Analyst Report: The Economic Necessity of Customer Service

January 21, 2009
The Economic Necessity
Of Customer Serviceby Natalie L. Petouhoff, Ph.D., Sharyn Leaver, and Andrew Magariefor Business Process & Applications Professionals
Making Leaders Successful Every DayFor Business Process & Applications Professionals
January 21, 2009
The Economic Necessity Of Customer ServiceFive Recession-Busting Strategies To Cut Service Costs And Increase Salesby Natalie L. Petouhoff, Ph.D., Sharyn Leaver, and Andrew Magarie
Executive SummaryIn this economic climate, no one can afford to lose a customer. Rather than halting spending, smart customer service executives will use this economic downturn as an opportunity to regroup and reprioritize. What should they focus on? Top customer service recession-busting strategies that cut costs and generate more revenue include: proactive chat, agent-customer co-browsing, online customer communities, unified communications, and multichannel knowledge management.
table of Contents NOTES & RESOURCES2 Customer Service Experiences Either Forrester interviewed 15 vendor and end user Generate Or Diminish Company Revenue companies, including eGain Communications, 4 Recession-Busting Strategies To Save Money, KANA, Lithium Technologies, and Salesforce.com.Cut Costs, And Increase Sales Related Research Documentsrecommendations7 "Forrester's Customer Service Innovation How To Capitalize On What Customer Service Can Offer In A Poor Economy Framework And Self-Assessment"January 13, 20099 Supplemental Material "The ROI Of Interactive Chat"February 4, 2008"The ROI Of Web Redesigns Made Simple"March 17, 2006
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Customer service experiences EITHER generate or diminish company revenueCustomer service has a profound effect on a corporation's bottom line. Here's why:
· Good customer service experiences boost repurchase probability and long-term loyalty. To show how customer service affects the bottom line, Forrester asked customers to rate their interaction experiences based on whether they were: 1) useful - could they get what they needed to do done; 2) easy - or did they run into all kinds of hassles in the interaction process; or 3) enjoyable - or did they feel frustrated and disappointed in the interaction. The results show that the higher the customer experience index, regardless of the industry, the more 1customers buy and the more loyal they are (see Figure 1).
· Poor customer service experiences lead to defects. For example, if a company has four million customers and each spends $100 per year, the total projected revenue for a year would be $4 billion. Industry standards show that approximately 30% of a company's customers (or 2more) have poor experiences. That represents 1,200,000 customers, and typically only about 2% of them complain to the contact center. That leaves 98% who don't complain, or a total of 1,176,000 customers that are at risk to defect. At a $100 a piece, this represents a whopping $117,600,000 loss in revenue annually.
· Poor customer experiences result in lost opportunities. While customers don't necessarily voice their disappointment to a company - as they've learned not to bother because nothing changes - they do voice their sentiments to anyone else who will listen. Research shows that disappointed informers will impart their disparaging opinions about your company at double the rate that satisfied advocates will spread good "word of mouth." And with the unlimited reach that the Internet provides, most companies are unprepared to monitor negative word of mouth or lack a systematic process to turn a situation around before they lose thousands of customers.
· Poor customer service experiences result in hidden costs. Obviously, poor experiences increase contact center call volume. If the issue is not res... [download for more]