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Will Customer Service Be Another Casualty of the Recession?
In a tight economy, companies try to cut operating expenses wherever they can.
For the rest of the May 2009 issue of CRM magazine please click here
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For the rest of the May 2009 issue of CRM magazine, please click here.

In 2008, the quality of customer service was finally on the rise in the United States. Executives had heard the cacophony of complaints and finally decided to do something about it. Even some of the customer service offenders ranked worst in independent surveys—telecoms and cable companies—were making progress. But these advancements are now at risk, despite the fact that customer service is crucial for the success of all organizations, from the one-person doctor’s office to the largest bank or telecom. There is a direct positive correlation between customer service and customer retention, as happy and satisfied customers are more likely to stay with an organization. In turn, revenue and profitability are directly related to customer retention.

When the economy gets tight and revenue falls, companies try to cut operating expenses wherever they can; reducing headcount in functions perceived as “overhead” is considered a good way to do this. According to the U.S. Department of Labor’s January 2009 Employment Situation Summary, nonfarm payroll employment was reduced by 598,000 jobs in the first month of 2009; 3.6 million nonfarm jobs have been lost in the U.S. since the December 2007 start of the recession, with approximately 1.6 million of that total coming in the most recent three months for which figures were available by press time (November 2008 through January 2009). While the Labor Department statistics do not show the functional areas of loss, many of these staff cuts historically tend to be in customer service and in the contact center. Our estimates are that more than 80 percent of companies have already—or in the next six months will—cut customer service or contact center staff as a quick way to reduce expenses. Unfortunately, many chief financial officers perceive contact centers as being staffed with expendable employees.

I appreciate the need to keep a business solvent, but I question the rationale behind cutting customer service before other staff and operating areas. During turbulent economic times, contact centers often receive more calls, not fewer. Many contact centers in the financial services industry are receiving additional calls because people are worried about the security of their savings and investments, or they have a desire to refinance. Insurance companies are receiving more reimbursement requests as people watch every penny; this generates more calls to check on the status of pending claims and to argue their disposition. And consumers are calling their telecom and cable providers to save a few bucks by changing plans or questioning bills, even for small amounts. So, while staff is being cut, call and inquiry volumes are increasing—not a great combination for customers or agents.

Most large contact centers—the ones with more than 250 agents—can sustain staff reductions of 10 percent to 20 percent without a major impact on the service level. This can be achieved by making better use of existing applications, specifically workforce management and self-service. However, once the cuts go deeper—and they are expected to—service quality suffers. Customers will find themselves waiting longer to speak with overworked and often unhappy agents.

Our belief is that leading companies will take a contrarian approach during this recession. They will strive to preserve their hard-earned and expensive gains in customer service and satisfaction. Sure, cuts to contact centers and service organizations will be necessary, but they should not be any greater than in any other area of the company. We recommend that companies prioritize the customer-facing activities that directly contribute to revenue generation, customer retention, and customer satisfaction, even at the expense of traditionally protected areas.

Think about it this way: If a company puts its customers first when times are bad and they are in need, customers will put the company first when times are good. Yes, this is trite—but it’s also true.

Donna Fluss (donna.fluss@dmgconsult.com) is founder and president of DMG Consulting LLC, the leading provider of contact center and analytics research, market analysis, and consulting.

Every month, CRM magazine covers the customer relationship management industry and beyond. To subscribe, please visit http://www.destinationcrm.com/subscribe/.

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To contact the editors, please email editor@destinationCRM.com
Every month, CRM magazine covers the customer relationship management industry and beyond. To subscribe, please visit http://www.destinationCRM.com/subscribe/.
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