October 12, 2009

Next Generation Customer Service

In light of the fundamental changes in consumer behavior over the past five years retaining customers is key to success: 34% of companies realize listening to and understanding customer needs is a development priority, while 32% cite the importance of improving customer service as top of the agenda.

Considerable changes in customer expectations are putting new challenges on the customer service (CS) function, driving organizations to seek an enterprise-wide understanding of—and commitment to—customer needs. To fully understand the demands of next-generation CS on organizations, Booz & Company recently conducted a comprehensive survey: ‘The Next-Generation Customer Service’ study, which included over 30 face-to-face interviews with senior CS executives, and a survey of 50 senior-level managers, in Europe and the Middle East.

The New Customer Service Agenda

“Consumers today are smarter than ever. The number of channels for customer interaction is ever-increasing and the ways consumers communicate, learn about products, and make purchasing decisions have fundamentally changed over the past five years,” said Ghassan Hasbani, a partner at Booz & Company.

Companies are beginning to understand these changes and are adapting to them. Now, customer service (CS) interactions are seen as opportunities for engaging with customers, gaining better customer insights, and leveraging service propositions for revenue growth. Technology innovation supports this: customer information can now be generated and leveraged more efficiently than in the past.

Booz & Company’s study and discussions with clients have shown that many organizations share a new CS vision, which redefines service as a key tool to grow the value of the customer base and an important strategic differentiator in saturated markets.

According to the report, companies are struggling with a disconnect between their CS vision and their actions. Hilal Halaoui, a principal at Booz & Company said, “Service organizations are at a crossroads and must determine whether CS remains a ‘hygiene factor’ or helps produce a truly customer-centric organization.” Achieving the latter requires a head of customer service, with strong strategic capabilities, in the C-suite. There are five key challenges organizations must address to become successful CS practitioners the study revealed: leverage service for revenue growth, innovate the customer interface, integrate customer touch points, drive customer-centricity and create high-performance operations.

Leverage Service for Revenue Growth

The move to active contact management from contact avoidance is a fundamental change in next-generation CS. Organizations are discovering new value by using each contact to generate new consumer insights, build loyalty, and leverage the interaction for cross- and up-selling. Effective customer interaction and comprehensive customer data management can help generate the insights that support individualized service, and make costly customer relationship management (CRM) investments pay off. Targeted information helps marketers cross- and up-sell to customers.

“In years past, the primary goal of CS was ‘getting the screen green’, but our results show that companies today are more focussed on active customer management,” stated Hasbani. Leading CS organizations are noting every customer contact to increase customer satisfaction, improve the service offered, and grow customer value.

Innovate the Customer Interface

Successful CS organizations have shifted their focus to reshape the customer interface as a core driver for new value. State-of-the-art voice recognition systems understand what customers say using natural language and can detect emotional “vibes” that allow the system to deliver the call, depending on the customer’s mood, to a complaint specialist or sales representative. More companies are also leveraging technology to enhance the interplay of channels.

On the front end, next-generation support systems allow a smooth interaction of an e-channel customer with a contact center agent. On the back end, shared, consolidated knowledge management tools improve the customer experience and drive down IT costs associated with maintaining multiple knowledge management systems.

Some companies have found that a service offering, in and of itself, can be an important differentiator and provide an opportunity to create a bond with customers. Others are experimenting with paid services as a key element of their value propositions, having found that many customers will pay for advanced support. Others have found that their business-to-consumer (B2C) customers are willing to take a step up in service and pay for the programs offered to business-to-business (B2B) customers.

Leveraging Web 2.0 offerings also actively involves customers in the service process. “These two-way interfaces capture customer suggestions and allow service agents to comment or directly follow up, providing high-quality CS at a low cost and generating the customer-specific insights necessary for value creation,” explained Halaoui. Interactivity will be a primary driver in upgrading call center operations to enhance the service experience. Striking a smart balance between contact automation and human interaction is a key success factor for service organizations.

Integrate Customer Touchpoints

As CS becomes a key driver of value generation and strategic differentiation, companies are pursuing integration strategies for their customer touch points on three levels.

