What is Customer Service? Definition, Satisfaction Metrics, Best Practices with Examples!


“Customer service is defined as the interaction between a customer and a representative of the organization. This article throws light on the benefits and advantages of good customer service, types and best practices along with satisfaction metrics.”

Table of Content

What is Customer Service?

Customer service is the provision and quality of assistance provided by a seller to a buyer before, during and after the purchase of a product or service.

While all or most organizations have a customer service team – what defines good customer service is the ability of customer-facing teams to listen to customers / potential buyers, identify problems, find a timely solution and deliver a satisfactory outcome.

Organizations are increasingly aware of the close ties between customer satisfaction and customer-centrism, where everyone in the organization works towards delivering good customer experiencesOpens a new window , of which customer service is a sub-set. Good customer service is a result of an organization-wide effort, which includes product, marketing, sales, support, infrastructure, finance, etc – any team that has a role to play, directly or indirectly, in the final experience of the customer. The service teams are largely responsible for communications with the customer and setting the right expectations, the delivery of ‘good customer service’ is a result of co-operation and customer-centric focus across the board, invariant of industry or size of the company.

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Today’s customer service has evolved from traditional point-of-sale or telephonic customer service, to become much more agile in the form of chat, chatbots, online, text, email, mobile, and even social media customer support. There are now even forms of self-support that provide answers to a customer 24*7.

Having a well-rounded and mature outlook on customer service is important to a brand’s promise to its customers to conduct business in an ethical and agile manner.

For example, the multiple touchpoints in a customer’s lifecycle purchasing decision with the brand and the subsequent customer service can be denoted as below:

Pre-purchase: Providing the ease to make a purchase increases the scope of purchase with a brand. Customer service pre-purchase can be in the form of help files, FAQ’s, explainer videos, boot camps, etc. Organizations see almost a 74% dropout in a buyer’s journey pre-purchase since there is a lack of customer service.

An example of good pre-purchase customer service is Apple. There is a bunch of granular level information available to a user that the purchasing decision is taken away from service to other aspects such as price-point and features.

During purchase: 50% of buyers consider customer service to be a post-purchase tool. However, service at the point of sale is critical to the decision-making process and in most cases, reducing the time to make a purchase.

Amazon is a good example of great during purchase customer service in the form of reviews, FAQs, live chat, and even phone support.

Post-purchase: Most brands offer customers the ability to liaison with some sort of customer service once a purchase has been made.

Southwest Airlines is a brilliant example of customer service post-purchase – which is when a customer gets off a flight. Customers can provide feedback at kiosks at the airport, through the mobile app in the form of a smart survey and also SMS and email surveys. This means that issues are caught and resolved before they hit social media.

All-in-all, customer service boils down to having knowledgeable individuals and tangible assets at the right time in the right place.

A recently conducted Gartner Research states that in 2019, 89% of organizations now compete on the basis of customer service and no longer on the differentiability of products or services making this one of the most important elements in the way brands conduct business.

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Why Should you Care about Customer Service: The 3 Key Benefits & Advantages

We have seen above that customer service is indelible in a way that an organization conducts business. But, here are the top 3 reasons and key advantages that depict it’s value no matter the size, type and industry that an organization conducts its business in:

Impact on revenue: It is a well-known fact that it is 6-7x more expensive to bring in new customers than to retain existing ones. A lapse in customer service is one of the biggest factors in customer churn. Prioritizing customer support ensures that customers stay loyal to the brand and help directly contribute to the bottom line of the brand.

Marriott focuses a lot of their training and energy towards customer service and hence sees a year-long occupancy rate of over 80% in their hotel chains which is a little more than a 22% occupancy rate than other hotel brands. This helps Marriott remain a profitable chain with a high brand value.

Experience economy: The world has evolved from a feature and price-sensitive nature to an experience-based economy. Positive experiences help retain existing customers and bring in new customers.

