Fist money

Customer service budgets are bigger in 2021 - so where will they be spent?


Despite huge digital service investment in 2020 and a grim financial outlook, the signs are that service budgets will continue to be robust in 2021. So what are the priorities?

6th Jan 2021

The world may still be in the grip of the pandemic, but that doesn’t mean that customer service has come to a grinding halt. While lockdowns are once again being enforced around the globe, minimising face-to-face interactions, this has merely meant the redistribution of customer contact to alternative channels, and in particular digital. 

This time around, however, most organisations are better prepared for this shift. Last Spring many were caught on the hop as COVID-19 forced a sudden recalibration of service operations. But now businesses know the drill - and many have the basic infrastructure in place to support remote working, are working on the technical architecture to support new digital channels and self-service, and have experience of managing their service staff remotely. 

Freshworks research estimates that there was a 75% increase to 2020 service budgets compared to 2019. Some of the biggest increases were seen in live chat and messaging (83%), cloud telephony (76%) and self-service (73%) as businesses looked to diversify the way in which they responded to their customers’ enquiries. 

So given the fact that so much investment has already taken place, and with economic forecasts looking particularly grim for many industries, it would be natural to assume that customer service budgets would be conservative at best in the coming year. However, commentators remain optimistic that 2021 could be another year of bumper investment as organisations seek to refine and restructure. 

Digital investment and innovation

“The genie is well-and-truly out of the bottle for digital and 2021 will see both an acceleration of improvements to existing digital operations, as well as a flurry of innovation as leaders find new ways of operating and engaging with customers,” says Peter Dorrington, founder of XMplify Consulting.

“Many businesses and sectors are still offering an inadequate customer experience through these new channels (and customers are beginning to voice their frustration with the laggards). History shows us that when there is a significant gap between the experience customers expect and what they actually receive, new competitors (and especially ‘disruptors’) quickly move in to fill the gap and take market share from existing suppliers.”

And the stakes are all the higher because customer adoption of digital is expected to continue to accelerate in 2021. 

Sagi Dudai, chief technology officer at Vonage, notes: “Digital customer service interactions will continue to increase with no marked drop-off in sight. The pandemic has set in motion trends such as an increased dependence on online shopping, digital financial services and telehealth (virtual care) options which are unlikely to abate in the event of a return to some semblance of normality. An inability to depend on in-person services has forced many consumers to use digital channels in their interactions with brands, and consumers will continue using these channels.”

Advances in technology will also encourage organisations to splash out - particularly if there is an opportunity to improve the quality of digital interactions in the coming year. For instance, Peter Dorrington predicts that given the proliferation of self-service, organisations will be closely monitoring developments in machine learning. 

"Advances in machine learning (the ‘smarts’ in AI) will continue to accelerate, especially in natural language processing / understanding (NLP / NLU)," he explains. "Computers are going to get a lot smarter at understanding what we want and how best to provide it. As more businesses offer self-service as a customer service option, this will be the enabler both for effective self-service for routine tasks and call triage, routing and agent support for the more complex and challenging tasks."

Overall, there appears to be consensus that service investment will continue to rise in the coming year - “We see no reason why this trend won’t continue as customer service teams focus more on the user journey and overall experience,” emphasises Simon Johnson, general manager, UK&I, at Freshworks.

Delivering better omnichannel service

One of the areas hotly anticipated to be earmarked for investment as a result of this focus on user journey is the seamless integration of the digital channels and platforms that were adopted during last year’s dash to digital

Research indicates that demand for this kind of omnichannel experience has now reached a critical mass, with a report by Precisely revealing that 50% of companies believe that their customers now expect more seamless, integrated experiences when interacting with brands. Indeed, Amy Scott, founder of Sedulous, suggests that customer tolerance for poor omnichannel experiences is plummeting, following a grace period during the frantic early stages of the pandemic. 

“According to Contact Babel’s The 2020-21 Customer Experience Decision-Makers’ Guide, 65% of UK businesses have had operational issues which have impacted on customers during COVID-19,” she says. “Customers at the beginning of the pandemic were forgiving of companies’ short falls with regards to the service they received, as we were all swimming together in uncharted waters. However, as time has gone by many customers are beginning to feel a bit fed up with organisations using COVID as an excuse for poor service.

