25 Feb 2016

A business case for an online customer journey

Bo-Peter writes*

Picture this: a consumer enters a store with a question about a product or service they’ve paid for. Before not too long, a company representative approaches and offers to help you with your question and quickly directs you to the solution you need. When done correctly, this customer experience is what keeps consumers happy and keeps customer loyalty. Now re-imagine the above scenario, but instead the consumer enters the digital store or website, and undergoes the same process.

In the current state of the online landscape, the customer experience has not yet reached what it could be, even though the internet is the first place consumers go for their questions. Translating an effective customer journey to the online world reaps the same benefits as the in-person experience with the upside of what ICT offers, lower costs for producers and lower prices for consumers. Likewise, these online experiences can help eliminate a source of consumer panic: having to telephone the representatives of a company call center. One answer to increasing efficiency and customer satisfaction, as well as cut costs are online self-service solutions in the form of Virtual Assistants, or automated online assistants (see picture).

Such a self-service solution goes past the simple search bar or deference to a call center and enables consumers to easily find the answers that they are looking for in a fast and efficient manner while creating a positive business case for producers and service providers. Essentially what the online Virtual Assistant does for a business is replace the costs of staffing and maintaining a call center by adding the functionality of answering the most pertinent questions online. Designed properly and with a sufficient knowledge base behind the Virtual Assistant, a self-service solution is much more than an FAQ and can create a dialogue with a consumer. A great example of this can be found with the Dutch telecom provider KPN.

Several micro-economic concepts can be utilized to describe the positive effects that a Virtual Agent can have on a business. Cost reduction is accomplished by reducing the amount of calls, and thus labor to answer those phone calls, that need to be made towards a company’s call center. This means that the, the variable cost of labor has been translated into a fixed cost with the virtual assistant. Likewise, this reduces the marginal cost of production as an increase in quantity no longer has an increase in variable costs of staffing a call center. With a reduction in the average total costs of production, a firm can enjoy from some incremental factor of economies of scale. In the short term, the firm might be able to maintain the price of the product or service it offers and benefit from rent which it can invest elsewhere, such as to innovate new products. Additionally, lower customer support costs means a lower market entry barrier for new products or services the firm produce. Finally, a firm that supports its customers can build brand loyalty and enjoy the benefits of creating demand for its own products in the future.

Bottom Line Call centers are an expensive, but vital operation for companies guiding the customer service journey. Online Self-Service solutions such as a virtual/digital agent can mitigate these costs and even produce new consumer insights for a firm. Though harder to measure the beneficial effects of a positive customer experience on a firm, more productive operations should be able to benefit both consumer and producer. If all goes right, this lowers production costs, and thus hopefully the cost to consumers.

* Please comment on these posts from my microeconomics students, to help them with unclear analysis, other perspectives, data sources, etc.

1 comment:

Robin Van Hemert said...

Hi Bo-peter, Nice post! I had never really thought about online customer service in a microeconomic way and I think you've done a good job explaining some of the benefits. However, I think there might also be some drawbacks. From personal experience, I know how frustrating it can be when companies rely too much on online customer service systems that don't work well at the expense of their call centers which, although more expensive, can also be more effective. I think it is very important for companies to maintain the image that they care about helping their customers (maybe even just as important as reducing their production costs) and switching to online support can undermine this. Ultimately I think it's great if you can have an amazing online support system. If not, I think it could do more harm than good.

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