A new perspective devoted to customer satisfaction, a key driver to increase a company’s value. By Alberto Griselli and Charles Monteux of the São Paulo office

1. CUSTOMER SERVICE:
ACHIEVING EXCELLENCE THROUGH A
COMPANY-WIDE APPROACH
PERSPECTIVE APRIL 2014
Alberto Griselli, Charles Monteux

2. Customer Service:
achieving excellence through a
company-wide approach
Published by
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April 2014
Written by:
Alberto Griselli, Charles Monteux
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3. PERSPECTIVE CUSTOMER SERVICE
INTRODUCTION 5
BEYOND THE BOUNDARIES OF CUSTOMER SERVICE 7
THE CHALLENGES TO ACHIEVE A NEW PARADIGM 8
GUIDING PRINCIPLES FOR CUSTOMER SERVICE EXCELLENCE 9
CONCLUSIONS 13
AUTHORS 14
CONTENTS

4. EXHIBIT 1
Benchmarking matrix: cost-to-serve vs. customer satisfaction
Players from the Telco sector; Latest available data (2011-2013)
Source: Value Partners analysis
Note: Data has been normalized to make it comparable; (1) Customer satisfaction index refers to customer satisfaction surveys results; (2) Cost-to-serve index refers to average annual caring costs per subscriber
CUSTOMER SATISFACTION INDEX (1)
LOW
LatAm 1
LatAm 4
Asia 3
Middle East 1
LatAm 3
Asia 2
Asia 1
Asia 4
LatAm 2
Europe 1
HIGH
COST-TO-SERVE INDEX (2)
LOW
HIGH
4 – 5

5. PERSPECTIVE CUSTOMER SERVICE
INTRODUCTION
It is common knowledge that within al-most
all industries, from financial services
to telecoms providers and retailers, satis-fied
customers generate more value to
companies than their less happy counter-parts.
High quality customer service
is a key lever in driving this satisfaction
and generating loyalty, and is thus criti-cal
in safeguarding revenue growth.
However, there are times when customer
care gets overlooked, particularly during
periods of rapid market expansion, yet
as markets begin to approach maturity it
becomes of paramount importance.
In recent years, successfully serving
customer needs has presented greater
challenges than ever before. Products and
service offerings have rapidly increased,
both in terms of number and complexity.
Consumers are more demanding, in-formed
and sophisticated, often expecting
immediate, ‘on-demand’ support for their
queries. This has been further compli-cated
as traditional customer segments
have been divided into sub-segments,
each with their own unique particularities.
Touch points have also proliferated, with
consumers using multiple channels to
complete their transactions. As a result,
companies have tough decisions to make
in order to find the right balance between
the quality of service delivered and the
corresponding ‘cost-to-serve’.
This balance is becoming particularly
critical in emerging economies,
such as those in Latin America, where
a burgeoning middle class has recently
gained access to a range of new serv-ices.
Between 2003 and 2009, the size of the
middle class in Latin America and the
Caribbean grew by 50% (World Bank1),
and is expected to grow even further,
from approximately 300 million in 2010
to 360 million by 2020 (BBVA Research2).
Despite their interest and excitement
in these newly available services, these
customers have typically experienced low
service levels, especially when compared
to more developed markets.
In Brazil, for instance, the ratio of com-plaints
by customers in PROCON3, a con-sumer
protection agency, grew 15% per
year between 2009 and 2012 for a group
of leading companies in the telecoms and
banking industry sectors.
In these markets, whilst the quality of
service may be low, the cost-to-serve is
relatively high, exposing how companies
are struggling to address this trade-off
(Exhibit 1).
Over the past few years, Value Partners
has supported a wide range of companies
from different industries to evolve their
customer care models in order to achieve
excellence. This paper provides insights
on the required steps to deliver this trans-formation
journey.
1 Economic mobility and the rise
of Latin American middle class,
World Bank Latin American and
Caribbean Studies, 2013.
2 Emerging middle class in “fast
track” mode, BBVA Research,
2013.
3 Boletim Sindec, Sistema
Nacional de Informações de
Defesa do Consumidor, 2012.

6. EXHIBIT 2
A well-defined customer care lifecycle exists, with clear expectations
for clients and companies
Customer Care Lifecycle Framework
Source: Value Partners analysis
2
CONTACT CHANNEL
CUSTOMER CARE LIFECYCLE
CUSTOMER EXPERIENCE
MULTICHANNEL / CROSS-CHANNEL
INFRASTRUCTURE / SYSTEMS
CROSS-FUNCTIONAL
COORDINATION
PROCESSES / PEOPLE
PRODUCT CONCEPT
...
...
...
CONVENIENCE
EFFICIENCY
CLIENT
COMPANY
SOLVE PROBLEM
ACCESS
NO CALL
REDUCE DEMAND
1
3
NEED
ISSUE
RESOLUTION
6 – 7
CLIENT
Expectation
Improvement
Levers

