Today’s consumer lives in a highly connected world, where information and knowledge are quickly shared over devices and social networks. The ‘knowledge economy’ empowers a consumer to make intelligent choices and broadcast her preferences to ever-growing audiences.
The knowledge economy is governed by rules that are starkly different from the ones that marked an economy of scarcity — the agrarian, industrial and post-industrial economies. Whereas land, labour and capital were the differentiators in the economy of scarcity, in a knowledge economy, everything is in abundance, making differentiation a tough prospect.
Competitive advantage
For organisations, the knowledge economy is characterised by low margins, stiff competition, and rapid technological changes, where customer service — leveraged by customer intelligence and technological innovation — becomes a significant differentiator.
In an environment of perceived parity between competing products and services, one where businesses try to woo the same customers, providing a differentiated customer service becomes the only lever with which they can gain customer loyalty
Segmentation and automation
Customers today employ many channels of contact, such as social media, web-chat, text messaging and video chats, apart from the traditional forms of telephone and e-mail. They are tech-savvy and socially networked, and demand instant answers to their queries and resolution of their problems.
Adding to the complexity, different customers tend to have specific preferences on their choice of interaction: while some prefer a live customer service associate (CSA), others prefer web-chat.
The challenge for companies is to reach out to customers via the channels they prefer, and which are appropriate for their lifestyles. A recent survey found that 74 per cent of dissatisfied customers largely blamed customer service for their discontentment.
Customer confidence and loyalty
By implementing multi-channel customer relationship management (CRM), organisations can provide personalised services to clients and move them from the ‘zone of indifference’ to the ‘zone of affection’.
To enable multi-channel CRM, organisations need to accurately segment their customers. Segmentation is important in building high-value relationships. Data from various customer interaction channels can be mined to sharply define customer profiles and target them with niche offerings.
Personalised support: Such offerings give preferential treatment and personalised support to high-priority customers who have been identified according to their needs and value to the firm. This would enable better resource allocation, cost savings and revenue capture.
The most valuable customer, for instance, can be given one-to-one customer service, even the service of the same customer service associate, whereas those at the bottom of the ladder can be offered automated or web-based services. Segments that fall in between can be serviced with a mix of both.
The more an organisation understands its customers, the better it can push the appropriate levers for the specific customer.
Human touch : While automation is a key enabler, it is the human touch that improves a customer experience multi-fold. Deciding which services to automate and which ones to offer CSA services in, is crucial in providing differentiated customer service.
The graph shows how this is done in the telecom industry. Customer calls on billing queries are serviced by CSAs, whereas customer issues that generate a high volume of calls, such as for confirmation of a particular service, are fully automated.
Knowing what to automate
Segmenting customers and automating selected customer service operations enables organisations to offer differentiated customer service in a competitive environment. This positively impacts customer loyalty and serves the goal of profitability.
Customer retention
Research by the Gallup Organisation shows that the key to winning customers is emotion, not the price or the product. Strong, differentiated customer service builds confidence in the brand and strengthens the emotional connect with the customer.
In a hyper-connected, highly mobile world, it’s a challenge to build long-term customer loyalty but the fruits of the effort make it worthwhile: repeat customers refer more people and bring in more business.
A Bain & Co study shows that after 10 purchases, a customer refers up to seven people. A company can increase sales by up to 50 per cent without increasing the budget. On the other hand, acquiring a customer costs five to 10 times more than retaining one. It costs six times more to sell something to a prospect than to sell it to a customer.
Customer retention, then, is the key to driving profitability, and retaining loyal customers becomes very important from a business perspective. Depending on customer behaviour, they can be divided into three zones: the zone of defection, where customers are extremely hostile and have low levels of satisfaction, the zone of indifference where they have a medium level of satisfaction and loyalty, and the zone of affection, where they are highly satisfied.
It is the last category that is of most value to a business: Customer evangelism in a socially networked, mobile world can prove more effective than any sales promotion.
A mere 5 per cent increase in customer loyalty can bring a 25-40 per cent increase in profitability (see graph). Customer relationship management focuses on moving customers from the first category to the last, converting them from hostiles to apostles.