Customer service offers a long-term view in a new relationship economy

I have been talking about the move from a transactional economy to a relationship economy for the last five years. But what are the implications? At the Institute of Customer Service’s Annual Conference my fellow speakers and I, leaders from large and small organisations, made it clear that we need to rethink some of our business strategies and genuinely build our propositions around evolving customer needs.

Customer behaviour has moved on - people are more savvy, better informed, less tolerant, expect greater personalisation and are better connected.

As organisations we need to move from monologue to dialogue, from research to insight, to genuine involvement of customers in the co-creation of products and services. We need tothink more broadly about what collaboration means inside and outside of an organisation. We are operating in a different world.

So what does all this mean for customer service?

We have to measure outcomes over a longer period, not just using the short-term focused balance sheet. When we really start to do this we can see customer satisfaction as a key indicator of long-term performance and prosperity. In this economy of relationships - not just with customers, but with employees, partners and suppliers - this is critical to an organisation’s success.

Whether it is through integrating different channels to create a seamless service experience or by using customer data to create authentic personalised offerings, engaging our employees, or responding to product and service innovation, building lasting relationships is the focus.

More than three quarters (78%) of UK GDP is generated by the service sector and up to 20% of manufacturing companies’ revenues come from service. Over 70% of people deal directly with customers in their jobs.

Customer service is therefore not only important to the performance of individual organisations, but also for jobs, employability and the reputation of the UK as well as our wider social responsibility.

Key areas to focus on

Our research shows that the three areas which have experienced the biggest decline in satisfaction are speed and responsiveness, dealing with problems and people issues – staff attitude, competence and behaviour.

Things that were once seen as differentiators – being easy to do business with, engaged and knowledgeable people – have now become hygiene factors for customers.

This means that organisations have to work harder to connect with customers and develop strategies that harness all the resources and competences at their disposal. We must stop treating the symptoms and get to the route cause of the issues; this requires leadership from the very top of our organisations.

Customer service, ROI and trust

One of the key areas of focus for the Institute is to provide evidence of the strong relationship between customer service and business performance. By using UKCSI to track customer satisfaction and compare the results to sales and market growth in the retail food sector, we have shown a clear and consistent link between high satisfaction and successful business performance.

Organisations with higher satisfaction on average have achieved higher sales growth and market share. This isn’t a one-off and has been the same picture for the last five surveys of the Retail Food UKCSI scores, by a margin of at least 3%.

We also see demonstrable links between customer satisfaction and trust. At a time when trust in organisations is at historically low levels, one of the tangible things that organisations can do to restore trust is to focus on their core purpose – serving their customers.This subject will continue to form an important part of our research programme in the coming year.

Customer service and employee engagement

If we want to build this trust with customers, we must start by looking from within. A theme that has emerged strongly in our research over the past year is the importance of employee engagement as a driver of customer service and business performance. As the economy grows this is becoming vital as a way of recruiting and retaining skilled and motivated employees.

62% of customers who had a good experience with employees repurchased and over a 12 month period companies with high engagement saw significant revenue growth. On the flip-side 77% of customers that had a bad experience avoided that organisation when they had the chance. Furthermore, organisations with low engagement saw a decline in revenue growth. 

Two measures of employee engagement have emerged from our research which are especially significant:

• Feeling proud to work for an organisation
• Feeling empowered to do the right thing for customers

Every business knows how costly it is to keep replacing customers, but do we really understand this – 95% of highly satisfied customers say they are very likely to remain customers.

Providing compelling evidence

The aim of the Institute is to continue to provide evidence like this to help forward the debate in the board room and influence key business decisions.

As the economy continues to grow there are significant rewards for organisations that can adapt successfully to the relationship economy, but this means a change of mindset from short to longer term.

We live in complex times and the pace and speed of change is accelerating. Customers are more demanding and organisations are struggling to keep pace. We are at a critical point for the service agenda. So much is possible, but only if we re-consider and focus our effort on delivering long-term sustainable service solutions.

Jo Causon is the chief executive of the Institute of Customer Service.