How to transform the Customer Services function (Part II)

In this post I continue the conversation I started in the previous post. To recap, this conversation is about transforming the Customer Services function.  When I say transform I am pointing at something different to change. Take a good look at change and you will find that change often deals with changing the content rather than the context which gives rise to the context. Transformation deals with the context.

What does Customer Services really do? 

Step outside of the content of handling calls, emails, or providing agents to respond to ‘click to chat’ requests and look at the Customer Service function.  What do you see?  I see the bigger picture.  I see the powerful functions of Marketing, Sales, Ecommerce, Operations, Logistics, Finance creating ‘garbage’.  This garbage lands in the lives of customers and the customers don’t like it.

Within the current context it is taken for granted that organisational functions will create garbage. Perhaps it is more accurate that this creation of garbage is hidden in the background and not even noticed.   Marketing creates waste by misleading customers, or not providing them with the information that they need.  Sales creates garbage by selling the wrong product or promising and not delivering.  Operations creates garbage by making/sourcing products that don’t do what they are supposed to do. Or are difficult to setup and use.  Logistics creates  garbage by not delivering the products on time. Or not even providing a date when the product is going to be delivered.  Finance creates garbage by getting the billing wrong or not explaining the charges adequately.  The Ecommerce unit creates garbage by not designing the website so that it is both useful, usable and responsive.

This garbage lands in the lives of customers and the customers don’t like it.  So they turn to the people in the business who can help with cleaning up this garbage: Customer Services. Put differently, within the current context the Customer Services function deals with/addresses/cleans up the garbage created by the rest of the organisation.

The access to transforming the Customer Services function is to focus on what is outside of the Customer Service function

It occurs to me that it is madness to focus on improving efficiency and reducing the cost of the Customer Services function.  Why?  Because that is simply finding more efficient ways of dealing with the garbage.  If we use the manufacturing analogy then we have a whole bunch of people creating waste.  This waste lands in the lap of the Customer Services folks to fix.  The Customer Services folks are fixing it as best as they can whilst the rest of the organisation is hell bent on cutting their resources and expertise.  Is this not insanity?

Surely, the lever for transforming the Customer Services function lies outside of the Customer Services function.  Who is the cause of the garbage in customers’ lives that drives calls into the Customer Services function?  Marketing, Sales, Operations, Logistics, Ecommerce, Legal, Finance etc.  If these functions did not create the garbage in the first place then there would be a huge reduction in the call volume coming into Customer Services. And accordingly a huge reduction in the cost of the Customer Services function.

I say that the access to transforming the Customer Services function is eliminating the garbage that the rest of the organisation is creating in the lives of customers.  Put differently, learn from manufacturing and build quality into the system so that the default functioning of the system is quality.

Which begs the question, how to do build quality into the system.  I say you start by disturbing the complacency of the existing system.  And a great place to start is to:

– Analyse the demand coming into Customer Services into ‘value demand’ and ‘failure demand’ where ‘failure demand’ is the demand falling onto Customer Services because of the garbage created in the lives of customers by the rest of the organisation;

– Code the ‘failure demand’ into buckets where the buckets represent the organisational functions (Marketing, Sales, Logistics…) that are the source of the ‘failure demand’; and

– Charge each of these organisational functions – on a monthly basis – 200% of the cost of dealing with the ‘failure demand’ generated by that functional silo.

Please note that for this to be effective, the charge has to be a real charge.  It has to hurt by reducing the money that the organisational functions have to spend whilst being held accountable for meeting their objectives.

Why charge the organisational functions 200% of the cost. To get these organisational functions present to the hidden cost of creating garbage.  When an organisation creates garbage in customers’ lives there are two costs. The first cost is the cost of cleaning up the garbage – the cost incurred by Customer Services.  The second, hidden cost, is the damage done to the relationship and thus the lifetime value of the customer.

You might be wondering how this would transform the Customer Services function.  Here is how I see it.  If that which I am proposing was implemented rigorously it would disturb the system.  The organisational functions feeling the most pain would be motivated to produce less garbage. And to do this they are likely to seek out the Customer Services folks to get a helping hand in better understanding the issues from the customer perspective.  Together they would reduce the ‘failure demand’ falling on Customer Services and take the Customer Services function out of the business of ‘cleaning up the garbage’ thus freeing up capacity some of which could be used to focus on stuff that genuinely adds value to customers and leave them surprised and delighted.

Notice that within this context, Customer Services shows up as a valuable function. One that acts as an independent check on the health of the organisational functioning. And acts as a catalyst for keeping the various organisational actors ‘honest’ and ‘in sync’ with the needs/expectations of customers. Doesn’t that constitute a transformation?

