Is A Customer Service ROI Provable?

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Is there a plausable ROI To Customer Service?

This is a question that has bubbled away for ages and every so often someone has a go at cracking it.

Can they trace a causal link between ‘service excellence’ and some form of ‘money made’ or ‘money saved’?

To date, no one seems to have experienced a genuine eureka moment. Or if so, they still have to convince the rest of us that the debate is over. Given the numbers that have tried, I’d suggest this provides us with an important clue about searching for this particular unicorn!

Is ROI Obsession A Form Of Psychosis?

My own view is that the need to prove ROI is a form of nervous twitch that most ‘liberal’ corporate functions fall prey to during their evolution. For instance, Marketing has been challenged over the years, as has HR. Currently, anyone who has ‘customer’ in their job title is prone to the same dis-ease.

‘Liberals’ want to sound like a senior ‘conservative’ team member (aka Finance) in order to prove their worth and thus ensure their right to budget and future existence. If their ROI seems flaky, they get nervous whenever corporate cost cutting takes place. Or feel somehow lacking if they ask for a greater role in the business and are challenged to quantify their value.

The problem they all suffer is that tangibles are so much easier to measure than intangibles. In fact to be precise, it is only the concrete, the physical, the directly visible that can be scoped and defined by stop watches and calculators. The other stuff, the intangible, the qualitative, the abstract and invisible somehow fall through the cracks. We might believe but we cannot prove. And in the business world that’s a frustration.

But the inability to directly measure something does not mean it is worthless. Quite the opposite. In fact the most abstract topic that has continued to evolve up the greasy pole of corporate favour is culture. This is illogical from the perspective of corporate Vulcan logic. You can no more directly show me culture that I can show you that unicorn. Yet huge amounts of cash are invested by the C-suite to improve corporate cultures.

Why?

Simply because in this instance, belief overrides logic. They are happy to accept proxy metrics. In the case of culture, the proxy measure is behaviour. It makes sense to judge a culture by the behaviour of those within it. Everyone can understand that. So let’s say we start by wanting to change some aspect of our corporate culture. Simply translate that into a behaviour called improved teamwork which feeds through into a hike in average performance. We can track that and therefore see the ROI.

In other words, when we need to quantify an intangible such as culture, we have to find forms of measurement ‘once removed’ from direct cause and effect. Neither culture nor in fact teamwork have intrinsic merit to Vulcan business logic. But if we see more sales converted from the pipeline as a result, we are willing to believe there is a connection between changing culture and making money.

Business Value From Great Service Is In The Eye Of The Beholder

How does this apply to Customer Service? The activity of Customer Service is certainly tangible. In fact, Customer Service is all about making things work, so it is rooted in the practical world. However the great intangible of Customer Service is quantifying the impact this has on subsequent customer behaviour.

Some believe in a direct cause and effect. Others do not and ask for evidence when large dollops of cash are requested. What is really under scrutiny here is any evidence of direct linkages between a positive customer experience and the behaviours of loyalty, advocacy, repurchase, lifetime value and all the rest.

The answer all depends on whether you are a believer, an agnostic or atheist regarding these linkages.

Take Marketing as a case in point. What is the causal link between a TV advert and customers purchasing a product or service as a result? TV Shopping channels will immediately shove a stack of stats in front of your nose proving the surge of telephone sales directly after a product has been promoted on air. Fair enough.

But what about those advertisements that seek to entertain us or just make us feel that the brand is cool? If we buy in six months time has that initial advert played a part in persuading us? Whatever the truth, it’s very hard to prove.

As a result, the agencies who charge a great deal for these ‘creative’ works, spend sizable amounts of cash to ‘prove’ the monetization link using proxy metrics such as brand recall. Or in today’s social media obsessed world, it’s become the level of engagement between customer and brand. Moving awareness or engagement up the curve is all fine and dandy, but is it causally connected to money in the bank?

Atheists say no. Agnostics will ‘uhm & ahh’. Believers read the charts and feel re-assured of a job well done. If that person happens to be the Marketing Director in a marketing centric company, then all is well.

Spend More On Your Customer Service. Just Get Over It!

Like our own blood families in which we can have cousins who are once or even twice removed from us and yet are still related, the impact of Customer Service is at least once removed from ‘money in’ and ‘money out’. Sure you can make service smarter and thereby reduce your ‘cost to serve’, but tracing the behavioural impact on customers will never be linear. So cause and effect always has to be creatively imagined.

It is therefore a matter of collective belief in the organisation we work in. For instance, is NPS, Customer Effort or another form of C-sat score the proxy that works for you? If so, then is it accepted that the quality of customer service is the main driver of that metric in your business? And while we are on a roll, can you then link lifetime value to that benchmark? If you can say yes to all of that then ‘bingo’ you have some kind of behavioural connection between service and money in the bank.

But remember, at best these are indicators and should not be assumed to be true in every market. In some, the nature of the product, the price point, the availability of alternative choice, are stronger drivers as to whether customer are predisposed to hang around a brand for any length of time.

However that does not mean poor service has no consequence on customer behaviour. One thing is certainly clear in the markets of 2011 and beyond. Upset me and I’m likely to kick back by bad mouthing you to my immediate or extended network. If seriously upset, I may also divorce you. Please me and you may have earned nothing more than the right to keep engaging me.

As a once-upon-a-time theologian who studied the behaviour of belief, there is one thing I can confidently tell you. A person has to want to believe for it to have any value. And that is something that will always remain beyond the comprehension of the non believer.

Personally I have always believed customer service is the second most important reason to prefer one brand against another. The number one of course is having the product that I want.

1 COMMENT

  1. Great post Martin, it was refreshing to see you perspective on this topic. As a firm that measures both culture and marketing ROI for clients this is an area close to my heart. Clearly I am a believer so to speak, I like difficult challenges and this fits nicely into that category. Being an athlete outside of work I know that measurement and hard training result in better performances, I don’t see it any differently when it comes to business. Even though these things are difficult to measure it does not mean its not worth trying, you learn something new every time.

    On the topic of customer service ROI specifically this will clearly vary from customer group to customer group and industry to industry. Certain products and services require super high levels of service, think of 5 star hotels like the Ritz Carlton. Whereas I really don’t expect high levels of service at the local convenience store (although that could be used to differentiate against the competition). The importance of the customer service component will vary from market to market and sometimes can be used as a disruptive advantage for example Zappos has staked its positioning around service in an industry previously known for lousy service (online retailing).

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