I often hear a lot of businesses and managers talking about a metric Cost-to-Serve(CTS) - reducing cost-to-serve a customer. They continuously talk about moving customers to lower cost channels and hence reducing the cost-to-serve & improving profitability. I find this ridiculous as an independent metric measured by businesses.
Let me explain you why:
What does Cost-to-Serve(CTS) mean?
Currently, if a business is using high cost channels, resources to service customers and hence it eats into the profit margin of the business. Hence, the managers & leaders in the company are mandated to move customers to lower cost channels so that it is a self-serve channel for the customer and minimizes resources from the business's end.
Let me now look at it from a customer's point of view - What is Cost-to-do-business(CTB)?
I reached out to my service provider thro' the phone( a relatively lower cost channel) and spent about half hour explaining my problem to the associate on the other side of the phone. I was told that the problem will be resolved in 24 hrs and that they were transferring it to another technical team who will address it. I waited and nothing happened - no response or no resolution was in sight. I called my service provider on the phone again and this time to my horror, I had to repeat the problem all over again for another half hour. Here's one hour of a customer's time that has been wasted by the company -that's pretty precious, in my view which businesses give a damn, as it does not cost them anything.
I also emailed the problem I was facing, to put things in writing to customer service - which took me another 15 mins and then there was a spate of automated mails that were generated promising resolution within further 2 working days! Now, I had lost close to 72 hours in addition to an hour over the phone. Now, the web channel again was a low cost channel to business but it was a high cost-to-do-business for me, as a customer, as nothing was resolved. Neither, the channels were integrated to treat my problem on priority given my prior poor experience. The Cost-to-do-business with the company was too high for me, as it was eating into my time and effort - that close to 73 hrs and 15 mins( 72 hours of lost opportunity and 1 hour and 15 mins of interacting with them over different channels). How does business pay for these costs and factor for these?
Many of the financial services companies who I do business with, have asked me to move to e-statements, mobile app, online banking etc. Now, I am increasing my storage space on cloud to factor for these and storing them as if I ask for an e-statement beyond a year or so, then they charge me for it. However, none of these businesses have optimized the charges they debit to me - as earlier they were sending me all of these and providing services. Now, all my online fund transfers are charged, my POS transactions on debit card has increased but my debit card annual fees is not reduced, it is the same as I had paid couple of years back! Since, the time I moved to online & mobile banking, am not visiting their branches which saves them a lot of money as they have reduced their cost-to-serve me. The cost of doing business- CTB- with my bank has in fact increased for me - If I factor my time and transactions charges that I pay to them.
I believe there is a balancing metric that companies need to look at -which is Cost-to-do-Business(CTB) for the customer while they look at cost-to-serve metric. For my bank, if my branch visits have come down, if my ATM transactions have reduced & POS transactions have increased or my problems with my utility service provider is not resolved over phone, web channel etc. the cost-to-business in fact has increased and they must pass on the benefit.
It's time for business to think from a customer's point of view and then factor for these as customer migrate to newer channels & touch points. The cost-to-do-business(CTB), then it is to be tracked as a metric and differential value of benefits passed on to customers too.