of thinking primarily in the realm of cost savings. Assuming that a call costs a brand $8.00, and a self-service interaction (chatbot or IVR) costs $1.50, you save $6.50. Further assume that of your 10,000,000 annual calls, you move a hefty 20% of calls out of your system into self-service for a savings of $13M dollars ((10M x 20%) X $6.50). That’s impressive savings. However, what happens if your service is not up to par, and the low-satisfaction self-service experience is the straw that breaks the camel’s back, resulting in losing even a tiny percentage of customers? The impact would be catastrophic.
If your business loses ½ of 1 percent of customers with a Lifetime Value to your business of $20k, and each call represents a customer, then the impact to your business is a net-loss of $1B. So, the trade-off here in this example (admittedly a bit hyperbolic to help shift the way we think about such things) is a net loss of $987,000,000 ($1B - $13M).
Think this is far-fetched?
We have worked with many clients where 15% or more of the customer base who contacted the brand and had a poor experience decided not to renew. It turns out that this poor experience, though seemingly insignificant in the big picture, was what pushed them over the edge. If the brand had known that they would have lost a customer by forcing them through another high-effort experience in the IVR or via a chatbot at the wrong time, they likely would have made a different decision. However, after the customer is gone, it is too late to do anything about it. This is why we strongly encourage making the decision now to think in terms of total profitability, and not just costs.
How “Smart Containment” Drives Profitability
Once this perspective is established, companies can go about maximizing “smart containment” within their self-service channels to help increase self-service channel adoption and usage for the right customers. The path to higher profitability lies in understanding which customers can be encouraged to go through another prompt from your chatbot or IVR, and which cannot. For those who cannot, we advise that you do not push them in every situation to keep going down the path to “a contained” self-service interaction, as doing so can lead to attritted customers. The far better approach is to understand your customers so well that you leverage AI and your chatbot and/or IVR self-service technology to offer different paths for different personas, including moving some customers out of the self-service channels proactively when the right conditions exist. The result is lower absolute containment, which we agree reduces hard transactional savings but also improves retention, which results in higher profitability over time.
If executives don’t understand the benefits of “smart containment” and embrace a “profitability-focus” they will continue down the current path of achieving higher absolute containment and win some short-term cost-centered battles but end up losing the war in a major way; the tradeoff is just not worth it.
More on this topic: J.D. Power recognizes the need in the marketplace to help service providers understand and employ a “smart containment” strategy to maximize profitability. If you’d like to discuss how to address this in your organization, connect with our self-service experts today.
About the Author: Mark Miller leads the J.D. Power Global Customer Service Advisory and is responsible for thought leadership, solutions development, strategic alliances and client support. He leads customer service, technical support and sales performance improvement and certification initiatives for the company.
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