Service Management 

Efficiency versus customer satisfaction: What’s the real driver for the “digital transformation”?

In the age of user experience, it’s more important than ever for companies to deliver the best service possible – but at what cost?

“Reduce overheads,” “cut wastage,” “eliminate redundant practices” – directives many of us have heard over the years and in principle all noble objectives. Why wouldn’t an organization want to de-invest in activities that are inefficient and can be done more cheaply in another way?

Sounds logical doesn’t it? After all, PricewaterhouseCoopers’ (PwC’s) recent CIO Survey revealed that 82 percent of CEOs point to operational efficiency as the area where they have seen the best return on digital investment.

Undoubtedly digital adoption can greatly decrease the cost of each sale and help replace outmoded practices, such as an over-dependency on paper within the insurance industry, or perhaps an over reliance on brokers or agents to issue policy certificates.

The investment choice dilemma

Insurance is an industry at a crossroads. Less than 30 percent of customers globally are enjoying positive customer experiences, representing nearly a 4 percent decline over 2013 according to the CapGemini World Insurance Report.

This sector has an investment choice dilemma – should funds be allocated towards streamlining policy purchase, certificate of insurance issuing and renewals processes or overall customer lifecycle management. Frequency of customer contact is especially relevant for insurers who typically have one moment of engagement a year, when the policy is due for renewal.

In the application economy where immediacy and delivering an optimized, high quality, personalized customer experience is critical, “savings” alone are a risky goal. Enterprises are now beginning to realize that a continuous push towards efficiency only connected to reducing the cost of customer engagement and homogenizing it as much as possible can actually be counter-productive. If the cost of each sale is reduced by 1 percent, this hardly matters if customer attrition is running at 10 percent-plus a year. You have bigger issues to worry about.

Why timing is (almost) everything

True digital businesses are looking at these relationships in a different way. Instead of seeing customer relationship management as a pure profit and loss exercise and searching for percentage reductions exhaustively, they take a holistic view from initial onboarding to needs anticipation, how offerings can be personalized, made convenient and 24-7. Go back just 10 to 15 years and all too often a message that “call center hours are 9 a.m. to 5 p.m., please call back tomorrow” would be heard if a customer had a question in the evening (e.g. when they actually had time, after work).

Cognizant global head of advisory services, social mobile and sensors Ved Sem makes the similar points in his recent LinkedIn post. He highlights the rush to achieve economies of scale and see the cost of each customer interaction as being the primary metric as very short-sighted.

Scale also presents challenges in a world where most people want to be treated as entirely unique and their preferences recognized. The push towards efficiencies means treating all customers the same and assuming identical purchasing patterns runs contra today’s sometimes ego centric consumer. In an app dominated world where immediacy is paramount and consumers time poor, the ability to deliver the latest product or service seamlessly across all platforms and devices means timing is (almost) everything.

Take CA Service Virtualization for example. By simulating the behavior of unavailable applications, databases and other systems, our customers benefit in three ways. Firstly, quality improves as integration testing of all dependencies can be carried out earlier, and defects identified and fixed.

CA Service Virtualization also reduces infrastructure costs as the number of dev and test environments don’t need to increase exponentially as the number of apps being developed grows. But if we were to ask customers what matters most, the majority would reply “time-to-market”, which is typically cut by 25 to 30 percent.

The “What ifs?”

The direct revenue impact of this is sometimes hard to quantify as it raises “What if?” questions – what if a product had not launched ahead of the competition, what if a new smartphone was not available on our website the moment it was launched? What can be measured though is revenue generated today rather than in several weeks’ or months’ time, that would not have otherwise been possible.

Ultimately, both improvements in efficiencies and the customer experience should not be mutually exclusive, and sometimes gains in the former can positively impact the latter. If the changes to an extended supply chain between a company and its suppliers reduce lost or delayed orders, then the customer is the ultimate beneficiary.

The toughest aspect is perhaps the investment trade off – what will bring the greatest rewards, that additional customer facing app functionality or a reduction in manual processes at the back end? Increased customer satisfaction ideally generates higher revenue per user, and improved customer retention. Cutting internal costs benefits the bottom line and is sometimes more easily quantifiable. This is where available metrics and relevant data come into play – so may the group with the most robust business case win.

Image credit: Metro Library and Archive

Justin worked in CA's marketing. He is no longer employed by CA Technologies.

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