Starbucks thrives on positive experiences based on a model of great customer service. The barista’s at Starbucks are trained to smile, maintain eye contact and provide personalized recommendations based on past purchases, seasonal specials as well as on the basis of judging likes and dislikes. Calling out the customer’s name while serving the customer leads to positive reinforcement making Starbucks the most visited coffee chain in the US.

Brand value: With smartphone penetration in the US at over 93%, customers have gotten used to getting what they want and when they want it. In fact, CEOs are admitting that their customers’ expectations have risen much more since the past three years than ever before.

Lyft is making inroads into Uber’s business due to a greater focus on an all-rounded customer service model. In fact, due to positive reinforcing ideas such as providing free rides to users going for job interviews, etc. it has not just increased the brand value but has also exponentially shot up the ridership.

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7 Common Types of Customer Service

Customer service can be provided in any form. But the 7 most common types of customer service are:

1. Phone based service

This method of customer service has been present for many years now and is one of the most widely used forms by organizations of varied types and sizes. Having a telephonic conversation with a customer helps gather emphatic undertones and can help in providing real-time support.

American Express provides its customers with global phone support so that their cardholders can reach a representative of the organization wherever and whenever they require and solve problems in real-time.

2. Email based service

Another widely used effective customer service method is email support. Since emails can be sent and replied to from anywhere and at any time with additional support to attach rich-media like materials,

Swarovski maintains an email contact form on their website so that customers can reach out to them with product-related issues, new product ideas and designs as well as to reply to delivery-related inquiries.

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3. Live chat support and service

Mature organizations have incorporated live chat as part of their good customer service plan to service customers in real-time about any issues they may be facing. This is an excellent customer service addition to brands that are in retail, hospitality, travel, and leisure, etc.

HP maintains a live chat that is a mix of chatbots and live chat agents to provide customers with real-time answers and solutions to the problem. This helps to tackle customer issues at a very nascent stage as well as increase the customer satisfaction rate.

4. Social Media service

Another form of great customer service that is taking precedence in the “forever connected” ecosystem is of social media. Issues can be monitored over social media and quick fixes can be provided to customers that have complaints or are facing issues. This method of customer service is where organizations are heavily investing in manpower and technology.

JetBlue maintains a team of social media customer service agents that monitor and respond to customer queries on social media in real-time. This could be with even minor issues like boarding pass reissue to also complex problems like compensation for flight delays and rerouting and rebooking passengers.

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5. On-Site service

One of the traditional but effective customer service models is the on-site customer service. In this method, problems are resolved at the location that the consumer is comfortable with such as the workplace or at home. While this model is expensive, it gives the impression of a brand caring about customer problems.

Tesla has technicians based across the country to go and solve customer problems at the location of their choice. This ensures that they maintain high brand value and customers that do not churn.

6. FAQ’s listing

One of the simplest but most effective methods of customer service is extensive FAQ’s. Brands can enlist numerous questions on their website that provides customers with access to answers with ease as well as real-time mitigating the use of real-life customer agents to a large level.

Microsoft has interspersed their website with multiple FAQ’s to troubleshoot everyday problems. This method saves time and effort which in turn saves money to focus on their core business objectives.

7. Tech-powered Self-Service (including Mobile Apps)

Brands are turning to self-service to arm customers with enough information to troubleshoot problems themselves before they reach out to the brand. This could be in the form of explainer videos, built-in troubleshooting applications, smartphone apps etc. These extensive assets help customers identify and resolve issues at their end and in real-time. A study by Forrester estimated that self-service could result in over a 63% reduction in customer complaints.

For example, Canva has created a dossier of self-service material that customers can now easily turn to and understand with real life-examples, screenshots, how-to tutorials and explainer videos making them self reliant.

The Top 7 Customer Service Metrics you Need to Track & Monitor!

