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June 21, 1999

Customer Disservice

Businesses are spending heavily on customer service, but many aren't getting the job done

By Jeff Sweat and Justin Hibbard

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ustomer service is at the top of the priority list for many business and IT executives. And it's an operational area in which many companies are investing heavily. So if businesses have identified the need for top-notch customer service and they're deploying technology to provide it, why can't more get it right?

Despite pledges that the customer comes first, and regardless of how many customer-oriented IT projects they launch, some businesses simply aren't getting the job done when it comes to making customers happy. Consumers and businesspeople alike complain of being put on hold when they call, getting the wrong information, dealing with sluggish Web sites, and being bombarded with marketing calls and material for products they don't want--all problems that technology, in theory, can help alleviate.

The scenes are played out in homes and businesses every day. When Luther and Susan Troen needed a phone line installed at their new house in rural Arizona last October, they called US West. A representative for the telephone company told the Troens they needed to run a pipe from their house to the street to get service. After they spent $18,000 to do it, the Troens called US West and spoke to another representative who they say had no record of their earlier call and told them the company didn't yet provide service in their area. "We were just stunned," says Susan Troen. "We keep asking, `Are we in America or a Third World country?'"

From 1994 to 1997, spending on customer-relationship management software and services, including customer-service applications, grew from $200 million to $1.1 billion, according to AMR Research. Over the same period, the American Customer Satisfaction Index--a measure of consumer attitudes toward some 200 companies in 35 industries--dropped from 74.5 to 70.1 on a scale of 1 to 100. The index edged up 1.2 points last year--but dipped again in the first quarter of this year. The index is based on an annual survey conducted by the University of Michigan Business School, the American Society for Quality, and Arthur Andersen.

Some companies and industries have seen their ACSI scores improve, but, overall, customer satisfaction isn't keeping pace with customer-oriented technology spending. That's because many things go into shaping customer attitudes toward businesses--personal interaction, product availability and quality, cost, ambiance--and technology isn't always involved. When technology is involved, it sometimes plays only a supporting role. "You don't get satisfaction and loyalty from IT," says Christin O'Neill, a consultant with Success Sciences Inc., a firm that deals with customer-service issues.

But IT, when mismanaged, can be part of the problem. Even when used as intended, IT is not always customer-friendly. Some customer-management applications, for example, are meant to help businesses track interactions with customers--but that doesn't necessarily translate into better service. BankBoston Corp. last year deployed Siebel Systems Inc.'s Sales Enterprise software to generate leads and manage the sales process in its small-business banking unit. "The primary driver was revenue," says Pam Ireland, senior VP and director of sales for the unit. "There wasn't an initial target in terms of customer satisfaction."

Of course, businesses do care about customer service; many commission surveys and create feedback channels to gauge how they're doing. In a recent survey of 300 IT executives by InformationWeek Research, "understanding and meeting customer needs" and "improving customer service" ranked as the top two technology and business priorities ("More Projects, Less Time," InformationWeek, June 14, 1999).

There are huge incentives for companies to get it right. According to the University of Michigan's Business School, there's a clear correlation between a company's score on the American Customer Satisfaction Index and that company's stock price. A one-point rise in a company's ACSI rating corresponds to an average $240 million increase in market value. No wonder, then, that businesses keep pouring money into customer-oriented technology.

Work In Progress
Compaq is one company that's aggressively investing to improve its service and support operations. Compaq's $9 billion acquisition of Digital last year was motivated in part by a desire to bulk up its services organization. Also last year, Compaq deployed Siebel Systems' enterprise software for customer support and sales-force automation.