Customer Operations
June 7, 2022

How Insightful and Personal CX Transforms CS Into Profit Centers

Tomer Suarez
Co-Founder & CEO, Interai

By 2025 40% of customer service organizations will be key profit centers in their business, effectively making them the future of sales.

Instead of being perceived as pure cost centers (and headaches), guzzling up staff and tech resources, customer service will become the key driving force of sales to existing customers; increasing LTV, and even impacting new customer acquisition.

But doing so requires a new approach; one that overcomes the current barriers and delivers a delightful and truly personal customer service experience.

Customer Service is King In a Seller-Free World

The way people buy has changed. Forty four percent of millennials prefer a seller-free experience, and to meet this demand most companies have invested in digital systems that enable self-serve sales and support.

This shifts even greater responsibility for the relationship to customer support teams. In effect, CS is becoming the only touchpoint where companies meet their clients and get an opportunity to provide excellent customer service. As such, customer service interactions that lead to retention will be the core mechanism for businesses to generate ‘easy’ income with low customer acquisition costs (CAC).

Customer Retention Is the Most Effective Way To Generate Income

Deloitte found that companies acutely focused on providing a great customer experience throughout the entire customer journey were 60% more profitable than companies that weren’t. And it all boils down to retention.

  1. New customers are expensive - It costs 5-7 times more to acquire a new customer than to keep an existing one, and in e-commerce this gap is increasing.
  2. Retention boosts profits - Improving customer retention rates (CRR) by just 5% has been shown time and again to boost profits by 25% - 95%. The longer customers stay with you, the greater their CLV. This is compounded because loyal customers tend to purchase more frequently and spend more with every interaction.
  3. Retention breeds referrals - As clients purchase more from a brand, they also refer more new clients.

This data shifts the customer service paradigm from ‘clearing out tickets’ to generating income through retention, remediation, cross selling, and upselling. But to really put it into action one needs to understand why retention is so influential.

Why Retention Is Critical for Reselling, Upselling, and Cross Selling

Retention is all about ensuring customer satisfaction so that they reach the next sales opportunity. Customers who experience bad service are unlikely to ever come back again. According to Zendesk, 24% of clients will return to you for 2+ years following a great customer experience, while 39% will stay away for at least that long following a bad one.

Understandably, there is a gap in average CRR between industries, attributable to factors like ease of transfer and competition. While Insurance, IT, and banking have CRRs above 75%, many SaaS companies experience CRRs of 35%.

But the underlying behavior is the same across every industry; only when the client relationship is positive and based on trust born out of great customer care, can upselling and cross selling even be an option. Only then the sweet spot is exposed where inbound customer service interactions can be turned into sales.

Excellent Customer Service Also Generates New Customers

Assuming fixed margins for a product or service, profit is generated in two ways: by acquiring more new customers, and by selling more to existing customers. But it is getting increasingly harder to acquire new customers due to lack of trust, abundance of choice, and greater competition. Customer acquisition costs thus have risen by 50% - 70% in the past 6 years to an all time high.

And that’s why investing in retention through great customer service delivers so much value. Delighted customers can’t help but recommend good service, both in-person and online. It’s basically free word of mouth marketing–aka the most effective type of marketing–leading to ‘free’ new customers.

This all leads us back to ‘great customer experience’ - what is it and how can we provide it?

Exceptional Customer Experience Has to Be Personal

Customer Experience (CX) is influenced by two things - the product and customer service. A product is inherently limited to its feature set and capabilities, but when it comes to service, companies have a chance to get personal and delight us.

Research reveals that 63% of buyers expect a personal experience from companies they interact with. Personal customer service means that an agent knows exactly who the customer on the line is, what they discussed with previous agents, that their birthday is coming up making them eligible for a gift card, and that they’re probably calling about a purchase they made 3 days ago. The relationship needs to pick up at every touchpoint seamlessly - no repeats, no delays, with empowered agents who can get it done.

Isn't it funny to receive an email promoting a product you just bought? 37% of customers think so too and would probably stop doing business with a company that doesn’t offer personalized service.

When customers describe how brands make them feel like an individual, it is clear that great personal customer service is not just tailored to each client, it is also proactive

Reactive vs. Proactive Customer Engagement

Reactive CX forces the customer to find the best channel to resolve their issue, be it a price reduction, a change in service, or even termination. In today's omni-channel craze, this can be overwhelming for both sides.

Who among us hasn’t placed a call and simultaneously initiated a live chat and sent an email just to get an agent on the line. For the client it’s a negative experience that impacts retention, and it creates immense pressure on CS staff and systems, distorting data, and costing money.

Gartner predicts proactive customer engagement will outnumber reactive interactions in as little as 3 years, literally “becoming a game changer, delivering effortless experiences, reducing cost, and increasing customer lifetime value.”

Thirty percent of proactive service will focus on preemptively resolving issues, like notifying of a delay in delivery or abruption of service, while another 30% of proactive interactions will be targeted at directly generating new income (18% to offer new products and 12% renew existing ones).

Proactive engagement will drive clients to self-serve channels and increase the feeling that the service provider is aware of their individuality and needs; fostering a feeling of trust promoting future sales.

So why isn’t all of this already happening?

Multiple Disparate CS Systems Are Holding Companies Back

To deliver insightful and personal customer service, agents and automated platforms need to see the full picture. Today, however, in most companies, CS agents receive tickets on one system and then revert to a homegrown back-office admin system that is not prioritized for customer service at all. They struggle to connect the dots between multiple disparate systems with separate interfaces and databases, like shipping and payments.

Instead of guiding the client to resolution, they are limited by what the client tells them and may miss critical bits of information that could change a grumpy call to a delightful experience.

Complete Tech Stack Integration Is the Key to Growth and High LTV

CS leaders intent on realizing their organization’s potential and becoming profit centers must join forces with IT and R&D to create technology that connects all the information about an individual customer’s lifecycle in one customer lifetime interface; one that supports full touchpoint integration, enables swift solutions, and proactive outreach.

Technology needs to support agents with insights, retention policies, and offers delivered at the right time and context for the customer they are currently interacting with. After solving an inbound trigger, agents should be empowered to prevent future frustrations, strengthen adoption, and increase spend. This is the essence of a delightful experience that boosts LTV.

Giants like Amazon and Uber have realized this, and re-built their systems to be totally client-centric. Smaller organizations, however, must look outside for solutions, and the faster they do so, the quicker profits will rise.

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