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It's a trap! Don't fall for these five customer service cost-cutting pitfalls

CX Best Practices

Due to various internal and external factors, including the broader economic climate, most businesses will find themselves in cost-cutting mode at different points in their company's life cycle. But, not all expenses can be cut equally, and certain successful short-term cost-saving tactics can be quite risky over the longer term.

Balancing value and risk when it comes to cost savings that impact the customer experience (CX) is particularly important. In a competitive market where brands succeed or fail based on the quality of their customer relationships, companies must carefully consider the impacts of scaling back or eliminating budgets related to customer-focused people, processes and technologies as many could have far-reaching negative effects. Here are five key customer service cost-cutting traps to avoid.

1. Prioritizing automation over human innovation

When deployed smartly and judiciously, automation offers some of the best tools and methods for freeing up humans to do what they do best: using innovative problem-solving skills to solve more complex customer issues and requirements. But, businesses need to know how to toe this fine line.

The main trap to avoid is automating everything and anything. Sinking all your company resources into automation can actually lead to diminishing returns. Exchanging high-potential human talent for AI-powered bots compromises your ability to deliver service excellence. Instead of looking at humans and bots as an either/or scenario, consider how they might work in tandem to collectively advance your customer service goals.

2. Focusing on today's burning issues, not holistic financial strategies

In business, there's typically always a fire to put out. However, short-term thinking is one of the best ways to ensure your company won't be around for the long term. Consider the significant damage that can be caused by a short-sighted financial plan.

Jeff Toister, president of employee-performance consultancy Toister Performance Solutions Inc. and author of The Service Culture Handbook, says it can be quite easy to hide problems with creative accounting. "Many companies fall into the cost-cutting trap because they rely almost exclusively on financial accounting," he says.

Toister recommends a more holistic approach of managerial accounting to help identify the root causes of overspending. He gives an example: Say a fast-growing cable company tried to lower its cost per service call by hiring field technicians with less experience. With traditional financial accounting, costs appear lower on the surface even if higher errors generated repeat service calls. "While the financial accounting showed a reduced cost per service call, the managerial accounting showed an increased cost per issue," says Toister.

3. Passing the buck when it comes to CX

When you're in the business of delighting customers, customer service can feel like everybody's job — and no one's job. This line of thinking can lead to a diffusion of responsibility.

It's important to recognize that leadership is essential to consistency in customer service-oriented businesses. Failing to invest in a C-level customer-focused role, like a Chief Experience Officer, may feel like a smart cost-saving move, but it can turn out to be the opposite. Without one clear leader with a mandate to drive processes and experiences forward — and to keep the company accountable to its promises — would-be investments in long-term customer relationships often fail to materialize.

4. Cutting marketing programs prematurely

Executives have typically viewed marketing as a cost center. That's why, when belt-tightening times arise, many executives see advertising and promotional activities as an easy place to start cutting costs.

However, some marketing campaigns — particularly those around brand-building — can take time to pay off. For instance, say a company launches a campaign to drive repeat purchases. If they pull the plug and fail to deliver on incentives they've promised the customer, their entire campaign could backfire. This doesn't only damage the marketing effort; it can damage a company's reputation with customers.

Make sure to evaluate what your marketing efforts really accomplish, and their impact on the customer experience as a whole, before prematurely cutting funding.

5. Failing to invest in outsourcing relationships

One of the most important venues to deliver on customer promises is in the contact center. Customer experience outsourcing can be a central component of an air-tight customer experience strategy, but not all outsourcing relationships are created equal.

There are outsourcing relationships that don't achieve the desired goals and results. This is especially true for those providers that promise better service at lower cost says Colin Taylor, Chief Chaos Officer at Taylor Reach Group, a customer experience consultancy.

Brands often get lured into thinking an outside vendor can, as Taylor says, "wave a magic wand and make a dysfunctional internal process work magically in an outsourced environment."

In fact, outsourcing high-value business processes requires a high level of rigor and resources, especially at the outset, in order to see reduced costs over time. Taylor says brands that outsource customer service or other aspects of the customer experience must focus on delivering the best quality service first, then reduce costs through improving process and implementing technologies post-launch.

"At the end of the day, cheap customer care is usually lousy customer care," Taylor says.

Even with the best business strategy in place, there may still come a time when you'll have to cut costs. Don't damage your customer relationships and your brand reputation by making poor cost-cutting decisions. Keep these traps in mind so they are easier to avoid today in order to protect your future success.

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