As time has gone by many customers are beginning to feel a bit fed up with organisations using COVID as an excuse for poor service.

“So, although digital transformation will remain a key area of focus in 2021, organisations will use the foundations laid in 2020 to iron out any hiccups to deliver a better omnichannel customer experience.”

With that in mind, Craig Farley, head of consulting at IPI predicts that 2021 will be “the year of the omnichannel customer experience”. 

“While customers have been contacting companies via digital channels for some time already, this is a trend that has been accelerated by the COVID-19 pandemic,” he notes.  

The cloud opens up opportunities

For many organisations, the solution to omnichannel experiences may lie in the cloud, according to Peter Dorrington. “For both omnichannel operations and AI, cloud-based platforms will become the norm for all but the largest enterprises – it is the best way that small-to-medium enterprises can leverage the benefits of these advanced technologies without having to spend more than they can afford or place risky bets on unproven technologies.”

Indeed, the cloud is expected to provide a solution to a number of the service challenges posed by the ongoing pandemic. Forrester’s Ted Schadler expects many organisations will make cloud-centric transformation a priority, moving all experience apps into the cloud.

Elsewhere, the increasing trend towards virtual contact centres is demonstrating that delivering excellent service transcends the physical walls of the contact centre. 

“With the increased move to cloud-based contact centres where communications are concerned, agents will be increasingly empowered to service customers through a single interface from anywhere in the world,” predicts Sagi Dudai. “Customer service teams will need to know they can do their jobs from anywhere, because their entire communications system is in the cloud and easily accessible with an internet connection.”

Many organisations will be considering the value of operating a virtual vs physical contact centre.

However, Kym Hamer, founding board member and chief customer and strategy officer at CXSA Middle East, has a warning for those organisations viewing virtual contact centres as purely a path to cost reduction. 

“I suspect that many organisations will be considering the value of operating a virtual vs physical contact centre,” she says. “In many ways the pandemic has offered service leaders an unforeseen opportunity to pilot new ways of working and alternative means of satisfying their customers. However, there are two fundamentals essential to customer-centric success to be considered. 

“Rather than seeing the move to virtual as a pure cost-reduction play, leaders need to evaluate and commit to the appropriate levels of investment and the right strategies and change programmes to ensure:

  • Real customer needs and wants are being unearthed and built into both relevant and poignant moments of truth along the journey and the delivery of solutions for customers that make the difference they were looking for.

  • Employee motivation, well-being and team spirit - those indefinable ‘somethings’ that have traditionally come from gathering around the water cooler - are at the heart of and are aligned across the value chain..”

Will employee experiences be overlooked?

This last point is particularly important. In the rush to invest in digital, it is crucial that the human element isn’t overlooked - particularly as the past 12 months have been such a strain on service staff and their mental health. Maintaining staff morale and support in the coming year will still likely be a significant challenge as remote working measures remain in place - Salesforce research estimates that over half (54%) of global customer service professionals worked from home during 2020, and only 43% expect to return to their normal workplace in 2021.

The underlying trends are fairly positive - Salesforce research found that service organisations by-and-large are continuing to invest in training programmes and infrastructure for their staff. But there are still concerns that employee wellbeing and support will be bottom of the pile when it comes to investment in 2021. At a time when empathy for customers is such a hot topic for organisations, it would be shocking if employee empathy is overlooked. 

Reinforcing this point, when the CCMA (Call Centre Management Association) conducted research into the rapid and profound changes taking place in customer service, it called upon contact centre and service leaders to ask themselves the following questions as they execute their 2021 strategies:

  1. How can you protect your team and provide them with the certainty, consistency and control they need to stay motivated during the remainder of the pandemic period?

  2. How will you balance the needs of the individual and the organisation when planning resources and flexible working arrangements?

  3. How do you anchor remote working colleagues around the values and purpose of an organisation?

  4. Are you offering upskilling and progression pathways to mitigate attrition and facilitate mobility to and from other parts of the organisation?

Food for thought for your own organisation as investment decisions are being made.


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