Should Service Be Stratified Based on Customer Value?

Should Service Be Stratified Based on Customer Value?

2/17/2011
By Donna Fluss
inContact Blog

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The simple answer to this question is “Yes,” if you can figure out how to do it cost effectively and you can come up with service offerings that make it worthwhile. Value-based servicing is where an organization provides a differentiated level of customer service, service quality or service offerings based on the perceived value of each customer. While it would be wonderful to provide outstanding customer service for everyone, practical considerations and the need for profits make this next to impossible. As a matter of fact, most organizations struggle to provide even acceptable levels of customer service.

The Formula for Value-Based Servicing

The three requirements for successfully providing value-based servicing are:

1. Know who your customers are
2. Know each customer’s lifetime value
3. Differentiated service options

Who Are Your Customers?

It’s harder than it sounds to track all of your customers, and even more challenging to monitor everything they do with your company. Customers interact with organizations through many channels – branches/retail outlets, contact centers, online, mobile sales, etc. – and few enterprises have the technology to consolidate this data into a single customer repository. As a result, most companies do not have an accurate view of who their customers are and the business they’ve done with the company.

Determining Each Customer’s Lifetime Value

If all of the required information were easily accessible, organizations could determine the lifetime value of every customer, which by definition is the net present value (NPV) of the profit from each customer’s future business. This is clearly easier said than done. Because companies are not good at forecasting the future at the customer level, their best alternative is generally to use incomplete customer data. This data is a combination of the business each customer has done with the organization in the past and any predictors of their potential future business – assets, income, job category, age, future needs, etc. Once (if) the data is available, determining lifetime value is a mathematical exercise, the results of which can be used to stratify customers into value categories.

Creating Differentiated Service Options

Enterprises need to identify and implement service offerings that appeal to different categories of customers. For example, the highest-value customers can be helped by top-rated agents and not have to wait in queue. These customers may also be given direct access to specialized resources and other perks. On the other hand, the lowest-value customers can be assigned to newer agents, and encouraged to use self-service applications.

In summary, the concept of value-based servicing is right for profitability-oriented enterprises, but implementing effective programs is hard to do. The vast majority of customers accept that organizations deliver service that is commensurate with their business value and potential, but all customers expect a reasonable level of competently delivered service and support. The bottom line is that if you have the information to accurately deliver value-based servicing, it will improve your bottom line. However, if you cannot do it right, it’s probably best not even to try, as it has the potential to hurt your reputation, brand and profits.