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The Tipping Point for Customer Service
Reframing service as a profit center is the key to driving new growth.
Posted Feb 27, 2008
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During his opening keynote at the destinationCRM 2007 conference, Malcolm Gladwell, author of The Tipping Point explained what's required to move an idea from relative obscurity to ubiquity in a short time. According to Gladwell, the market must be caused to see the idea in a new light; to see it from a different perspective. The idea needs to be "re-framed." Gladwell illustrated the point by describing how Apple re-framed the iPod as a fashion accessory instead of just another portable audio device. This new perception drove the iPod to market dominance overnight. Back in 1921, when 300,000 people listened to a live broadcast of the Dempsey-Carpentier championship fight, the world suddenly saw radio as more than a mundane machine for broadcasting the news; radio instantly became a way to experience world events as they happened. This reframing sparked immediate and precipitous growth for the radio and broadcast industry. When people see an idea from a different perspective, the idea can take on new importance, and drives major change. Because of its name, you'd think that Customer Relationship Management (CRM) would have grown up around supporting the entire customer relationships. But in truth, Customer Support has always been a bit of a third wheel to the more dominant Sales and Marketing components of CRM. Enterprises have traditionally viewed Sales and Marketing as drivers of revenue, and therefore can easily justify their investments in technology to support bringing in new customers. Customer Service has been shortchanged because it's viewed as a cost center. But what if Customer Service were to be re-framed as a producer of revenue? How would that change a company's will to investment in processes and technologies that support Customer Service? Let's take a look at Customer Service from this "profit center" perspective, and see exactly how it can produce revenue. And as we do, ask yourself how well your firm takes advantage of these opportunities. First, great service and support are what keep existing customers coming back. In a 2006 Harris Interactive Poll, 63 percent of customers noted that they usually buy more from a company because of outstanding service. We're all keenly aware of the high cost of acquiring new customers, and we're equally aware that it costs less -- as little as one tenth the expense - to sell to an existing customer. Stated differently, a sale to an existing customer can be ten times more profitable than a same sale to a new customer. Poorly executed service squanders the opportunity to reap those higher profits of repeat sales. Great Customer Service locks in those higher profit sales. Does your firm invest in the processes and technologies that will enable it to deliver the quality of service that will keep your customers coming back? Do you measure and manage customer churn, as it relates to Customer Service? And do you continually adjust and refine those processes and technologies?
Second, great service will grow your customer base. In his best seller "The Ultimate Question" Fred Reicheld describes a strong connection between great Customer Service and revenue growth, via the "promoter" -- a customer who has been so satisfied by your firm's service that he sends new customers to you. In Gladwell's terms, these are the "mavens" -- customers who have come to know and value your service, and enthusiastically tell others about it. New customers mean new revenue, as a direct result of great Customer Service. Do you actively seek feedback from your customers as part of the service process? And do you act on what you learn in order to cultivate more promoters and mavens? Third, great service opens the door for opportunities to cross-sell and up-sell. Virtually nobody speaks to your customers more than your Service and Support people do. They're in a great position to identify and capitalize on cross-sell and up sell opportunities that often miss the radar of the sales team. But the fact is, you cannot sell until you serve. If a Customer Service organization is equipped with the tools and technologies to provide top-notch support and easily identify cross-sell and up sell opportunities, they can serve and sell effectively. Do you provide your Customer Service organization with the training and tools to sell within the Support process? Finally, service and support, when tailored to the exact business requirements of a customer, can add significant value to your core offering, and pass that value to your customer's bottom line. Smart customers understand this, and are often willing to pay more for a higher level of service. By investing the time to deeply understand your customers' business, and creating new service offerings that will drive value for your customers, you'll be in a position to create an entirely new revenue stream through your service organization. What percentage of your overall revenues comes from your service organization? And how can you increase it? The "tipping point" toward market leadership for many companies is when they decide to place a greater strategic emphasis on Customer Service and Support as part of their overall CRM strategy. When Customer Service is re-framed as a Profit Center, it can become a strategic factor in your firm's growth and profitability. If this change hasn't already occurred in your organization, it may be your opportunity to be the catalyst to create the "tipping point" for your organization's change. About the Author James Watson is a Regional Director with Neocase Software. Neocase Software Inc. is a global leader in Customer Service solutions, maximizing productivity and quality of service through collaborative offerings including self-service, knowledge management, partner portals and advanced workflows. For more information, go to www.neocasesoftware.com. Watson can be reached at 207.741.9047 or jim.watson@neocasesoftware.com
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