February 14, 2004

Customer service automation

Customer service, like everything else, has undergone a revolution in the past two hundred years. In the olden days there was a corner grocer who knew people personally and therefore could render excellent, customized service. Then the large department and grocery stores appeared on the scene. These large corporations could offer goods cheaply, but didn't know or care who their customers were nor what the customers were willing to buy. Now, companies are trying, via software and databases, to recreate the corner store insight and knowledge, but in a scalable fashion. Whether it is frequent shopper cards coupons, or automated recommendations of books, companies are trying to use software to scale their ability to know what the customer wants, and hence give it to them.

This is good for the company, because if companies only try to sell what is wanted, they do not have to spend as much money advertising and maintaining unwanted inventory. In addition, such tactics aren't as likely to annoy the customer as trying to sell the customer something undesired. This also builds customer loyalty, since the company gives the impression of caring about customers' perceived needs. This is not a false impression: the company does care about customers' needs, because satisfying these needs is the only way the company makes money.

This is also good for the customer because it gives them what they want, at minimal fuss. It also makes for cheaper goods in the long run, since companies aren't spending excessive amounts of money on ill targeted customers; a single twenty something with no children has no need for diapers, and sending them coupons for those diapers only wastes resources.

However, there is a fly or two in the ointment of customer awareness via large databases. In stark contrast to the grocer, large companies are not the peers of their customers, and this inequality can lead to issues. In addition, the quality of the customer service provided by software, while better than no customer service, isn't a replacement for human interaction. I am explicitly leaving aside the issues of privacy since they are murky and still being defined.

The corner grocer, whom companies are trying to emulate in service, was a member of the community. If he cheated a customer, word got around. If he was doing anything unethical, his peers and customers could apply neighborly pressure in order to rectify his behavior. And, most importantly, the knowledge he gained about hist customers was counterbalanced by their knowledge of him as a neighbor. Few of these constraints operate on modern, large companies in anywhere near the same fashion. I'm not denying that people can affect the behavior of retailers with words, activism and lawsuits. However, changing the behavior of a large corporation is never going to be as easy as changing the actions of a local shop owner.

In addition to the difference in resources and power between customers and companies, it's also clear that performance suffers. This isn't strictly related to the gathering of customer data, but the existence of such data inspires companies to cut costs by automating. In general, I believe that the service provided by any software is inferior to that provided by a real live human being. And by building these databases, companies are being seduced by the siren call of reducing human interactions—if software (a [relatively] fixed cost that scales well) can recommend a good book, who needs an employee (a recurring cost that scales poorly). I realize that this may sound Luddite, but certainly in the current incarnation, I've found such software doesn't match up well with recommendations from real people.

In short, I believe that more and more companies are customizing and tailoring the customer experience in order to cut costs and build loyalty. But I also feel that there are significant downsides to such tailoring and I'm not sure that it's worth it.

Posted by moore at February 14, 2004 09:30 PM
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