In the last edition of the Verghis View, we looked at what constitutes ‘middle class’ around the world – the largest number of people lifted out of poverty in the shortest period of time – ever. As we explored a little deeper, we discovered a wide gap between what we in the US consider ‘middle class’ and what the rest of the world thinks. In this edition, we explore how getting your customer service and support house in order prepares us for a global ecosystem where value and reputation play a very important role in people deciding where to spend their money.

Trickle Down or Trickle Up?

Make no mistake about it. The days of ‘trickle down’ products and services are over. People in emerging economies are no longer satisfied with obsolete (and sometimes banned) technology and products. You don’t have to look far for examples. A recent Business Week article reported that new products, packed with innovative features and available at a far lower cost, have been developed locally in India and China, then exported to the US.

Pressure on your service and support margins are intensifying. So are fierce global competitors, some of whom aren’t even on our radar screens yet. What can you do to prepare? Plenty! The fact is, when customers have a far smaller portion of their disposable income to spend, what really matters are brands, quality and reputation. These matter – a lot.

Start by examining your customer base

Examine your existing customers by revenue, and the odds are high that 80% of your revenue comes from just 20% of your customer base. Yes, it’s the old 80/20 rule again. I’m pretty confident that, as an organization, you do a good job with the folks who pay you a lot of money. Perhaps toogood, if you assume all high-revenue customers also generate high profits. 

The other 80% of customers – the ones who bring in only 20% of your revenue – are often an afterthought. Yet this is precisely where a great opportunity lies.

Improve service to that 80% of your customer base in an efficient and effective way, and you’ll improve their customer loyalty and your profitability. After all, it probably wouldn’t take much to increase their customer service experience from where it is right now. Often your relationship with this segment is transactionally good, meaning each customer interaction is treated as a one-off transaction, rather than as part of an ongoing relationship.

Don’t make the common mistake of thinking that each segment of your customer base wants the same high level of service. Contrary to popular belief, all you have to do is to give them service that is better than what they expect and make sure it’s better than the competition. Like most people, your customers understand that you get what you pay for. Just be sure to give them more than they expect!

So your challenge is to figure out how to serve 80% of your customers better than you do currently. If you can accomplish that, you should be able to raise your customer loyalty scores and your profit margins at the same time. In fact, I’ll go as far as to boldly assert that it is actually easier to delight these customers (given their lower expectations) than the ones who pay you a lot of money and often have correspondingly high expectations of service.

In order to increase your profit margins, you must lower your Cost to Serve. Let’s simplify this concept by defining it as the revenue per customer segment / cost to serve that customer segment. Once you gain insights into how you can increase customer delight and decrease the cost to serve this price-sensitive customer segment, you can then apply the lessons learned. Use them as the foundation to prepare your service and support organization to support the business as it looks to the developing world for growth.

So reducing the cost to serve is important. But how can you do that without reducing quality? Haven’t we already squeezed out about as many efficiencies as we can? The answer is yes – IF you keep doing business as usual. In previous newsletters and talks, I’ve introduced the concept of what I have dubbed a ‘Savvy Support’ model.

There are a few key concepts to understand before you implement a Savvy Support model, and I’d like to introduce one. (Thanks to theConsortium of Service Innovation for their work in this field.)

Differentiate between how you deal with ‘new’ issues versus ‘known’ issues — those that someone in your organization or support ecosystem is already aware of.

In the next edition of the Verghis View, we will walk through New to Known, and examine the tremendous impact understanding and making intelligent decisions on this information has on lowering your Cost to Serve.