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    What is the Relationship Between Customer Service Quality and Market Share?

    By James Duval | Yahoo Small Business

    Is there a relationship between the size of a company and its ability to deliver quality customer service, and if so, what does it mean for the way we currently view business success?

    What is the Relationship Between Customer Service Quality and Market Share? image customer conversion rateWhat is the Relationship Between Customer Service Quality and Market Share?As businesses grow, their customer satisfaction seems to drop – but why is this? And what can large businesses do to keep their growing customer base happy?

    The idea that the larger a company gets, the more inefficient it becomes in certain areas is one that runs counter to the set notions of how companies should operate. The discourse of our times revolves around the notion that continual growth is the aim of the game; companies should always be aiming to expand, conquering new markets and winning over new customers.

    But, just as the huge, hulking Goliath was viewed by everyone as the epitome of what a warrior should be before he was felled by a scrawny shepherd with a slingshot, the idea that bigger necessarily equals better could be a misguided one.

    Is there a relationship between the size of a company and its ability to deliver quality customer service, and if so, what does it mean for the way we currently view business success? The question is an important one because companies are increasingly being judged on the way that they treat their customers and bad customer service can often lead to stormy waters. An inability to deliver good customer service can also be an expensive character flaw for a company.

    So what, if anything, does the size of a company have to do with the way it interacts with customers?

    Defining Customer Service ‘Success’

    In 2011, a report by the UK Institute of Customer Service found that as a general rule, for every 10% of market share gained there was a 1.5% drop in customer satisfaction. This statement was arrived at by combining figures from the twice yearly UK Customer Satisfaction Index (a survey of 26,000 consumers across 13 different market sectors) with data from the Office of National Statistics and the Centre for Economics and Business Research.

    Professor Spiros Gounaris of the University of Strathclyde illustrates this problem in more detail:

    As companies strive for continuous growth they have to target customers beyond the ones they presently serve. This means attracting customers with a different set of needs and wants.”

    Companies that are small and lack the appropriate amount of resources to deal with the number of customer queries they are receiving, are also likely to experience significant problems. Smaller companies and the smaller customer service teams they are likely to have, are going to be at a distinct disadvantage when it comes to having the engagement, flexibility, investable capital and employment and training that is needed.

    But there is another side to this story that adds a level of complexity. Put simply, good customer service increases a company’s profitability, which in turn leads to growth. A 2011 study purported to show that a 5% increase in customer retention can lead to an increase of 125% in profits. The book ‘Leading on the Edge of Chaos’ claims that companies that prioritise giving customers a good experience have 60% higher profits then their competitors, and that a 2% increase in customer retention has the same effect as cutting costs by 10%.

    What all this illustrates is that it is not simply a case of a company being too big or too small to deliver good customer service, it is also important to realise that delivering good service can often set a company on a path to losing the quality of that service.

    So, should a company put a limit on growth or accept the argument that their customer service is necessarily going to have to suffer if they want to grow?

    What is the relationship between market share and the ability of a company to deliver good customer service?

    Too Small for Good Service?

    Good customer service requires a significant investment of resources and time. Unfortunately a lack of time and investable resources is exactly what makes a small company small. Customers are becoming more discerning, more informed and the expectations that they have for companies is changing. Customers expect companies to have multi-channel customer service that is coherent.

    It can be difficult for a small company to simultaneously run a website, call centre, social media accounts and forums all at the same time in a coherent and effective way. The problems that small companies have with customer service can act as a limiter to growth in a big way and really hold a business back.

    Trying to deliver quality customer service that turns people into committed advocates of your brand and your products, often leads to two main kinds of problems for smaller companies:

    • Where to direct the limited resources that you have, to try and have the maximum impact?
    • How to ensure a high level of flexibility and adaptability within your processes, while also keeping a sense of coherence?

    How Small Companies can Improve their Customer Service

    A small pool of resources doesn’t necessarily equate to an inability to give your customers a valuable and fulfilling experience when they interact with your company, it just means that a company is not going to be able to do everything it would ideally like to.

    The basic truth of customer service is that the majority of people still want to be able to communicate their questions or concerns to a real human being. While the automation offered by IVR and other kinds of cloud call centre systems is useful for monitoring, delivering certain bits of limited information and allowing customers to direct themselves, the end goal for most people is still to get through to another human being.

    Technology is a great way for smaller companies to begin to punch above their weight and effectively deal with larger customer numbers and bigger workloads. Cloud applications and storage are a great way to avoid hardware and security costs, while still maintaining a high level of capability for multi-channel customer interactions and social media that allows a company to do less with more.

    Other ways that small companies can improve their customer service is to make asking for a quick round of feedback a central element of their process, so that they can tweak and mould their customer service over time. This is linked to the idea that it is ok to set expectations based on your size. Most customers will understand that it is simply not possible for you to operate a 24 hour customer support service or that it may take you a working day to reply to an email, as long as you inform them that this is the way things are beforehand.

