In the previous article, we saw how customer satisfaction can be good for shareholders. However, it may also lead to sudden problems as more and more new customers opt for your company. Now let’s see how, for example, investing in customer service might need to be reconsidered – at least according to the website of the INSEAD business school.
Invest in customer satisfaction or in reducing costs?
All money which is spent on improving customer service is money denied to other priorities such as, for example, cost-cutting technologies. The trade-offs between productivity, service quality and profit can become tricky.
Another study, from 2012, claims that any service provider should aim to achieve not maximum productivity but the most profitable level of productivity. Factors such as higher margins or better prices motivate the provision of better service: company resources are then better spent on improvement of customer service – even if efficiency should suffer.
Nevertheless, in high-wage, low-margin, or low-competition environments, companies should automate wherever the technology allows them to do so.
So how is it with customer satisfaction and customer service?
An economy which is predominantly service-based requires managers and shareholders to approach productivity in a way that acknowledges there are some contingencies. It would be especially damaging to plan only for the short term since all the considerable market benefits of increased customer satisfaction will probably become observable only in a longer term than until the next quarter.
That said, adding more customer service capacity is not always the correct decision: the economic aspect still matters. It seems that many companies invest too heavily in customer satisfaction.
-jk-