And finally

Clearly for this transformation to occur it has to be led by the CEO and supported/enabled/enforced by the CFO. And their commitment or lack of commitment discloses all that one needs to know about the importance of the customer.

How to shape customer behaviour and create delight at no extra cost

Anna: the difference between despair and delight

My heart sank when I saw the queue in the bank and I mentally calculated that I could expect to be waiting some 10 – 20 minutes before I got served.  Is it worth waiting that long simply deposit £200 into my bank account because I do not like to carry cash around in my wallet?  Just as the two parts of me (The Rider, The Elephant) were tussling over that question something caught my attention.  One of the three cashiers (Anna) left her seat behind the glass cage, opened the secure door and became a part of us – the customers.

She went up the first person that was waiting and asked her if she was waiting to deposit cash into her bank account.  The old lady mumbled and said she wanted to wait in line.  Then Anna went to the next person – an old man – and asked the same question.  He told her that he was waiting to withdraw cash from his account.  Anna told him that if he had his cashcard then he could withdraw it from the ATM and she would show him how.  The old man made some excuse.  Then Anna went on the next person and the next and after some eight refusal she faced me.  When Anna was facing me I took her up on her offer to show me how to quickly deposit the £200 into my account.

Anna told me that the they (I assume the cashiers) had noticed that customers do not like waiting.  She also told me that most customers turn up and simply want to pay money into their accounts or withdraw money from their accounts.  So they had decided that the best way of reducing the waiting time and educating customers was simply to ‘hold the customer’s hand’ and guide them through the task of depositing or withdrawing money.  She showed me which ATM to use.  Then she turned the work over to me yet standing beside me she guided me through the five simple steps.  In less than two minutes I had completed my task and was simply delighted: delighted with Anna, delighted with Santander, delighted with the self-service technology; and delighted with myself for ‘being open to the new’ and ‘learning a useful shortcut’ that will make my life easier in the future. I thanked Anna and left the Santander branch.  On the way back I pondered some questions and came up with some thoughts that I want to share with you.

Thoughts on customers, customer facing staff and the customer experience

Telling is not the difference that makes a difference. I can remember at least four instances when a Santander cashier has deposited my money into my bank account and then proceeded to tell me that I would do that myself by using the ATM.  Nonetheless, I did not change my behaviour.  In fact I have lost count on the number of time I have been given advice and not acted on it.  Telling is our default mode when we want to remodel human behaviour and it is spectacularly ineffective.  Telling speaks to the Rider (the neocortex) and yet you need to ‘speak’ to the Elephant (limbic brain) to shape behaviour.

Knowing is not the difference that makes a difference.  This is a corollary of the previous point.  The simple fact is that The Rider knew that I could use the ATM to deposit cash into my account.  Yet, the Elephant discounted this knowing.  Why?  Because the Elephant is risk averse. I had not changed my behaviour because my Elephant had taken an emotional position: risky might lose my money; probably will not know what to do and will make a mess of it in public and so lose face; and it is not likely to work so I am going to have to take time to figure out how to make it work and/or go the cashiers to sort out the mess.

If you want to remodel customer behaviour then build a ‘scaffold’Lev Vgotsky who studied cognitive development pointed out that effective learning and development depends on the right scaffold – one that the learner can use to climb higher safely one step at a time.   Think about construction work: the scaffold is a structure that enables the workers to build the building more effectively whilst feeling safe.  One form of  ‘scaffold’ is a ‘more knowledgable other’ (MKO) – someone who has mastered the domain and can act as empathetic guide and coach.  This is why Anna was so effective in changing my behaviour.  She led the way by literally walking to the ATM and then she led the way by guiding me through the process – one step at a time.  If you want customers to use self-service technology then you have to do what Anna did: train them to use it in a safe supportive environment.  And here is a key point: behaviour (doing, the experience) shapes learning much more than learning shapes behaviour.

Design self-service to create value for your customers.  Part of the delight of my customer experience was actually experiencing how easy it was to use the ATM to deposit cash into my account.  That is to say that the designers had cracked the usability of it: it was intuitive and it addressed the kind of concerns that may come up like I deposit £200 and the ATM thinks it is £160. Furthermore, the process consisted of only five steps and could be completed in less than two minutes thus saving me time which many customer value as we never seem to have enough of it as so much occurs as being spent on drudgery.  Simple tasks are great candidates for self-service provided you save the customer time and/or effort and the customers is embedded in the right context.

