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  Good Customer Service Must Begin and End with Profit
 
Despite the efforts of so many companies to improve service, customer satisfaction levels have been dropping nationwide for years. In fact, the American Customer Satisfaction Index (ACSI), a cross-industry national economic indicator of customer satisfaction, reports that 38 industries polled show a steady decline since 1994.
 
The truth is most business executives don't know what their customer service ROI is, let alone what it should be. Nevertheless, they spend money - sometimes an astonishing amount - on employee training, customer satisfaction research, mystery shopping, and manager incentives with the blind belief that it will pay off in the end.
 
This approach begins with the unchallenged conviction that good service always leads to higher profits. Armed with this belief, business professionals often give little scrutiny to customer service expenditures, and launch extensive service crusades, making grand promises to their customers as they whip their staff into a frenzy of friendly service activity. Ritual phrases like "We're dedicated to excellence," and "The customer is number one," are thrown around as companies proclaim they will become the Nordstrom of their industry.
 
In the end, customers may be more satisfied, but the desired rise in profitability rarely occurs. Profits may go up or down, but it is devilishly difficult to figure out how much change is due to service quality initiatives. The bottom line is this: without a predictable, measurable ROI, service strategies are ineffective and short-lived.
 
The newest approach to customer service is a holistic one - Customer Experience Management - better known as CEM. It's a profit-based approach to service in which companies ask themselves "What do we want our customers to do more or less of? Do we want them to complain less frequently? Spend more with each purchase? To recruit new customers through word-of-mouth?" In making this list, attitudes (such as satisfaction) and feelings (such as delight) are not included -- only measurable, observable customer behaviors that can be influenced through service interactions.
 
After identifying measurable service objectives, the next step is to calculate the financial effect of an incremental change in customer behavior. For example, how would a one-dollar increase in the average customer purchase, or a five-percentage point reduction in the volume of complaints to call centers effect revenue? It quickly becomes clear even a small change in some customer behaviors can have a substantial financial impact.
 
The subject of employee training is next on this agenda: What specific knowledge and skills are needed to influence desired customer behaviors? And then incentives and measurement: What rewards will be most effective at reinforcing the use of those skills? What metrics should be gathered to trigger rewards?
 
With the CEM approach, there is always a clear path to making money. Suddenly, all those fuzzy, feel-good terms on which so many businesses base their service initiatives (such as "customer loyalty" and "customer delight") are left to PR companies. This doesn't mean the customer suffers. On the contrary, desirable customer behaviors will only come about if they are satisfied, loyal and occasionally delighted. But companies cannot make the world a better place for customers unless they show a profit. By defining good service in terms of its effect on the bottom line, everybody wins.