7. PERSPECTIVE CUSTOMER SERVICE
From a customer’s perspective, a well-defined
customer care lifecycle exists
that can be classified into three sepa-rate
steps, ‘need’, ‘contact channel’ and
‘issue resolution’. The customer’s need
is generated from an enquiry, request
or issue that they may face during the
exchange of goods/services.
The process then advances to the
contact channel phase. This may be a
single, multiple or cross-channel interac-tion,
either determined by the cus-tomer’s
convenience requirements or
influenced by the company’s desire to
maximize efficiency. It is the customer
expectation that the process
then concludes with the successful
and timely resolution of the request
(Exhibit 2).
Traditionally, the primary focus of cus-tomer
service has been the efficient and
appropriate resolution of client queries.
Major attention has thus been given to
indicators such as average call handling
time, abandon rate, IVR retention, con-tact
unit costs and satisfaction indices
which are all designed to improve the
operational performance of the contact
center, while reducing costs and manag-ing
customer satisfaction.
The proliferation of touch points and
ongoing changes in customer prefer-ences
have raised many questions
surrounding channel management.
While the initial approach was to simply
move customers to low cost channels
and thus improve profitability, there has
been an increasing focus on the optimal
use of multiple channels which lead to
an improved customer experience.
As a result, new digital methods of
communication are considered more
and more as complementary channels
instead of replacements to traditional
ones (multichannel approach).
However, although the above are all
important measures, it is necessary
to go beyond the boundaries of the cus-tomer
service department to achieve
excellence in customer care. A key
aspect of this is for companies take a
more holistic end-to-end approach to
delivering customer service. In doing
so, companies would begin to better
understand the genesis of customer
queries and thus proactively address,
and hence reduce, the number that
must be dealt with.
BEYOND
THE BOUNDARIES OF
CUSTOMER SERVICE

8. 8 – 9
Whilst the benefits of this holistic approach may be clear, Value Partners believes there are a number of challenges that companies typically face in embracing this new approach to customer service:
The task is perceived as monumental: accountability for customer service needs to widen to include the entire company rather than a few select functions within the organization. However, the required mobilization to achieve this appears too large - people, organizational structure, governance model, processes and technologies - and potentially distracting from short-term priorities and objectives.
Solutions require end-to-end coherence: when a client makes a specific query, its solution typically involves multiple functions or departments within the organization. Effective solutions require alignment across all of the building blocks within a company. It is therefore common to set-up ad-hoc multifunctional working teams to address the most critical occurrences (in terms of customer satisfaction or volumes/costs). Nonetheless this approach is limited in scope and time, often tactical in nature and without proper empowerment, is limited in its effectiveness and sustainability.
It is difficult to quantify impact:
organizations struggle to link internal performance and quality metrics
to customer satisfaction. As a result,
it may be difficult to quantify the connection between the large short term costs of deploying organization-wide change and the corresponding long term influence on customer loyalty, attractiveness and, ultimately, revenue growth.
As a consequence, commitment from top levels of management is not certain: whilst awareness of the importance
of developing customer service from
a different perspective undoubtedly
exists, it is not necessarily matched
by the willingness to embark on
the required long-term journey.
It is our view, however, that the aforementioned barriers can, and should,
be broken so that companies in emerging markets could achieve a new paradigm in customer service, both in terms of improved customer satisfaction
and a reduced cost-to-serve. In order
to do this successfully, Value Partners believes that companies willing to
embark on such a journey and reap
the benefits of such actions will need to abide by a set of guiding principles.
THE CHALLENGES
TO ACHIEVE
A NEW PARADIGM

9. PERSPECTIVE CUSTOMER SERVICE
a) Priorities and actions should be
determined by a complete rethink of
customer contact reasons
It is our experience that many compa-nies
devote the majority of their effort
to figure out how to manage and opti-mize
the treatment of any given custom-er
contact, though may often neglect
the root-cause of the query itself.
This effect is often exacerbated by
the fact that companies often classify
customer requests using an inappropri-ate
system or taxonomy, as such the
true nature of the issue may be lost as
the request is processed. In order to
address the limitations of this approach,
it is critical to completely “rethink” and
redesign customer contact codes in
order to ensure:
• a clear link between the contact code
and the reason for the contact
• ownership and accountability within
the organization to address the root-cause
of the contact
This point is illustrated well with an
example from Latin America where it is
relatively common among service com-panies
to receive a large number of en-quiries
that “request a second invoice”.
However, such a generic contact code
can hide the true cause of the issue and
makes it difficult to assign ownership of
the problem’s solution.
Once the motivations for the calls are
analysed, it becomes clear that the
causes of these requests can vary
greatly between customers. Some are
related to a “change in address”, others
to a “late invoice arrival” and yet others
to “incorrect charges”. From a simple
root-cause analysis it is thus clear that a
range of solutions are required to solve
this problem. However, these solutions
would only be made possible through
the introduction of new classification
systems which would enable the deliv-ery
of clear accountability to different
parts of the organization.
GUIDING PRINCIPLES
FOR CUSTOMER SERVICE
EXCELLENCE

