Organisations need to resist cost-cutting impulse and invest in the service agenda

Businesses are operating in very challenging times, and conditions are likely to get even tougher. A combination of rising inflation, the escalating cost of living, geopolitical upheaval, supply chain blockages, recruitment challenges, and future Covid risks will make the second half of this year a difficult arena in which to do business.

In such times, there is a natural impulse for organisations to ‘batten down the hatches’ and look to cut costs. For many, if customers rein in their spending, then finding further efficiencies across the organisation becomes even more essential.

However, I am concerned that some organisations will attempt to find savings in the service and support they provide to customers – and in my view, this would be a mistake.

We have already seen the troubled waters this can lead businesses into in the travails of the airline, airport and wider travel industry. They were hit hard by the pandemic and understandably cut back on staff and overheads. But the signs are they cut too far. Now, the resultant cancellations, delays and queues serve only to blunt the industry’s potential recovery. Customers have long memories – some of them may not come back, while others will be much more reticent about booking a flight or holiday abroad for fear of getting caught up in travel chaos.

Customer satisfaction stalling

The airline industry may (thankfully) be something of an outlier, but I fear we could begin to see similar tendencies in other sectors as conditions tighten. Indeed, we are already seeing some concerning trends in our UK Customer Satisfaction Index (UKCSI) which we publish twice yearly and has been running since 2009. In it, we collect data and responses from thousands of customers of organisations across sectors. The latest UKCSI was recently published at the beginning of July.

What we see is a very mixed picture. On the one hand, the overall level of customer satisfaction is at a high – 78.4 points out of 100. However, a rise in satisfaction levels that we had been seeing has now stalled, and indeed in some sectors has begun to fall over the last 6 months.

At the same time, it has been concerning to see a continuing increase in the number of customer complaints and service issues. In fact, these have now reached a record level with one in six customers reporting that they had experienced a problem. It is only the fact that businesses have become better at resolving problems when they arise – i.e. better at ‘service recovery’ – that has avoided a more serious dent to overall satisfaction levels. But this is not sustainable (or acceptable) on a long-term basis.

Indeed, our research finds that organisations spend an average of 3.8 days a month resolving customer issues and problems. The cost of that amounts to a staggering £9.24 billion – a drag on productivity and the economy that we can ill afford.

The effects of encountering service difficulties are already clear, with those customers who experienced a problem rating organisations at only 67.2 (out of 100) on average, compared to 80.7 amongst those who had not experienced an issue.

Turning the tide

What can organisations do to turn this around and move satisfaction back in the right direction? First, there needs to be the right level of investment. There needs to be recognition at the top of the organisation that customer service is not just an administrative or purely ‘delivery process’. It must be seen as critical and put at the heart of the culture of the business – with clear links to profitability, productivity and staff retention.  In essence, it is a key business driver. Better service drives increased sales, better customer engagement and more loyalty. The business case is already clear.

With the right investment, service can be adequately resourced. But another essential element is to conduct a proper resource planning exercise, looking ahead to anticipate the peaks and troughs of demand. This requires a full understanding of the end-to-end customer journey, complete with all the dependencies and hand-offs to third parties and suppliers.

Understanding your customers

Another issue that businesses must assess and address is the growing polarisation amongst customers. Over a third (35%) of customers say they are prepared to pay more for excellent service, while 12% favour a no-frills, low-cost service. In light of the cost of living crunch, nearly six in ten customers say that they expect low prices to become more important to them in the next two years – so the gulf between those who are prepared to pay more and those who simply can’t afford to do so is likely to grow. Organisations need to think carefully about the different groups within their customer base and how they can best meet their differing needs and preferences. A one-size approach is simply not going to work.

How service is delivered is also critically important, of course. Our research finds that many people welcome the increasing ability to self-serve and use automated technology for transactional purposes. However, this must not mean that customers can’t get human help and support when they need it. “Making it easier to contact the right person to help me” is one of the top three measures customers would like to see to improve service. Technology can be a wonderful thing – but it mustn’t be used as a sticking plaster over insufficiently resourced customer service functions.

Invest in service, invest to win

Businesses may have thought that, having come through Covid, we were facing into better and easier times. The truth, though, is there are many challenges to come. The organisations that resist knee-jerk cost-cutting and invest in the service agenda will undoubtedly be the ones best placed to ride it out and continue to see their businesses grow.