Is the Self-Serve Economy Costing Businesses More than It Saves?

Although consumers have grudgingly grown accustomed to providing their own customer service—whether at the bank, gas stations, grocery stores, public transit systems, airports and now even at restaurants, post offices and hospitals—there’s mounting evidence that this trend isn’t as good for business as many organizations bargained for.

More than two decades ago, businesses and organizations began what would become a headlong embrace of a new twist on outsourcing: making customers do for themselves what previously was done by employees. Companies’ overwhelming motivator: saving money.

For example, an ATM banking transaction cost a bank only 20 cents, compared to $4.25 for a human interaction with a teller, according to a study by the Information Technology & Innovation Foundation (ITIF). A widely cited study by global research and advisory firm Forrester Research found that the average customer service call cost an organization $6 to $12, a live instant chat or email interaction ran $2.50-$5, but an Internet-based self-service interaction cost less than 10 cents.

So after gas stations deployed self-service pumps and banks installed ATMs, grocers and other retailers followed suite with self-checkout aisles. That phenomenon has spread—via kiosks—everywhere from the U.S. Postal Service to hospitals and clinics.

Self-serve customer service is big business. Investment in intelligent virtual agents, just one aspect of the trend, is expected to grow from $352 million in 2012 to more than $2.1 billion by 2019, according to Albany, New York-based Transparency Market Research.

Quantifying the Costs of Automating Customer Service

But now, recent research is showing that this reliance on self-serve customer service can have staggering real-dollar costs for businesses, along with alienating customers and battering brand loyalty.

In a study released in March, global business consultancy Accenture pegged the cost to U.S. businesses of poor customer service at $1.6 trillion annually. In its seventh “Customer Rage Study” released in December 2015, Washington, D.C.-area Customer Care Measurement & Consulting (CMCC) gauged poor customer service-driven losses to be what it projected was a conservative $202 billion annually. That number has mushroomed from about $85 million when the study was first conducted in 2003. Both studies draw ties between these staggering losses and companies’ increasing reliance on automated or online customer service.

Accenture found that 83% of U.S. consumers prefer dealing with human beings over digital channels and that more than half had switched products or services in the past year because of poor customer service. Of respondents who had defected to competitors, 82% said better customer service may have persuaded them to stay.

The #1 offender? Both the Accenture and CCMC studies found that it was the frustratingly ubiquitous utterance, “Your call is important to us.” More than 80% of respondents in both surveys labeled the phrase—usually heard during recorded voice-mail loops—as the most galling they encounter during customer service experiences. A significant percentage of respondents felt the phrase should be banned altogether. (Another on the CMCC list included, “We are currently assisting other customers. Your call will be answered in the order in which it was received.”)

Even research touting the virtues of self-serve customer service acknowledge its shortcomings. For example, in a December 2014 report, Forrester reported that more than two-thirds of U.S. online consumers had unsatisfactory customer service interactions in the previous year. More than 58% of consumers surveyed in December 2013 by software technology company Nuance were unable to resolve their customer service issues via self-serve Internet tools. A 2015 Microsoft survey found that a whopping 79% of Americans who couldn’t find needed information via online self-service mechanisms said it was because there was either too little information or it was too poorly organized for them to find what they needed to know.

What’s the Real Savings—If Any?

Given that hundreds of billions of dollars are on the line for U.S. companies, how do organizations calculate the savings they believe they realize by turning customer service into self-service? Curiously, it seems. A 2012 Forrester report projected that organizations that deploy the self-serve approach saved an average $22 million annually by reducing “unnecessary channel escalations.” What the study didn’t explore is how many consumers gave up in frustration before attempting to “escalate” their complaint. For example, Nuance found that 71% of those who tried Web self-serve threw in the towel after a fruitless 30 minutes looking for information they needed.

The ITIF study boasted that more widely deploying self-service technology would boost the U.S. economy by $130 billion annually, “the equivalent of an additional $1,100 in annual income for every household.” The organizations, however, didn’t explain how that extra $1,100 would make its way to U.S. households each year.

Companies that rely too heavily on digital interactions may be extending their reach, but they also risk alienating valuable customers and foregoing opportunities to upsell or cross-sell other products or services. In a 2015 study titled “Service is the New Sales,” Accenture found that consumers are more than twice as likely to be upsold (45% versus 18%) through a human interaction than through a digital channel. Savings companies realize through digital efficiencies also can be offset by the promotions and discounts they are forced to offer to win back customers who defected after a poor customer service experience. “Many companies are approaching a tipping point where expense associated with digital exceeds the value of digital benefits,” Accenture concluded.

Not an All-or-Nothing Choice

The question isn’t whether organizations should offer any self-service or online customer service tools. It’s instead how far they should go in relying on these options, and how tough they should make it for consumers to access the admittedly more-expensive-to-provide human help when they need it. Case in point: How often have the options on a customer service voice mail menu failed to account for your question, while providing no option to connect to a human being to whom you can pose your question? Can you recall encountering online forms that refuse to allow you to move to the next step unless you fill in all of the blanks, regardless of whether the question applies to your situation, or if you even have an answer to it?

“Companies have lost sight of the importance of human interaction and often make it too difficult for consumers to get the right level of help and service they need,” Robert Wollan, Accenture’s senior managing director of advanced customer strategy said when the 2016 Accenture study was released. “Companies wrongly assume that their digital-only customers are their most profitable, and that customer service is a cost. Consequently, they over-invest in digital technologies and channels and lose their most profitable customers, who want experiences that cover both digital and traditional channels.”

Noting that experts have calculated that its costs four to 10 times more to attract a new customer than to retain an existing one, Accenture concluded in its 2015 study that “if companies with large, embedded customer bases could improve customer retention even slightly, they could generate hundreds of millions of dollars in margin improvement.”

So, what’s an organization to do? “I think the biggest takeaway for U.S. companies is that there is growth right in front of them by doing something they can control: paying attention to the balance of human and digital” customer service, Accenture’s Wollan told the Chicago Tribune. “You can take advantage of the opportunity to be that company that stands out on service, or at least avoid the risk of being the company that doesn’t.”

Written by: Stephanie Nora White, founder and managing partner of WPNT Ltd and Rebecca Theim, a freelance writer and an associate of WPNT Ltd. Image: Corporate Communications Experts: Rebecca Theim (left) and Stephanie Nora White (right) .