Customer service is nothing if quantifiable. There need to be hard set metrics to monitor customer service and customer satisfaction to identify what’s working and what’s not, investments in technology, people and training and also to benchmark in the industry as well as among competitors. The top 7 customer service satisfaction metrics are:

1. Customer Acquisition Cost (CAC)

The customer acquisition cost is an important metric to monitor for any customer service oriented organizations as they need to know if there is a major dollar value spend towards getting new customers and generating new business. While this isn’t directly denoted by the customer service provided, it is indirectly impacted by the brand value of the organization as well as a personal perception about the brand.

The customer acquisition cost can be calculated as:

Customer acquisition cost (CAC) = Total spend on marketing and sales in a given timeframe / New customers acquired in the same timeframe.

2. Net Promoter Score (NPS)

Another widely used metric to gauge customer service satisfaction levels is the NPS for the organization. NPS is a single 10 point question where customers rate the referenceability of the brand. The NPS can be calculated for the whole organization or certain departments. These scores can also be benchmarked against some predefined timely metrics. In this rating scale, the rating between 0-6 is known as a detractor, 7-8 is known as passive and 9-10 is known as a promoter.

Therefore, to calculate NPS:

NPS Formula = (Number of Promoters – Number of Detractors) / Total Number of Respondents * 100

3. Customer Satisfaction (CSAT) Score

The CSAT score is an important metric to understand the satisfaction levels of a customer with an organization. This score can either be in the form of the average of a star rating or a smiley rating or a percentage calculated on the basis of a linear numeric value assigned to each transaction of a consumer with a brand.

To calculate CSAT:
CSAT = Sum of all scores / Number of respondents * 10

4. Customer Effort Score (CES)

The customer effort score is the score that most customer service teams use to benchmark against a customer’s experience with that service team on the scale of very easy to very difficult. This score helps to understand if a customer is satisfied with the service received or not and what is the average score for the team, department or even individual.

To calculate CES:
CES Formula = Percentage of Easy – Percentage of Difficult

5. Churn Rate

The churn rate is another important metric that helps to calculate customer service satisfaction by calculating the number of customers lost. Organizations focus energy on keeping existing customers because it is much cheaper to keep customers than to get new ones. Hence, calculating the churn rate helps understand if too many customers are leaving the organization and then, in turn, help identify why.

To calculate churn rate:
Churn rate = Clients at beginning of period – clients at end of period / Clients at the beginning of a period

6. Customer Health Score

The customer health score is used by organizations to calculate customer service satisfaction in multiple methods and including multiple scores like CSAT, CES, and NPS. These scores are used to identify customer interactions with the brand over a period of time and classify them into red, yellow and green. Red denotes that there is a high chance of the customer churn, yellow is that there is a risk and there needs to be an improvement in customer service quality whereas green denote satisfied customers.

7.Average Handling Time

The average handling time is a core customer service metric that organizations used to check the effectiveness of support teams. This score includes calculation of multiple metrics such as how long before an issue was picked up to be resolved by the organization, the average time to solve the issue, the total time spent to resolve one customer issue, the time before customer returned with the same/different problem, etc.

A mix of the above customer service satisfaction metrics can be used by organizations to calculate customer service effectiveness. It is important to remember, however, that these metrics hinge on the data collected by organizations in the first place. However, employing a number of these techniques is a good model to calculate satisfaction levels among customers.

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Best Practices to Deliver Excellent Customer Service

Just providing customer service isn’t always enough. That has to be backed with some best practices to cement positive and good customer service. Some best practices of great customer service, are:

  • Centralize customer service

Customer service is redundant if only that department is customer-centric and geared towards solving customer problems. Great customer service should form the DNA of the organization and all stakeholders and employees should be vested towards that goal. If you act in silos, the perception that it gives the customers is that there is no genuineness to help. If everyone in the organization speaks the same language, it goes a long way in reducing customer churn at every touchpoint with the organization.

