What is customer service?
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Published: 27 March 2024
Contributors: Keith O'Brien, Amanda Downie

What is customer service?

Customer service is the dedicated organizational function that manages customer relations throughout the purchase journey. It can help customers best use their purchased products and services, and resolve any customer issues that arise from the use of the products or services they purchased.

Customer service, also called customer care or customer support, helps organizations ensure that customers are happy with their purchases. Most importantly, it ensures that organizations are prepared for the inevitable customer issues that can arise.

Product defects, though unfortunate, occur no matter the provider. Some customers will not love their products for one reason or another. Some will complain about the pricing compared to the value produced by the product. Customer feedback, which can be positive or negative, is an expected part of the customer journey. It is incumbent upon the customer service team to handle all of these situations to avoid damaging their brand reputation.

Hallmarks of an excellent customer service experience are speed in responding to customer needs, creative problem-solving capabilities, and an overwhelming desire to make the customer base happy.

The difference between bad and good customer service has a demonstrable impact on business success. Better customer service helps improve customer retention and customer satisfaction, ultimately improving customer lifetime value. In fact, 88% of respondents to a Salesforce survey(link resides outside ibm.com) said that good customer service was as important as the actual products or services that are purchased in making customers happy.

Minimizing avoidable customer churn improves customer service and contributes to an organization’s bottom line. Happy customers are loyal customers, and more likely to recommend the products through positive word-of-mouth. Creating customer loyalty is not just about delivering excellent products or services; it can also be accomplished by demonstrating that the company and its customer service agents are actively listening to and taking action on customer service complaints.

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Why customer service is important

While every organization is different, it is universally true that it costs more to recruit a new customer than it is to sell to an existing customer. According to McKinsey(link resides outside ibm.com), the cost of replacing the value of one existing customer requires finding and activating three new customers.

An effective customer service department can increase customer retention, thereby saving an organization money. In addition to retention, providing good customer service demonstrates stability to the larger business community. Investors and other stakeholders will take note if an organization is treating its customers well, which can be a sign that revenue growth will arise—or continue—in the future.

Initiatives that increase customer satisfaction by at least 20 percent have a cascading effect on other business outcomes, according to McKinsey2 (link resides outside ibm.com). They can increase an organization’s cross-sell rates and the company’s share of the wallet.

Meeting customer expectations has become harder as the cost of switching brands or providers is cheaper today. Customers expect organizations to provide customized experiences or solutions at an affordable price. They have a low tolerance for anything that does not deliver value. It’s important to invest in and prioritize customer service to not only meet the needs of their existing customers but also recruit new ones.

Ways organizations can provide the best customer service

Active listening: Half the battle of providing good customer service is often how quickly an organization can respond to requests. As customers increasingly vent their issues online through social media, chat rooms, or message boards, they expect nearly real-time responses. Organizations can use powerful tools to identify those issues and reach out quickly. The customer service representatives who respond do not necessarily need to solve the issue immediately; they need to acknowledge it has been received.

Proactive outreach: Most organizations consider customer service to be a major component of the overall customer experience function. One way CS can benefit from customer experience is by having the organization use email or other communication methods to reach out quickly after a new customer has purchased a product or service to assess the customer’s satisfaction.

Use the right tools: Companies should invest in robust customer relationship management (CRM) tools to track customer purchases, interactions with the customer support team and overall issues they have reported. CRM workflows help organizations better know who are their biggest customers and enable them to track overall purchases.

Learn from bad experiences: A customer who reports a new issue can give an organization valuable proactive feedback that can save the organization larger headaches later on. Smart organizations prioritize customer feedback directly after a product is launched as it might portend a potential defect or poor customer experience. It might need to recall those products or fix the issue early on, so future customers don’t have the same negative experience.

Invest in and train the call center: Organizations should invest in improving the customer service skills of their representatives, since they interact directly with customers. There are a whole host of subjects that these representatives must learn to stay current with changing customer behaviors. Examples include how to use social media channels to communicate with customers and how to use other technologies like generative AI. Representatives can also learn a lot through sensitivity, anti-bias and empathy training, so they are prepared to handle specific issues. They should also learn how to handle unruly customers who are angry about a particular incident or product.

