Why is customer satisfaction at a 17-year low?by
Research into customer satisfaction points to a supply-side problem with customer support and a demand-side problem regarding customer expectations.
I read a fascinating report the other day from Zendesk called The Customer Experience (CX) Trends Report 2022. I saw a dichotomy between what people are saying and what they are doing regarding Customer Experiences (CX). Organisations seem to be paying lip service to CX, but that's all, I think some of these numbers prove it.
So, I reached out to Zendesk to get their take on the report and invite them onto our podcast. I was very pleased to have chief technology officer of Zendesk Adrian McDermott join us and explain what these numbers mean and what organisations should do with their experiences to take this concept beyond lip service and do something with it.
I highly recommend reading the entirety of the CX Trends Report. However, here are some of the stats that stood out to me most:
- 73% of business leaders reported a direct link between customer service and business performance.
- 64% of business leaders say that customer service has a positive impact on the company's growth.
- 60% say customer service improves customer retention.
- 70% of customers said that they'd made purchasing decisions based on the quality of service.
As a result of all those things, 56% of organisations say they will focus on driving better customer experiences over the next 12 months. That's great that leaders recognise that customer experiences should be a priority.
Now, let's move on to what customers say:
- 81% of customers say a positive customer service experience increases the likelihood that they're going to spend more money or make more purchases.
- 74% say that they will give a company the benefit of the doubt if they make an error.
- 61% of customers say that they would switch to a competitor just off the back of one bad service experience.
My regular readers will remember that customers’ satisfaction scores across the board are falling or stagnating for most organisations. The American Customer Satisfaction Index published a report that suggested customer satisfaction was approaching a 17-year low. This finding leads to other stats that stood out to me in Zendesk’s research:
- 23% of organisations said that they were looking to increase customer satisfaction.
- 23% said they are looking to drive stronger relationships.
So, I always like to reverse stats like this last one. Framing that one in reverse means 67% are not looking to increase customer satisfaction or drive stronger relationships.
Hence, the dichotomy I spoke of earlier. We have organisations saying that CX is critical and will be a priority. However, we are near a 17-year low in customer satisfaction, and most companies are not looking to improve satisfaction and relationships.
So, what is going on here? You know I love a debate, so I asked McDermott for his view. What he said was fascinating.
A mindshift about CX on the supply side is required
McDermott says this breaks down into a supply-side problem with customer support and a demand-side problem, regarding customer expectations. He says you can address these stats from each perspective.
For example, from the supply-side perspective, McDermott says the organisation that thinks CX is important but does nothing about it probably still sees customer service as a cost centre rather than a revenue-generating engine for growth. McDermott says that in these cases, you have to illustrate to the c-suite how it can be tied to business growth in order to gain their interest investment. In Zendesk's report of more than 1,000 organisations, the high-performing segment, the customer service champions, were eight times more likely to view customer service as a revenue driver from a supply point of view.
Also, too many companies focus on the commerce angle, so that's where they invest their resources. McDermott explains that the business leaders he works with focus on the customer acquisition phase. However, that can be short-term thinking, particularly when you consider that churn is imminent and based upon one lousy transaction per their research. It's too short-term to focus only on the acquisition and not have any resources devoted to serving customers long-term.
McDermott recognises that the contact centre as a cost centre is a strong mentality. However, the most innovative companies he has worked with have challenged that mindset.
For example, Shopify, the Canadian retail platform, realised that many customer service problems were feature-related. The customer's situation would have been resolved automatically by a feature at a higher plan level. The traditional mindset of a contact centre is to handle the problem and not cross-sell the existing customer to a higher plan level. Let that upsell be someone else's job. However, Shopify recognised that the contact centre employees were the ones talking to customers. So, they started having customer service not only solve the present problem but also inform and educate the customer on how a higher plan level would serve them better.
But what about the demand side?
McDermott says that customers have high expectations of digital experiences on the demand side. We've all become search experts. We also expect quick responses with definite answers.
These things are valuable and essential. We relied on those experiences through the pandemic, and now we judge all of our experiences in the digital world by those yardsticks. For example, we think things like, "If you don't provide the level of service that I get from my rideshare company, why would I use you? I'm going to keep looking until I find someone who does." Also, customers don't want to wait three days to do a return, and they don't want it to be inconvenient. We think, "If you're going to do that, I'm not going to buy from you again."
In addition, there is a mindset shift on the part of customers. For example, 68% of people expect personalisation when reaching out to a contact centre. Customers don't want to hear, "Hi! My name is Adrian, and I will be helping you out today. Can I please have your account number?"
McDermott says it comes down to investment priorities to rise to the customer expectations on the demand side. Right now, Wall Street demands growth. So, companies invest in the things they perceive will facilitate that.
However, since we live in a subscription economy that lives and dies by repeat business, McDermott thinks that the mindset should shift to thinking about customers for life. Over a customer's lifetime, the time spent on acquisition is a small percentage. The rest of their relationship is small interactions from time to time. Hopefully, these small interactions will encourage customers to continue to buy year over year.
Therefore, a demand-side perspective strategy would be to consider customers' lifetime value instead of customer acquisition. McDermott says it is happening, but slowly.
So, what should people do with this information?
So, there is what companies say they will prioritise and then what they actually prioritise. There is a definite gap between the two. McDermott has the following advice to close that gap.
To start, McDermott says that leaders for CX should have a fundamental mindset shift from customer acquisition to the lifetime value of the customer. They should also consider their plan to improve the lifetime value of customers through better experiences that foster retention. Finally, determine how to decrease churn by creating intelligent, frictionless experiences that meet their expectations and are appropriate.
The word appropriate is significant here, too, because it describes the frequency and role that the relationship will play moving forward. For example, McDermott recently ordered a microphone online that arrived shortly before we spoke. He described his ideal relationship with this company as a customer-led journey where he contacts them if there is a problem. McDermott doesn't want 40 follow up emails from them. He thinks organisations should recognise their role and respond appropriately to their customers' expectations for the relationship.
Moreover, McDermott encourages leaders in charge of CX to determine also how they will prove to the "powers that be" they are driving long-term value and growth for the company. He says showing that you are doing a fantastic service to shareholders is critical to these entities. Moreover, it reinforces the idea that putting resources into CX is a revenue-driving investment rather than a cost.
I agree with McDermott about the mindset. People need to look at things differently. However, they also need to go beyond the theory and do something by taking practical action.
I also wish that more organisations were looking at the lifetime value of customers rather than the short-term value because that would drive a lot of behavior and strategy on their part.
There's also a significant opportunity to look at customer science or customer intelligence through the lens of behaviour and the behavioral science aspects. Understanding the patterns of what your customers are doing is essential to your strategy for lifetime value.
Over 20 years ago, I founded my company Beyond Philosophy on the idea that theory was great, but you had to do something with it to make it worthwhile. Looking up from what is close to a 17-year low in customer satisfaction, it's time to give CX more than just lip service. Will your company think of customers for the long-haul or the short-term? Instead of answering, act and show everybody your answer.
This blog was written in partnership with Zendesk.
Colin is Founder & CEO of Beyond Philosophy LLC who help organizations grow by improving their Customer Experience and identifying hidden unmet needs. As a result, the Financial Times selected Beyond Philosophy LLC, as one of the best management consultancies for the last two years.
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