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  • Rod Morgan, Head of Faculty at RPM-Academy

The Rise and Fall of Customer Service

The pendulum of perception of customer service swings between satisfaction and frustration. In recent years, however, the prevailing sentiment seems to lean heavily towards the latter for the consumer. Many might claim, based on personal experiences, that the landscape of customer service has witnessed a transformation, and unfortunately, not for the better. Amidst the growing cacophony of complaints and grievances, it's imperative for organizations in all sectors, both public and private, to dissect the factors contributing to this decline and chart a course towards restoration.

A warning sign stating, "Ignore your customer long enough... and they will go away!"

An article published in Forbes Magazine in mid-2023 cited a study conducted by Customer Contact Week Digital, that showed that the consensus among consumers is grim: 57% believe that customer service has deteriorated over the past year, with a quarter expressing that it has worsened significantly. Only a meager 4% perceive an improvement. While such assessments are based on perception and belief and as such, subjective, they hold immense weight in shaping the customer experience, a pivotal factor in today's competitive market.

What's Changed?

One might think that the COVID-19 pandemic acted as a catalyst, reshaping the dynamics of customer interactions. Remote work, supply chain disruptions, and shifting consumer behaviors imposed unprecedented challenges on all businesses. The abrupt transition to digital platforms strained traditional service models, exposing vulnerabilities in responsiveness and adaptability.

A smart phone in someone's hand with an A.I. Chatbot visible. A book in the background with the title "Artificial Intelligence".

Yet, attributing the decline solely to external factors would be a simplification of what is a complex issue. Fundamental flaws in organizational culture and strategy play a significant role. In an era dominated by efficiency metrics and cost-cutting measures, the human touch often takes a backseat. Automated responses, impersonal interactions, and scripted dialogues erode the essence of genuine service, leaving customers feeling undervalued and disengaged and most certainly continued rapid advances in artificial intelligence and generative AI will most certainly increase this risk in the absence of human-centered design. Other contributing factors to consider are;

  • Inadequate employee training and development: Inadequate training can leave frontline staff ill-equipped to handle customer inquiries or complaints effectively.

  • Insufficient staffing levels: Understaffing can lead to longer wait times and rushed interactions, diminishing the quality of service.

  • Overreliance on automation: Automation can streamline processes but may result in impersonal interactions that fail to address customers' unique needs.

  • Inadequate communication channels: Limited avenues for customer feedback or support can hinder responsiveness and leave customers feeling unheard.

  • Poor organizational culture: A culture that prioritizes efficiency over empathy may devalue the importance of genuine customer interactions.

  • Inconsistent service standards: Discrepancies in service quality across different channels or locations can erode trust and loyalty.

  • Lack of empowerment: Frontline staff may feel disempowered to resolve issues independently, leading to frustration for both employees and customers.

  • Failure to adapt to changing customer preferences: Ignoring shifts in consumer behavior or technological advancements can result in outdated service offerings.

  • Ineffective leadership: Senior management's failure to prioritize customer-centricity or set clear expectations can trickle down and impact frontline service delivery.

  • Misalignment of incentives: Incentive structures that prioritize sales targets over customer satisfaction may incentivize behaviors that compromise service quality.

The repercussions of subpar service extend far beyond disgruntled customers. Organizations bear the brunt of diminished loyalty, tarnished reputation, and lost revenue. In an age where social media amplifies grievances with lightning speed, the repercussions of a single negative interaction can be catastrophic.

"A happy customer tells a friend; an unhappy customer tells the world"

Correlating Poor Customer Service with Business Loss

Bar chart showing a decline.  An arrow has been added to further illustrate the loss.

While quantification of the impact of customer service decline on business performance will vary depending on industry, context, and measurement criteria, numerous studies and reports (and common sense) have highlighted the correlation between customer service quality and business outcomes. Here are some key points to consider;

  • Customer Retention and Lifetime Value: Research consistently shows that retaining existing customers is more cost-effective than acquiring new ones. High-quality customer service fosters loyalty, leading to repeat business and increased customer lifetime value.

  • Word-of-Mouth Impact: Dissatisfied customers are more likely to share their negative experiences with others, potentially damaging the organization's reputation and deterring new customers.

