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From Cost Center to Revenue Center: Evolving Customer Care

By January 5, 2024January 18th, 2024Insights, Customer Care
Published Date: Friday, Jan 05, 2024
Last Updated on: Thursday, Jan 18, 2024
Care team creating different ways for brands to approach customer care.

The idea that customer engagement and revenue go hand in hand shouldn’t be groundbreaking.

As early as 2014, critical research published by the Harvard Business Review revealed that customers who had positive experiences spend 140% more than those who received poor service.

Nearly a decade on, customer care remains at a crossroads – balancing on a knife-edge between cost-containment and increasing customer churn. As businesses fight to do more with less, and customer expectations soar at a breakneck pace, companies can no longer afford to underfund – or neglect – their CX. 

The power shift is clear: Customer care is no longer a line item solely associated with expenses, but a pivotal driver for profitability. In this article, we delve into the evolving role of customer care, exploring how and why forward-thinking brands are reshaping their strategies to meet customer expectations and strategically boost their bottom line.

The cost center culture (and its risks)

Customer care has traditionally been seen as a “cost center” – a drain on profits and a necessary evil. Until very recently, most customer care strategies focused primarily on minimizing labor costs, implementing lean practices and achieving an optimal mix of offshoring to lower headcount expenses. In short, the chief goal was to provide a defensible service standard at the lowest possible cost. 

As a result, organizations geared their CX protocol toward reducing average handle time (AHT) and shortening live interactions. It was a speed at all costs approach – one that prioritized quantity over quality. Julian Raabe, expert partner at McKinsey, writes: “The increasing complexity of customer engagement meant few if any companies were equipped to pursue these goals while at the same time improving customer satisfaction and increasing revenues from their care interactions.”

While endorsers make bold claims about cost-containment, the “cost center” approach has major implications for businesses and their customers, including:

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Risk 1: Reduced focus on existing opportunities

Businesses assume that there are no substantial revenue opportunities in customer care and focus only on curbing costs. The traditional revenue mindset celebrates net-new acquisition, rather than recognizing the value of the lifetime journey and the upsell, cross-sell and resell opportunities that come with great customer service. This is also critical to customer retention – where a 5% increase can boost profits by up to 75%.
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Risk 2: Focus on the wrong metrics

A focus on cost savings leads to an obsession with vanity KPIs that fail to paint the bigger picture. Poor customer outcomes become a byproduct of blindly meeting handle time metrics – even if issues are left unresolved. This results in repeated callbacks from disgruntled customers, leading to increased labor costs, issue escalation and higher turnover.
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Risk 3: Increased customer churn

Customers now expect more than table stakes when it comes to brand interactions. 60% of consumers have actively purchased a product from one brand over another based on the customer service they expect to receive. And, when issues reach a boiling point, customers are rarely forgiving. Once customers are disappointed with a brand, only 18% will keep their business – and a mere 15% will advocate for their services.

Embracing a modern mindset

The modern market demands that businesses look at customer care through a new lens – not as an overhead, but as a high-return investment into the customer lifecycle. 

Customer care is moving beyond just “issue resolution” toward being a revenue stream in its own right – with endless opportunities for meaningful experiences that lead to retention, loyalty and advocacy. These opportunities arise at every stage of the customer lifecycle, from initial net-new interactions with chatbots to targeted offers for existing customers – and data suggests investing in the “full lifecycle” approach pays dividends:

Customer-focused companies increase customer lifetime value (CLV) by around 2.3 times on average.

HubSpot

Businesses prioritizing CX can grow their revenue up to 1.7 times faster than companies that fail to engage customers.

Forrester

86% of buyers are willing to pay more for an exceptional customer experience that truly satisfies their needs.

PWC

Businesses need to openly embrace the idea that great CX isn’t just a commodity, but an essential value-adding buying factor. 95% of consumers say customer service impacts their brand loyalty, naming easy access self-service and professional agents as crucial factors. Needless to say, companies that excel at empathy, personalization and facilitating quick, long-standing resolutions are winning on differentiation. Those too narrowly focused on expense management are already falling behind, facing poor customer outcomes and expensive recovery efforts. 

To succeed in this vastly competitive landscape, businesses need to adopt – or at the very least acknowledge – four key principles:

CX sells at every stage in the customer journey

Unlike sales and marketing, which tend to be more discovery-focused, consumers interact with customer service at all points in their lifecycle. From pre-inquiry to account cancellation, customer service is now the entry point for new and returning customers alike. As a result, service agents are no longer just wearing a “problem solver” hat, but actively influencing buying behaviors – be it suggesting an upgrade or convincing a customer to renew.

The lines between marketing and customer service are blurring

To generate revenue through customer care, businesses must go beyond their traditional silos and learn from marketing’s influence on customer engagement. Segmentation and analytics can be introduced to help agents understand the needs of customers, and tailor offers and incentives based on their specific needs. By blurring the lines in this way, businesses can satisfy the demand for personalization, increase CSAT and steer outcomes in their favor.