Treat different customers differently.  Anna offered to help some eight people all of whom refused before she made the same offer to me which I took up enthusiastically.  The interesting thing to note is that all of these customers were older than me.  They struck me as being the kind of people that trust people more than technology and the kind of people who prefer the human touch to hi-tech.  These people are never likely to be the early adopters so the right thing to do is to find the early adopters – the younger people, the busy professionals, the young mums with children – and remodel their behaviour.  Put more simply,  scatter the seeds where they are most likely to grow with the least effort.  Then wait for the followers to adopt this practice by social osmosis.

Being precedes doing so focus on the being.  There is something special in Anna’s being – it is the first thing that I noticed last time we interacted and this time.    Of the three cashiers she was the youngest.  Of the three cashiers she was the only one that smiled and looked happy.  When she came into the customer den – to where we were standing – she was totally calm.  Her whole being exuded the air of caring, helpfulness and competence.  She was not pushy: she was not in a rush to get any of the customers to do anything in particular.  Her totally being was an invitation: “I can make your life easier if you will allow me to do that, will you allow me to do that?”  It was her being( the way she was being) that got my trust and why I took up her invitation to use the ATM.  What am I saying?  You can’t fake caring it is simply who you are or who you are not: if you genuinely care for your customers it comes through and the Elephant (subconscious) picks it up and if you do not care the Elephant picks that up as well.  My advice: hire more people like Anna and create an environment that supports and nourishes their natural being.

Your customer facing staff have valuable insights into your customers.  The Santander cashiers spend their professional lives observing, talking with and serving customers.  So is it any surprise that the Santander cashiers know that that the most frequent service that they are asked to deliver is either to bank cash or withdraw cash for customers.  Is it any surprise that they also know that customers hate waiting?  What else do your customer facing staff know about your customers and your business that if you tapped into would make a difference to your customers and your business results?  Have you created an environment that calls forth these insights from your staff?

If you want your customer staff to improve the customer experience then create clearings for insight to be acted upon.  Have you ever played paintball?  What is it like to move around in a densely wooded area?  Difficult, tedious, painful and slow right?  Well in many organisations it is the same experience for customer facing staff to do the right thing by your customers.  So if you want them to do more of the right things then you have to create ‘clearings’. What is possible in a clearing?  A lot because the space is not cluttered, it is empty.  I am clear that the Santander management at my local branch had enabled the cashiers to act on their insights by creating a clearing: permission to step out of the glass cage and help customers by walking them to the ATM and showing them how easily they can help themselves.

Treat different employees differently.  The employees that are most ingrained in the existing way of doing things are the ones that are most likely to stick with the existing way of doing things.  It is the younger employees those that have not been assimilated into your existing culture that are the most promising candidates for trying out new ways of doing things.  I could not help but notice three things: Anna was the youngest of the three cashiers; she had only been with Santander for a relatively short amount of time; and she is not English.  So it makes perfect sense that the other two cashiers stayed within their glass cage where they are comfortable and Anna walked out of it.  Yet, if all three had stepped out of the glass cage then there would have been no cashiers to serve the older customers who expect cashiers to sit behind glass cages and do stuff for them.

Improving the customer experience and delighting customers need not cost any more.  What extra costs did Santander occur by allowing Anna to leave her glass cage and help me to serve myself?  None at all. The customer experience was improved by simply redeploying the existing resources in a more imaginative / more valuable way.    Incidentally, if you spend much time in a call centre you will find that the bulk of the incoming demand for attention from customers is ‘failure demand’: the call centre is being asked to rectify ‘defects’ introduced into the customer experience by marketing, sales, logistics, finance…… So by improving the customer experience you can take out as much as 80% of the cost of your call centre operations.  How many millions is that in savings?    And in the process your create customer delight simply because your organisation gets it right first time.  To paraphrase Philip Crosby ‘quality customer experience is free’.

If you want to drive up efficiency and reduce your costs then focus on effectiveness

John Kay one of the UK’s leading economist and wrote the following in his FT column yesterday: ” …profit-seeking paradox – the most profitable companies are not the most aggressive in pursuit of profit.”  A similar paradox applies to efficiency and cost reduction.  If you want to drive up efficiency and cut costs then you should focus all your efforts on effectiveness – from the customer’s perspective.

Generally customers are busy people so why are we getting so many calls from them? That is how I started my investigation into IDV’s sales order processing and customer services team back in 1996?  By asking this question I identified that high value customers were calling in the most: they had placed high value (high volume) orders for a range of our products on one order.  I discovered that on average one sales order resulted in 2.6 deliveries because of stock shortages.  So customers were ringing in to ask the status of their order, why it has been only partially delivered and when they were going to get the rest of their order….

So customers were up in arms because they were not getting the products they ordered when they expected them.  IDV had large warehouses (a fixed cost) that were almost half empty.  Costs in the logistics function were going through the roof because most customer orders required multiple deliveries because one or more products were out of stock.  All because management had handed the stock manager aggressive stock level targets – she met them by cutting stock levels to the bone!

