Transactional economy vs relationship economy: How will service differ?by
Something very new has risen from the ashes of the recession: consumer power.
Speaking at the Institute of Customer Service's annual conference, the industry body's CEO Jo Causon emphasised how the British marketplace is in an “era of unprecedented complexity,” and warned that “customer service is fundamental to the success of the UK economy” - a sentiment also echoed by fellow speaker John Cridland, director general at the Confederation of British Industry.
With customers better informed than ever before, with greater expectations, and empowered to do some serious damage to brand reputations courtesy of social media, Causon declared that organisations must prepare themselves for "a whole new world".
This is one where companies succeed by prioritising collaboration over competition; where organisations must be consistent and reliable, and their behaviour needs to be open and transparent. It is a place where customers are regarded as part of – not separate to – the company, as opposed to being viewed as mere statistics and classifications.
In this vision of the future, customer communication will move from monologue to dialogue, and consumers prioritise value over price.
In summary, “we’re moving from a transactional economy to a relationship economy,” Causon said. In line with this, price and product have become red herrings in the corporate equation; people are willing to pay more for a positive experience, and will make recommendations based on the service they receive. A poor experience, then, means a loss of recommendations and repeat purchases.
This shift is something that companies simply can’t evade and certainly cannot ignore - because not only is it important, it's also imminent.
After five years of steady growth, customer satisfaction has fallen according to the latest figures from the UK Customer Satisfaction Index – while consumer expectations continue to rise. These satisfaction levels correlate directly with business performance, so act as a real wake-up call.
For UK businesses, then, Judgement Day is nigh. Organisations that fail to leave their transaction-driven ways behind in order to re-engage with their customers and focus on service, will meet a sad fate, attendees were warned. In line with this, Causon predicted that increasing numbers of businesses will reassess their incentive culture to recognise service quality as opposed to sales – a huge change for many businesses.
As such, front-line, customer-facing employees will play a critical role in their company’s transformation. Organisations will need to engage their workforce as well as their customers, then – something which Jo describes as a “major challenge”. It’s certainly one worth confronting though; employee engagement is a significant driver of customer experience.
Companies with a sustainable and well-rooted focus on service will have the advantage when it comes to capitalising on the economic upturn.
But what will this service look like? “In a time of complexity and change, leadership, trust and ease of doing business with are more important than ever, said Jo. “And as we move forward, organisations will also need to improve agility, develop customer insight and ensure that they’re measuring the right things.”
John Cridland highlighted Jo’s last point by announcing the redundancy of traditional productivity measures. “Real productivity today is far more about quality of experience,” he said, meaning companies need to change their thinking and adapt their business models. But to do this, they’ll have to make some considerable investments.
Organisations should be prepared to part with some serious cash to ensure they successfully adapt themselves to this new marketplace, attendees were told. “There is only so long you can go along achieving excellent performance in terms of customer satisfaction, before you need to make big investments,” noted Cridland. And he added the recent dip in satisfaction levels may indicate that this grace period has expired.
“The figures show that if you’re not spending money, if you’re asking people to just work harder with no pay rises, focusing on operational expenditure rather than capital expenditure, you will eventually plateau. If you want to make another step change, you’ll need more business investment the last few years have seen.”
Service-driven policies are also expected to crop up in the UK’s future market. But do they have a place? Consumer-focused regulations, after all, can often develop into product regulations, which then have the danger of unitising markets and encouraging products to become nigh-on identical. “Product regulation is an area I’m very nervous about regulators getting into,” admitted Cridland. “The net effect is that you lose the differentiation as the product becomes unitised. You them damage innovation in companies – why bother being different from competitors?”
Regulations do have their place in industries of the future though. When implemented in the right places and managed in the correct ways, they have the potential to benefit both businesses and consumers in British markets of the future. “If trust reaches a particularly low level, it’s in companies’ interest that they agree on two or three things that they all do to improve the trust in the industry. Like simple rules on switching banks in the financial services sector. That can go some way to improve trust. So when it comes to regulation, it is horses for courses.”
Britain is in a unique position, post-recession, allowing businesses to be confident about the future. “I’m feeling quite optimistic about the prospects of the UK economy,” said John. “We have one thing that stands out in the global market – our brand.” British brands are popular all over the globe, and are some of the most trusted.
“The new middle classes are choosing to spend their growing disposable income on British brand, and customer service is key to that. So, I think organisations will increasingly spend on customer service to support their brands. We’re on the cusp of a brand-led British recovery, where customer service will play an integral part.”
So, no crystal ball is required to tell the fortune of the UK’s economy – customer service levels appears to be a good gauge of a company's future fortues. Luckily, this means that companies can take their fate into their own hands – so long as they act fast.