Customer care data is critical to marketing potency

As major search engines and advertising platforms begin to limit the use of cookies, businesses need to find newer, more innovative approaches to capture customer data. Customer care is a gateway to vast amounts of first-party data that can suggest intent to buy, product propensity and buyer preferences. These rich insights can ultimately drive full-on marketing communications and strengthen customer engagements with improved personalization and segmentation.

Reputation means revenue

Brand loyalty is hard-earned, and businesses rarely get a second chance. In a digitally advancing, self-serving world, customer care is the face of a business – and potentially the only human-to-human encounter a customer will have with a brand. These interactions are usually emotionally charged “moments of truth” that shape customer perceptions. When businesses make strides to provide premium, personalized experiences in these “moments of truth,” they can expect repeat purchases, increased loyalty and better referrals.

customer care establishing loyalty between customer and brand.

Evolving from cost center to revenue center

The transition from a cost center to a revenue center requires significant transformation – both culturally and procedurally. Exceptional customer experiences are paramount, and providing premium, omnichannel service reigns supreme. Still, there’s a balance to strike; very rarely can businesses afford to meet this standard for every customer in their sight. 

Contact centers must now focus on striking a happy medium between three key priorities: customer experience, cost-containment and revenue attainment. Below, we’ve listed a series of recommendations that add up to improved CX and benefit to the P&L.

Build a “revenue culture”

The “revenue center” mindset needs to experience a trickle-down effect. Companies must ingrain a profit-centric approach within all agents – offshore or in house. To truly produce results, the revenue center has to be a shared culture. Agents should understand their contribution toward this concept – and be empowered not to cut corners. This starts with selecting success metrics that justify expenses based on customer-centric priorities.

Businesses who continue to obsess over handle times are unlikely to reap the full rewards of great CX. With automation and self-serve carrying much of the heavy lifting, businesses should instead measure success by scoring customer engagement – based on CSAT, first-time resolution rate (FTRR) and repeat custom.

Invest in innovation

In recent times, customers’ changing attitudes toward self-service have resulted in reduced call volumes, but often at the expense of customer experience. With modern AI and customer-oriented tools, organizations can nail a near-perfect balance between both. New technology such as virtual agents, natural language processing (NLP), conversational AI chatbots and sentiment-driven IVR can personalize experiences for consumers across all digital channels – while also acting as gatekeepers for more expensive agent interactions. 

Businesses shouldn’t just prioritize self-serve automation. Certain agent-facing AI tools like Quiq Suggest can be used to provide real-time conversational cues to agents in more complex situations, based on what top CSAT performers have said and done in the past. This can help agents to reduce escalation and resolve issues within the first interaction.

Invest in people

The role of the agent has changed dramatically alongside the shift in customer care culture. As service agent responsibilities expand beyond tech support, there’s a need for leaders to adjust their management styles and suitably upskill their teams. For many, this means cultivating new mindsets – abandoning historical practices to deliver exponential value for their business.

Ultimately, agents need to feel capable and empowered to meet these expectations. This means providing them with more than just automation and savvy interfaces. In-depth training, coaching and re-skilling is critical to their success. Agents also need to understand sentiment and signals, leveraging real-time data to inform their actions, making education around engagement and intent an essential learning curve. In short, there’s a newfound respect for customer support as a profession, and with that comes an increased premium. Businesses should be prepared to invest to unlock substantial results.

Automate the everyday

Conversational intelligence and natural language processing (NLP) can handle a wide variety of repetitive tasks – including everyday customer conversations – without human involvement, reducing workload and freeing up agent time to invest in higher revenue activities. 81% of contact center executives are already invested in AI for agent-enabling capabilities and operational efficiency.

Additionally, with machine learning (ML), chatbots and IVRs can be configured to continually learn from best-performing agents and become capable of handling more complex interactions independently, further reducing the reliance on expensive physical resources.

Final thoughts

Modern businesses are now challenged to view customer care as a strategic investment in the entire customer lifecycle, where every interaction presents an opportunity for revenue generation. The call to action is clear: businesses must transition from a cost-center culture to a revenue-center mindset.

The traditional “cost center” approach, with its focus on minimizing outlay at the expense of customer experience, is no longer sustainable. The risks associated with this mindset, such as overlooking revenue opportunities and increased customer churn, underscore the need for a paradigm shift.

Harte Hanks Customer Care is built on this premise. For over 40 years we’ve helped brands add a smarter edge to customer service with headcount, technology and automation that inspire effortless first-time resolutions. Our award-winning team can help you drive breakthrough reduction in support costs while continually moving the needle on customer engagement, differentiating your brand from your market’s biggest players.

Contact us today.