10. CUSTOMER CONTACT RATE
CUSTOMER CARE COSTS
EXHIBIT 3
Case study: Latam player results
Source: Value Partners analysis
POSITIVE EBITDA CONTRIBUTION IN THE RANGE OF 20-60 BPS
-40%
Q1
Q4
-30%
Q1
Q4
SATISFACTION
Q1
Q4
Q3
Q2
10%
10 – 11

11. PERSPECTIVE CUSTOMER SERVICE
c) Accountability needs to be re-allocated
to include all functions and
external partners that contribute to
the generation of customer queries
Last but not least, the responsibility
for reducing the number of customer
queries should be held by the relevant
parts of the organization where these
claims originate (including third parties
covering activities within the value-chain).
As part of this, the directors,
who are responsible for specific contact
categories, should be held accountable
for the reduction of query rates within
their control.
Whilst the “tight” activity of the Cus-tomer
Service Committee should be
sufficient to ensure the relevant transi-tion
in accountability, the ‘stickiness’
and compliance of these changes may
need to be further reinforced through
the review of management incentives,
including potential charge-back of
customer service costs to responsible
functions and/or third parties.
b) A company-wide governance model
is required, with strong commitment
from top-level management
As previously mentioned, company-wide
engagement is critical to address
the root-cause of client requests.
Grouping queries by ownership is the
first step to build quantitative aware-ness
of the origin of customer service
requests, yet widespread engagement
needs to be ensured for systematic solu-tions
to be designed and implemented.
One effective possibility is to set-up a
permanent “Customer Service Com-mittee”
(e.g. CEO/managing director
and first line of directors) to define the
program’s ambition, its targets and
priorities, and to monitor its progress on
a regular basis. The Committee should
also steer the change management
program required to promote the wider
participation of the organization in the
reduction of query rates.
Whilst working for a leading mobile
operator in Latam, the results of this
approach were very impressive: a 40%
reduction in customer contact rate, a
30% reduction in customer care costs
and a 10% improvement in customer
satisfaction during a nine month period
(Exhibit 3).

12. Amazon.com, the omnipresent online retailer, consistently strives for customer services excellence, aiming “to be Earth’s most customer-centric company”.
As such, Amazon does not simply focus on resolving customer issues, the company takes a more proactive approach by seeking to avoid the need for customer queries in the first instance (and as part of this strategy, Amazon also educates customers
in the use of self-service channels).
In short, Amazon has created an organizational culture which drives the company
to drill-down to the root causes of customer issues, thereby reducing their occurrence in the first instance. Amazon achieved a staggering 85% reduction in contact
per order rate, whilst simultaneously handling a 12-fold increase in revenues.
AMAZON.COM CASE
Amazon contact per order index
YEAR 0
YEAR 4
YEAR 8
1
5
12
Revenues index
100
45
15
12 – 13
Source: The Best Service is No Service – How to Liberate Your Customers from Customer Service, Keep Them Happy
and Control Costs, Bill Price and David Jaffe; Value Partners analysis

13. PERSPECTIVE CUSTOMER SERVICE
It is our view that the
aforementioned barriers can,
and should be broken in order
for companies in emerging
markets to achieve customer
care excellence
CONCLUSIONS
The approach described within this
perspective is one that has been tried,
tested and proven in markets with high
expectations for customer service
around the world.
As such, its implementation will al-low
companies in the Latam region to
achieve a new paradigm in customer
satisfaction and cost-to-serve.
Whilst the journey to implementation
requires commitment, discipline and
hard work, the potential rewards are
significant and include double-digit
reductions in query rates per year, con-current
increase in customer satisfac-tion
and positive EBITDA contribution in
the range of 20-60 basis points.
Bibliography
Anton, J., Belfiore, B., 2010,
BenchmarkPortal, LLC. & Purdue
Research Foundation. “Banking
industry benchmark report: Best-in-
class call center performance”
Duncan, E., Jones, C., Rawson, A.,
2013, Harvard Business Review.
“The truth about customer
experience”
Echo Research, prepared for
American Express, 2012. “Global
Customer Service Barometer”
Gitomer, J., 2010. “Customer
satisfaction is worthless,
customer loyalty is priceless”
Price, B., Jaffe, D., 2008. “The
best service is no service: how
to liberate your customers from
customer service, keep them
happy, and control costs”
Tess, D., Parry, M., 2010, Value
Partners Perspective. “Customer
care for Telecom operators: from
management headache to source
of competitive advantage”

14. 14 – 15
AUTHORS
ALBERTO GRISELLI
Director, São Paulo Office
alberto.griselli@valuepartners.com
CHARLES MONTEUX
Senior Engagement Manager, São Paulo Office
charles.monteux@valuepartners.com

15. PERSPECTIVE CUSTOMER SERVICE
High quality customer service
is a key lever in driving this
satisfaction and generating loyalty,
and is thus critical in safeguarding
revenue growth.

16. Copyright © Value Partners
Management Consulting Spa
All rights reserved
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