  1. Product line integration: Many companies are moving to create a single interface for customers, delivering a comprehensive service experience across the entire product range, based on different customer segments’ needs. This leads to increased customer satisfaction, more cross-selling opportunities, and cost synergies.

  2. Sales and service integration: The need to respond to the customer segments’ preferences and the desire to maximize the impact of every customer interaction make every customer touch point a sales and service outlet.

  3. Touch point integration: In an environment where sales processes often engage up to three different contact channels and customers use different service touch points, next-generation CS means two things: First, the ability to provide a seamless customer experience across channels and second, the ability to formulate and execute a cross-channel service strategy.

Many CS companies are taking steps toward integration that encompasses all touch points across both sales and service. “Some already leverage channel interplay to drive usage to certain channels or to generate more valuable contact opportunities. Shops and the e-channel still provide attractive untapped opportunities to integrate both sales and service,” commented Hasbani.

Drive Customer Centricity

The majority of interviewees stated that their organizations will become more service-centric in the future, with a focus on increasing customer satisfaction. Halaoui said, “The success of CS depends on the strength, strategic capabilities, credibility, and influence of the head of customer service. We found strong support for an institutionalized chief service officer role, yet of the companies we interviewed, only a third had such a position.”

Most of the companies surveyed stressed the importance of interaction among the service, sales, marketing, and technology functions, with nearly three-quarters believing that sales and marketing will become more strategic CS partners in the near future. In a service-centric organization, the role of CS is to represent the customer and drive improvements aimed at increasing customer satisfaction across the organization.

Given the goals of CS to retain customers and drive top-line growth, CS organizations must make their contributions transparent. Although service is an integral part of building customer retention and loyalty, there are no precise metrics to substantiate it. Today, only 20 to 30 percent of CS organizations systematically track the success of their cross- and up-selling efforts, however, more than 85 percent of the companies surveyed plan to have some metric in place to measure customer satisfaction within the next two years.

Listening to—and understanding—clients’ needs and aligning service offerings to address them is the key to retaining customers. “When we asked our interviewees about the development priorities for CS capabilities, they cited listening to and understanding customers’ needs (34 percent) and improving customer service (32 percent) as their most important priorities,” said Hasbani.

Create High Performance Operations

CS organizations need to put in place a solid service foundation before moving on to establish best-in-class CS. “Our interviews show that many companies are still struggling to remedy service issues,” said Hasbani. Nearly two-thirds of respondents reported that their latest improvements focused primarily on changing or optimizing existing operations.

Once the proper tools and processes are in place, the next step in creating high-performance operations is to optimize organizational structure and staffing. The study identified several best practices to develop and retain high-performing staff: Cross-train agents, develop specialist roles, prioritize training and coaching, understand what motivates agents, and develop flexible workforce schedules.

While stable and efficient CS operations are an important cornerstone on which to build the service vision, many companies pay insufficient attention to innovative, forward-looking investments. “Within organizations, the next-generation CS vision will prove a hard sell, if urgent performance or cost issues distract from achieving the longer-term vision,” cited Halaoui.


Next-generation CS represents a transformation from a necessary function for resolving customer problems into a value-generating service that is a strategic differentiator in the market, with customer satisfaction and margin contribution now key metrics for success. Tomorrow’s value will be driven by the ability to leverage service to enhance customer interactions, generate customer insights, and help transform the entire company into a customer-centric organization.

By taking advantage of every point of customer contact, CS can begin to contribute to the larger goal of positively engaging the customer. Moreover, organizations that learn to stay ahead of innovation to build an even stronger relationship with individual customers, will find that service can be a powerful means to build consumer loyalty.

The appointment of a strong chief service officer is a positive step in the direction of next-generation CS. Providing the chief service officer with the resources to coordinate cross-functional information exchanges is an essential second step. Today, a company’s success in winning and retaining customers increasingly hinges on its CS performance. Only a step change in CS approach and top management commitment to invest in service innovations will allow companies to deliver on their vision of CS as a strategic differentiator.