  • Competitive Advantage: In competitive markets, superior customer service can differentiate a business from its rivals, attracting customers and bolstering market share.

  • Cost of Acquiring New Customers: Poor customer service may necessitate increased spending on marketing and advertising to attract new customers, driving up acquisition costs.

  • Operational Efficiency: Efficient customer service processes, such as timely issue resolution and effective communication, can reduce operational costs associated with handling complaints and inquiries.

  • Brand Perception and Equity: Positive customer experiences contribute to a favorable brand image and strengthen brand equity, which in turn supports pricing power and customer trust.

  • Employee Morale and Productivity: Engaged and satisfied employees, empowered to deliver excellent customer service, are more productive and less likely to turnover, reducing recruitment and training costs.

Cost of Poor Customer Service (COPCS)

Estimating this element of cost of poor quality (COPQ) could provide valuable insight into the financial impact of subpar customer service. Much like COPQ is employed in quality management, (i.e. the costs incurred as a result of defects, errors, and inefficiencies in products or processes), COPCS would encapsulate the financial ramifications of inadequate service delivery. To calculate COPCS, organizations would need to consider various factors, including;

  • Lost Revenue from Customer Churn: Quantifying the revenue lost due to customers defecting to competitors as a result of poor service experiences.

  • Acquisition Costs for New Customers: Calculating the increased expenses associated with marketing, advertising, and promotional efforts to acquire new customers to replace those lost due to dissatisfaction.

  • Operational Costs of Handling Complaints and Returns: Assessing the expenses incurred in addressing customer complaints, processing returns, and rectifying service failures.

  • Impact on Employee Productivity and Morale: Factoring in the indirect costs stemming from decreased employee morale, increased turnover, and reduced productivity resulting from managing dissatisfied customers.

  • Reputational Damage and Brand Equity Erosion: Evaluating the long-term consequences of negative word-of-mouth, social media backlash, and diminished brand perception, which can impact future sales and market share.

  • Legal and Regulatory Costs: Considering potential legal fees, fines, or penalties resulting from customer disputes, compliance violations, or regulatory non-compliance related to service failures.

Quantifying these costs would provide organizations with a comprehensive understanding of the financial implications of poor service quality and serve as a compelling catalyst for investing in customer service excellence initiatives.

"The Customer's Perception is Your Reality.”

The preceding quote is from the renowned learning and development veteran and author, Kate Zabriskie. It is a terse reminder that your organization's future success depends on how you react to your customers ever changing needs.

A hand holding magnifying glass and the word "customer" is featured prominently in the lens.

To reverse the perceived and/or real downward trajectory of customer service, a paradigm shift is imperative. Organizations must prioritize customer-centricity, embedding it into the very fabric of their operations. This entails a multifaceted approach, encompassing culture, processes, and technology.

At the heart of this transformation lies the empowerment of frontline staff. They are the face of the organization, wielding immense influence over the customer experience. Investing in their training and development is non-negotiable. Equipping them with the principles, tools, and methods of customer service mastery fosters empathy, problem-solving skills, and resilience in the face of adversity. Moreover, extending this training to all employees, including senior management, reinforces a shared commitment to excellence.

In this age of artificial intelligence and generative AI, embracing technology as an enabler, not a replacement, is paramount. Automation should complement, not supplant, human interaction. Leveraging data analytics and AI-driven insights enables personalized, anticipatory service, transcending transactional exchanges to foster genuine connections.

In Conclusion

The decline in customer service is not an irreversible fate but a call to action. Organizations that heed this call, doubling down on their commitment to customer-centricity, will emerge as trailblazers in a sea of mediocrity. The path to excellence is paved with intentionality, empathy, and a relentless pursuit of improvement. As we navigate the tumultuous waters of the modern marketplace, all organizations must chart and steer a course towards a future where exceptional service is not the exception but the norm.

Certificate in Customer Service Mastery

RPM-Academy offers a 39-module Certificate in Customer Service Mastery ideally suited for all roles in an organization, from front-line employees to senior management for the sale price of $29.95 CAD*.

* Regularly $99.95 CAD and available for a limited time at the price of $29.95 CAD. Group volume discounts available for up to 50% off the the already reduced sale price!


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