Lessons from the Recession: Where Customer Service and Support Investments Yield Superior Returns for Communications and High-Tech Companies

In the midst of the downturn, Accenture launched a comprehensive research effort with several goals. At a high level, we wanted to understand the impact the recession was having on communications and high-tech companies’ business and, more specifically, the changes the companies were making to their customer service and support activities to encourage continued spending even as customers’ budgets began to shrink.

We also wanted to find out what actions customers were taking in response to the downturn and the factors that were driving their decisions to either reduce or increase their spending on communications and high-tech products and services.

Finally, we hoped to determine customers’ state of mind with regard to such products and services, and glean insights into whether various aspects of the customer service experience made them more loyal to their communications and high-tech providers—and, thus, more likely to maintain or even increase their spending with those companies.

Our research was based on surveys of three distinct groups: 625 global enterprise customers of communications and high-tech products and services; 1,535 consumers of communications and high-tech products and services; and 462 global vendors of communications and high-tech products and services.

Respondents from CHT vendor companies participating in the survey were primarily senior-level executives from all segments of the global CHT industry. All regions of the world were represented by these vendors, and in terms of segments, the largest percentage was providers of telecommunications services and computer software. Furthermore, more than half of vendor respondents were owners or partners, C-level executives or vice presidents or directors.

The Impact of the Downturn
The recession led to softer demand for many CHT vendors. In fact, they reported that approximately one-fourth of their customers reduced their spending in the past year. Our research with customers validates this estimate: Between 20 and 26 percent of consumers and enterprise customers revealed that they had indeed cut their CHT spending. For both enterprise customers and consumers, the biggest reasons for these cuts were budget constraints or the acquisition of lower cost replacements.

Service Contracts
Despite these cuts, most CHT vendors reported either stability or growth in the purchase and renewal of service contracts among both consumers and enterprise customers. What is driving this positive outcome? Vendors attributed it to several new offers they formulated: lower prices, additional content for the same price, high-value product and service bundles, and more flexible payment options.

Vendors also said they had relaxed requirements for contract commitments and had developed special price incentives (including rebates or free installation) to encourage customers to purchase or renew services. Another quarter had increased the quality of the service and support they offer, or had lowered requirements for higher customer status levels.

Investments in Service and Support Capabilities
CHT vendors clearly believe their investments in customer service and support have been both valuable and timely. In fact, 41 percent of respondents said service and support is much more important during a downturn than during times of robust growth, and virtually all said it is important to their business to invest in service and support during a downturn.

Sixty percent of respondents reported making such investments, from purchasing or merging with another business with superior customer service operations, to building or improving Web support portals, to making business process improvements or creating better knowledge management capabilities.

It follows that CHT vendors overwhelmingly reported increased costs in all key areas of service and support. However, our research also shows that just 18 percent of vendors are using advanced analytical tools to determine which cost changes would generate the greatest return on investment.

The Vendor-customer Relationship
Regardless of whether they increased or reduced their service and support spending, eight in 10 vendor respondents said their actions have positively affected the overall customer service and support experience. However, an overwhelming majority of customers said they have either noticed no difference in the service and support experience delivered by their CHT vendors, or have even received worse service.

Obviously, this gap should concern vendors, especially given that a large majority of customers (92 percent of enterprises and 81 percent of consumers) who think the service and support experience delivered by their vendors has improved were more likely to keep doing business with those companies during the downturn.

Along the same lines, just under 60 percent of both consumers and enterprise customers who think the service and support experience has degraded are more likely to eliminate or reduce their spending with those companies during the downturn.

In addition, our research has revealed that while 84 percent of enterprise customers thought their vendors valued their business, only about one-fourth of these customers said they were very loyal to these vendors. The situation is even more critical among consumers: Just 40 percent thought their business was valued, and less than 20 percent said they were very loyal to their vendors.

The Value of Loyalty and its Connection to Service
With loyalty such a scarce and precious commodity, we set out to understand its connection with service. The key takeaway: More loyal customers may be so because they have received improved service and better information.

For instance, very loyal enterprise customers were much more likely than others to report that their customer service and support experiences had improved during the downturn, and to be aware of offers their vendors had made to change, simplify or reduce the cost of their relationships with customers.

In addition, very loyal enterprise customers were almost five times more likely than others to say they had received extensive information from their CHT providers on how the economic downturn had affected them and what the downturn meant for customers, and were also more likely to believe vendors valued their business.

A similar pattern was seen in responses among consumers. Such loyalty has real value, especially during a downturn. For instance, we found that customers who described themselves as very loyal were less likely than those who were neutral or not at all loyal to have cut spending on CHT products and services in the past year. These loyal customers also are the ones who will help lead companies into recovery, as they were more likely to say they planned to increase spending during the coming year.

With the worst of the economic downturn apparently behind us, most areas of the world are beginning to turn their attention again toward growth. But as they prepare for the upturn, communications and high-tech companies should remember the lessons learned in the past 12 months, as related by Accenture’s research.

For instance, our research indicates that while enterprises and consumers were switching suppliers for the products they need, or were halting purchases of new products entirely, primarily because of affordability/budget constraints, few ceased to renew or buy new service contracts for their high-tech gear.

This finding clearly demonstrates the resilience of service and the opportunity vendors have to leverage service and support as a competitive differentiator. To their credit, vendors recognized this, and continued to invest in service transformation, often to the exclusion of much else, during the downturn.

Our research also highlights the value of effectively communicating with customers, especially during a downturn. While vendors said they increased the frequency of communication with customers during the downturn, most customers—especially consumers—were not aware of receiving such communications.

Perhaps as a result, many consumers questioned whether vendors really valued their business. Vendors seeking more effective communications should make social media a much bigger part of their service and support activities. By leveraging the power of these tools to intimately connect with customers—especially consumers, with whom vendors often do not have a direct relationship—they can start and maintain a dialogue that helps foster loyalty.

As companies around the world begin the process of determining the short- and long-term impacts on customers’ psyches and buying behavior, one thing is clear: How a customer thinks about a company after the sale—in other words, the service and support interaction—has a major effect on whether they decide to buy from that company again in the future.

Thus, as they plan their strategies for the post recession economy, communications and high-tech companies should make creating and consistently delivering a superior service and support experience one of most critical elements of their customer agenda. In doing so, they can help greatly enhance their ability to gain market share, grow more profitably and achieve high performance in a changed world.