Empower customer service workers: Organizations understandably want to centralize customer service responses to recurring issues. That way they can provide a consistent experience to every customer and avoid unnecessary friction in resolving customer issues. However, that can sometimes backfire if the response template doesn’t fit the specific customer issue or if there are extenuating circumstances. Organizations that excel at customer service know how to combine both standardization with employee decision empowerment. McKinsey provided an example of customer service representatives at DBS(link resides outside ibm.com) being empowered to solve any customer issue where the cost is less than USD 200.

Types of customer service

Modern organizations must be able to cater to customers through various customer service channels to ensure positive customer experiences. These can include:

In-person: In-person communication happens when someone in a brick-and-mortar location asks to speak to a customer service representative or the manager. Some people will always want to resolve issues face-to-face, especially if their issue can be solved immediately while in store.

Phone calls: A call center is an important offering for those customers who still want to talk to a customer service representative but not in person. The rise of self-service and other automated channels has made phone calls more costly, so some organizations try to minimize this service. But making it difficult for people to use the channel they prefer might lead to more lasting negative consequences such as bad word-of-mouth or customer turnover.

Text messages: The rise of smartphones and messaging applications (for example, WhatsApp) means that more individuals can text organizations directly. For some, this is the perfect channel because it creates immediacy while enabling customers to go about their days while waiting for a follow-up response.

Social media: This is an increasingly popular service channel as consumers believe that publicizing the issue makes the organization respond faster. The reason for this is that organizations are wary of creating lasting reputational issues. Indeed, many organizations have created specific social media profiles to handle customer service issues so their main accounts aren’t clogged up by requests and answers.

Self-service knowledge base: Organizations that provide knowledge bases full of information and tutorials and frequently asked questions (FAQs). This is to meet the needs of an increasing number of customers who prefer addressing their questions or issues without interacting with a human. Knowledge bases can include a mix of articles, graphics case studies, videos and audio.

Chatbots: The rise of generative AI will likely improve chatbots, making them appear more human-like and less likely to encounter issues they cannot solve. Older chatbots were tied to a finite number of scripts and were often not as successful in solving customer issues as humans.

Forums: These are places where customers can ask questions that are answered by customer service representatives or sometimes, by fellow customers. It’s a great way to provide personalized service by also encouraging customers to help each other.

Types of customer service metrics

There are several intertwined metrics that organizations track to ensure both their customer experience and customer service functions are performing at a high level. They can be divided into two levels. The first deals with tracking how customer service teams are effective at dealing with specific customer service issues. The second relates to success metrics on how happy customers are, which is related to the work of the customer service teams.

First Response Time (FRT)

The FRT metric deals with how quickly customer support agents can respond to a customer request. This is both a product of technology (what tools an organization needs to unearth these requests) and personnel (how many agents are on hand to reach out). However, organizations are experimenting with chatbots that can begin conversations and have customer agents assist when these bots can no longer help with a specific issue.

Average Resolution Time (ART)

This metric involves how long it takes from the beginning of troubleshooting a customer service interaction until the issue is resolved.

Issue resolution rate

Issue resolution rate has to do with how many customer service issues are successfully addressed and resolved. While a customer service team cannot expect to resolve every customer problem, failure to solve almost all issues is a sign of an issue.

Customer Satisfaction Score (CSAT)

This relates to customers who claim that they are 'satisfied' or 'very satisfied' when asked about their experience with a product at a touchpoint along the customer journey. Good CSAT scores can either demonstrate that an organization is providing worthwhile products or services or that customers needs are being met by the customer service offering.

Net Promoter Score (NPS)

This identifies a customer’s likelihood of promoting a product or service to someone in their community. For example, if someone uses an affiliate link or is compelled to post something on social media about their experiences with a product. It is a percentage-based score, which depends on determining how many people are 'highly likely' to recommend a product (9 or 10 on a scale of 10) versus those who are 'unlikely' to recommend it (scores 6 or less). Many consider this score to be a stronger indicator(link resides outside ibm.com) of long-term customer satisfaction and a more valuable statistic as high NPS means more positive word-of-mouth.

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Resources Customer service versus customer experience

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Driving a reimagined customer experience

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Customer service trends

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Tips for exceptional customer service strategy

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All links reside outside ibm.com

1 What is customer service?, Salesforce, August 2023
2 Experience-led growth: A new way to create value, McKinsey, 23, March 2023
3 The State of Organizations 2023, McKinsey, 2023
CSAT versus NPS: similarities and differences, Survey Monkey