  • Be knowledgeable

It goes without saying that you can provide excellent customer service only when you know your brand, product and/or service thoroughly to know the problems it solves and the areas where it lacks. Being ambiguous about information gives off the perception that the organization doesn’t care about the customer enough to know their own brand well.

  • Offer personalized service

An important tip in good customer service is the ability to provide personalized services. If you believe in a “one fit for all” model, you will fail! You need to be flexible enough to identify gaps in the customers’ wants and needs and then bridge that gap. Customers appreciate when the service they receive is personalized and localized to them. This also helps in reinforcing positive brand value.

  • Collect and act on feedback

Use tools like the Net Promoter Score (NPS) and Customer Satisfaction (CSAT) to collect timely and periodic feedback from your customers. Not just collect but also analyze and act on such feedback so that the customer knows that you are taking feedback seriously. Good customer service is based on collecting and acting on customer feedback.

  • Walk the extra mile

An important tip to providing excellent customer service is to walk the extra mile for the customer. Make an effort to resolve problems and issues the customer has and tailor-make solutions whenever possible to keep the customer loyal to the brand.

Customer Service Trends to Keep an Eye Out for in 2020 Innovation in customer service is going to be on the single most important factor in propelling brands to be at the forefront of their industry and be recognized as thought-leaders. Some key customer service trends to keep an eye out for in 2020, are:

1. Artificial intelligence and chatbots

Customer service in 2020 will evolve from humans behind chat software to tools that can leverage artificial intelligence to auto-respond to queries. Smart chatbots will help customer self-service on queries. This doesn’t mean that there will be no human intervention; this only means that human assets are freed up for other activities and there is interaction with customer queries only when there are complicated requests or where the tool is limited.

AI-enabled chat tools, as well as chatbots, bring a structured and uniform response mechanism to the customers. This also means that support is available round the clock and self-service takes precedence.

2. IoT and connected devices

IoT and connected devices are finally going to live up to the hype and make hyper-personalized customer recommendations a reality. Smart devices will help solve customer problems without there being a need for any service agents to be involved.

The industries that will be most impacted by IoT and connected devices are e-commerce and online shopping. There will be ease to make purchases and solve problems in real-time.

Own a smart refrigerator and are running out of milk? Don’t worry, the refrigerator will order it for you. Out for a run and want to purchase an energy drink at the local store? Swipe your Garmin watch over a receiver gateway to make a contactless payment. Deep level integration with data and technology means that customer service no longer needs human intervention.

3. Social media sentiment analysis

Social media is one of the most newly adopted but widely used platforms in 2019 but in 2020 that trend is set to grow even further. With a little over 3 billion social media users across the globe and the ease as well as access, customer service is going the social media way.

It is imperative that brands monitor social media to gather sentiments from the audience in real-time to analyze if something is broken or something is coming their way. Southwest Airlines has put together a team to reach out to and communicate with fliers on social media even before they have the chance to come online and vent about service/product gaps. Proactive social media monitoring and engagement is going to be one of the biggest changes for customer service in 2020.

4. Video

Video can be used in many forms for social media. This is in the form of pre-recorded videos such as in-depth how-to, problem states, and DIY customer service. Video for customer service in 2020 will also be in the form of live videos, webinars and even for troubleshooting.

Since video is easily accessible and easier to understand than text or images, the video will be one of the most widely used forms of customer support in 2020.

Target has invested more in video chat and is encouraging video to be a primary form of customer service.

5. Omnichannel support

Gone are the days when brands could pick a channel to provide customer service on and ignore the rest. 2020 will see brands focus on multiple modes of delivering customer service including chatbots, email support, social media, phone support, etc. It is important to be present where your customers are and then solve problems at a nascent stage before they become full-grown issues and complaints.

Due to mobile penetration, it is also becoming increasingly important for brands to offer mobile support including mobile-enabled chat, content that is easily accessible by mobile and mobile-friendly websites or apps.

2020 will see the biggest shift in customer service to an all-encompassing omnichannel model instead of a localized and siloed service.

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