Three Steps to a Modern Profitable Service Organization
| Published: May 26, 2015 | Comments
Transitioning your support organization or contact center from a cost center to a profit center is an onerous process that can be difficult to navigate. Yet, it is a journey that must be purposely undertaken, performed crisply and executed successfully to thrive in the competitive world. Being viewed as a cost center creates an endless journey of continuous cost cutting, funding reduction, and the need to always be more efficient this year than last. It is a self-destructive cycle that ends with an underfunded support organization attempting to provide ever increasing services to an ever demanding customer community in an ever more competitive market. The historical mantra has been simple: “do more with less;” when the discussion should be focused on creating organizational value, defining competitive differentiation, creating loyal customers, and promoting profitable growth.
Many companies have viewed their support organization as a necessity to remain in business. The view was simple: “customers will not buy without support, but customers do not buy because of support.” Support was a necessity and delivered at a minimal level and at the lowest possible cost. These organizations are funded on a cost-budget basis, and share these characteristics:
- Provide more support with less budget
- Offer more channels with minimal funding
- Stretch technology far beyond its useful life
- Use siloed applications as band-aids
Efficiency has its limits and frequently has adverse effects. The maximum efficiency that can be gained is limited by the total budget. Additionally, efficiency improvements can be captured only once and become part of next year’s baseline budget.
As budgets are cut year-after-year to provide additional margin to the organization, the quality of support diminishes, technologies age and workaround processes become more prevalent, which result in more inefficiencies. Personnel become frustrated, customers become frustrated and you fall behind your competitors. Cheap, quick, easy siloed technologies are implemented on a temporary basis; but temporary, all too frequently, becomes permanent. It creates a vicious circle spiraling downward and the organization is trapped.
The “trapped customer support organization” comes under attack on multiple fronts:
- Enlightened competition providing better customer service start taking market share
- Customers, empowered by easy-to-obtain, readily available information and the ability to socially broadcast their experience, increase their demands
- Increased competition for scarce internal funding. Cost-based organizations fall to the bottom of the budget list and are “designated for investment next year,” but next year turns into the following year, and so on.
Over time, these forces take their toll on the organization as it slips further and further behind the competition and industry service standards.
The CX Value Equation
To escape the trap, an economic framework must be established to measure and illustrate value. The measured value made by customer service must be considered across three major areas: Efficiency (E), Retention (R), and Acquisition (A). When combined, we refer to this as the CX Value Equation:
CX = E + R + A
Efficiency allows an organization to do more with less;
Retention is the ability of an organization to keep and grow the customers it already has; and
Acquisition refers to the ability of an organization to increase its customer base.
The CX Value Equation effectively defines a financial bridge between a CX customer service strategy and the organization’s profit line. With a defined CX Value Equation, you have a tool to illustrate the service organization’s contribution and progress. You are now ready to transform your organization from a cost center to a profit center.
Three Steps to a Modern, Profitable Service Organization
The key to transforming your organization is to modernize its capabilities so you can capture and illustrate the benefits.
Here are the steps to modernize your organization and turn it into a profit center:
Step 1: Set CX Value Equation Metrics and Baseline Your Service Organization
Start with efficiency metrics. These are the easiest to identify. Get a handle on the important ones, such as self-service and first contact resolution rates. Add retention metrics to the model. Great candidate metrics include Customer Effort Score (CES) and Net Promoter Score (NPS). Finally, add acquisition measurements with metrics like the number of opportunities and referral rates.
For further information, please consult Customer Experience (CX) Metrics and Key Performance Indicators, an Oracle White Paper.
Once your model is designed, baseline your current operational performance. This is your starting point from which you will demonstrate your progress and contribution to the organization.
Step 2: Modernize Your Service Organization
Use the Roadmap to Modern Customer Service Strategy to move from a cost center to a profit center. When this strategy is followed, the activity can be a self-funding.
Start by establishing a proper capabilities foundation. Then add new capabilities and provide consistency across all interactions. Finally, drive continuous innovation to remain ahead of the competition. The foundational activities are how you get going. You must resist the urge to skip steps and attempt to implement innovation on top of your outdated infrastructure. This will only lead to failure. Skipping steps is how an organization ends up with disparate systems (e.g. stand-alone chat) and business processes that function poorly, deliver substandard service, and require manual support and workaround processes to operate – hardly an effective strategy.
Let’s lay out the steps:
- GET GOING to save budget and generate cost savings that support investments to
- GET BETTER and improve retention with consistent quality of service, optimized capabilities and strengthened relationships, so you can
- GET AHEAD to create revenues by monetizing more opportunities, personalizing interactions and being proactive in an omni-channel environment
Step 3: Continue to Measure, Demonstrate and Evolve
Modern customer service is not a destination, but rather an evolving journey. This year’s customer service capabilities become table stakes for providing service next year. Customer needs and demands will continuously change. Market forces will change. Technology will change. The Internet of Things (IoT) is upon us, and will accelerate change.
Liberating your cost-centric customer support organization can feel like an impossible task. However, by leveraging the CX Value Equation and tailoring it to your needs, you can demonstrate the true value of the services you provide to your organization. By using the Roadmap to Modern Customer Service’s strategy: Get Going, Get Better, Get Ahead approach, you can self-fund and transform your center from an entity that is viewed as “overhead” or a “necessity” into a strategic, competitive asset that generates revenues and profits.
Click here to read the full whitepaper.
Strategy & Planning, Customer Experience
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