    You should find that smaller companies are most often given more of a chance than larger companies when it comes to customer service.

    Too Large for Good Service?

    It is frequently the larger, more ubiquitous companies that attract the fire and fury of consumers. From the biggest airlines to telecommunications giants, the trend seems to point towards organisations too big to realistically be able to treat their customers as anything others then numbers in their systems.

    It is perhaps an unavoidable truth that the larger a company gets and the more customers it has, the more removed it has to become from each individual one of those customers. In many ways, the customer service challenges of larger company are the same as those of a smaller company but with the numbers raised dramatically; the question of how to direct a limited pool of resources in a way that is going to have the maximum impact.

    The results, however, are often substantially different. Larger systems can build up inefficiencies and bottlenecks in ways that smaller ones won’t, thereby leading to a steady portion of resources being wasted. There is also likely to be a much higher level of visibility and public reaction to widespread customer service failings.

    Some of the main problems caused by the size of a company when it comes to customer service are:

    • Adopting a “one size fits all” approach, where all customers are treated as the same so there is no variance in the information or guidance given to people
    • Offering very little in the way of actual customer support (or in the case of Facebook and Twitter, only offering FAQ support) because there are large communities of consumers who help each other, rather than coming to the company for help unless they absolutely have to
    • Getting lost in jargon or overly complicated language on your help or FAQ pages
    • Companies like Amazon offer very little in the way of customer support and do not offer features like live chat
    • Automating the vast majority of their helplines so that customers can only get through to a human if it is really, really necessary

    The one cardinal sin of customer service is over-promising and under-delivering, and this unfortunately seems to be something that larger companies can fall into relatively easily.

    How Large Companies can Improve their Customer Service

    The main aim of large companies when it comes to customer service is making every effort to ensure the human touch is kept alive as much as possible within their processes. Maximising human interaction within a system that must deal with high volumes can be difficult and potentially costly, so it is important that technological solutions are utilised as much as possible.

    Multi-channel cloud call centre packages that are linked to IVR menus are an example of how technology can actually extend the amount of time that customer service agents have to deal with customers, by allowing customers to direct themselves to the kind of help they need and also allowing an agent to communicate with them over multiple channels in real time.

    Technology can also be used to track different customers as they make their way through the system. Analytics is an important part of the way that modern businesses evaluate the efficiency and effectiveness of a customer service system, allowing the identification of bottlenecks and points of inefficiency.

    There is likely to be rapid technological advancement in this area in the coming decades, with NanoRep, that monitors customer/agent communications so that it can provide quick answers to similar questions, being one exciting signpost to the future.

    One of the main aspects of customer service that customers have come to expect is a quick answer, especially when it comes to social media, so it is important to set expectations. Setting aside a period each day where company representatives will respond to Tweets in real time is one example of how simple changes to the way technology is used, can have wide ranging results on the quality of customer service provided.

    The Advantages of Being Mid-Sized

    It would seem that medium-sized companies inhabit the best aspects of both worlds here. On the one hand they have a degree of flexibility and a resource base that can elude smaller businesses, but on the other they are much more dependent on, and connected to, each individual customer in a way that seems to elude large companies.

    Mid-sized companies are right in the point of the market share scale where it is possible to give the customer the experience that they want, and not a promise of one or the glossy illusion of one.

    Often, smaller companies feel like they have to offer a level of customer service that is comparable to larger companies and so often over-stretch themselves, and in the same way large companies will often have videos, presentations and fancy features, which means that the whole process comes off as impersonal.

    Medium-sized companies seem to be best situated to put in place customer service processes that are based in technology enough to be efficient and based on a full multi-channel experience, but that there is also enough space to give each individual customer a much fuller service.

    This is not quite the whole picture though. Numerous studies have explored the link between market share and customer satisfaction with the service provided, and a common thread is that the link between good customer service and increasing your market share depends on whether or not there is “homogeneity in the nature of demand.” What this means is that companies need to understand the main things that motivate their customers to get in contact with the company and gear their processes towards meeting that need.

    An example would be a tech company where the majority of customers are unlikely to have the technical knowledge needed to diagnose and solve product problems themselves. The customer service process should therefore be geared around putting customers in touch with experts as easily as possible, and then giving these experts all the tools and applications they need to help customers diagnose what is wrong with their product. The process could be made more efficient by using technology to track what the most common queries are and featuring easy, jargon-free instructional videos on your website.

    Is it Either Growth or Good Service?

    So the answer to this question is no. While the ability to deliver targeted and effective customer service is directly tied to a company’s profitability and its ability to increase its market share, an increase in market share can also begin to negatively affect a company’s ability to provide quality customer service.

    But the central point is that as long as you continue to harness and structure your customer service processes around the homogenous demand of your customers, whether that be for jargon-free technical help or a quick and easy way for customers to order new parts, there is a potential to achieve growth while maintaining good service.

    What do you think about the link between market share and a company’s ability to provide good and valuable service; do you think it is a good metric or just a meaningless coincidence?

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