Back in 1997 Heskett and Sasser published The Service Profit Chain. A book that asserted and showed empirical evidence for the link between a strong customer service orientation and higher profitability. The book that influenced me to make the transition from the back office (finance) to the front office (marketing, sales, service).
Today Valeria Maltoni (Conversation Agent) wrote a post declaring that ‘the most influential thing a company can do is to have a strong customer services culture: 55% of people recommend a company based on that experience.’ She bases this assertion on the latest research published by Harris Interactive on behalf of RightNow Technologies for the North American market. This survey also states that 40% of customers started doing business with a company solely based on their reputation for great service.
In 2010 Harris Interactive is telling us what Heskett and Sasser demonstrated in the Service Profit Chain back in 1997. It is also something that most of us know from our own experience. Over a week ago I was at a one day conference and one of the speakers spoke about how well he was looked after his insurance company after a motor accident. What was the reaction of the audience? First surprise. Second, please tell us the name of your insurance company.
Given the choice we do business with the companies that do a good job of taking care of us – those that have a strong customer service culture.
Yet despite the research and our intuitive understanding of the importance of Customer Services, this function does not get the executive attention it merits. Companies continue to invest heavily in marketing whilst looking to all kinds of means to cut the cost base associated with the Customer Services function.
Today the Guardian reported that the average FTSE100 chief executive earns £4.9m per year or 200 times the average wage. Clearly these executives are delivering the results their shareholders want through other strategies such as moving into new markets, investing heavily in targeted marketing and aggressive cost cutting. I have been there before – that was the early 1990s before the rise of the relationship marketing and CRM.
I predict that the companies that underinvest in Customer Services today to make short-term revenue and profit targets will pay the price in the longer term. But then that is a price that has to be paid by future CEOs and shareholders.