Looking at it from a customer experience perspective I decided to focus on two, customer friendly, operational effectiveness metrics: customer contacts per order placed and deliveries per order.  My intention and commitment was to take out this ‘non value added demand’: demand that created waste (time lost, peace of mind lost) for the customer and waste (higher costs) for IDV.

Then I set about working with the folks to redesign the ‘order to fulfilment process’ that cut across a number of functional groups.  At no time did I look for lower cost ways of handling incoming calls from customers.  Nor did I look at lower cost ways of making deliveries.  Why?  Because that is simply finding better ways to deal with the waste created by inappropriate internal policies and practices.  Instead, I focussed on taking out the root causes of the ‘non-value added demand’ falling on the customer services function so that the IDV got it right the first time and thus saved customers worry and time.  The end result was a big increase in customer satisfaction accompanied by a large drop in costs across the functions (sales order processing, customers services, logistics, warehousing and stock management, finance) that handled the customer order.

Now contrast my approach (which I attribute to excellent mentors) with the way many organisations deal with the customer services operation today. The taken for granted practice is to hide the customer services number, to replace humans with technology, to focus relentlessly on getting the most out of the contact centre agents, to drive labour costs down by moving offshore etc.  They do reduce costs mainly by degrading the customer experience.  The trouble is that they also drive down customer satisfaction, customer loyalty and customer retention; the costs associated with getting new customers to replace the customers that have left due to the efficiency drive are hidden in the marketing and sales budgets.

So here are my tips for improving efficiency and reducing costs:

The smart way to cut costs in customer services is to focus on improving effectiveness – improving the customer experience. How do you improve effectiveness?  By doing it right first time by the customer. Why does this matter to the customer services function?  It matters because somewhere between 25 to 80% of the demand that is falling on the customer services centre is ‘failure demand’. This is the term that I have stolen from John Seddon to replace ‘non-value added demand’.

Failure demand is the demand that the customer has to place on the contact centre because some product, communication, policy, process or touchpoint has failed the customer. This is demand that the company does not want to deal with.  And it is demand that the customer would much rather not place on the company.  An example of this kind of demand is where the customer rings the company because she was promised  a delivery time of six weeks and it is now week 7 and she has not heard anything from the company.  Or the customer calls in to complain when he finds the warranty or the insurance is not worth the paper that is written on.  This means having the ear of the CEO, COO and CFO as the people who will have to make the necessary changes will sit in Marketing, Sales, Product Management, Logistics, Finance and so forth.

Once you have a cultural practice in place to find and deal with the root causes of failure demand you can turn and look at the value demand: the demand that customers place on customer services and which creates value for these customers.  The key thing here is to separate this demand into the simple and the complex.

Simple demand – where is the nearest store, what are the opening times, topping up a mobile phone etc – is a great candidate for self-service through a smart use of information technologies such as websites and IVR.   A great example is the airlines allowing customers to check-in and print their boarding passes: it saves customers valuable time and allows the airlines to save costs.  Another example is electronic banking.  The beauty of this approach is that if it is approached in a customer centric way then customers will thank you because you have improved convenience; you have saved them time – which is often in short supply; and put them in control.

When it comes to automating simple demand and requiring customers to serve themselves you must remember that is not always appropriate.  So you must allow customers to speak with the customer service agents – easily.  For example, the customer is in his car and wishes to move money between his accounts.  This is something he can do himself when he is sat at his desk and connected to the internet; yet it is not advisable when you are driving a car.  It is also possible that your self-service solution breaks: Self Service is not an easy fix or why I love Kylie.

By taking out the root causes of failure demand and introducing self-service channels for simple value demand you will increase customer satisfaction (usually dramatically) and save  your organisation a considerable amount of money.   In one case that I know of,  the savings run into tens of millions of pounds per year.

The final step is to deliver great service on the complex value demand.  For example the customer is browsing your website and needs your help in making the right product choices. One company that uses customer service agents to contact and help customers who have abandoned their shopping carts is putting a £1m+ on the bottom line.  Another example is from the insurance industry: taking care of the customer when a traumatic event occurs e.g. car crash; guiding the customer through the process; doing as much of the work as possible for the customer so as to ease the customer’s burden.  Or the customer is in a foreign land, has a change of circumstances, has no access to self-service and needs help (from a capable sympathetic human being)  in changing her flights and getting to her destination with the least hassle.  Do this right and you win customers for life.

The approach that I advise and have practiced is still the road less travelled.  Why?  Because it is counter-intuitive.  And because it requires the whole organisation to play ball.