Is a bad economy good for customer service?

Cutbacks might seem prudent right now, but smart companies are investing in customer service during the downturn

It's no secret that both consumers and enterprise IT customers have been spending less money lately, leaving vendors to make do with less as well. But does this necessarily mean they'll cut back on service? Gripe Line reader Bruce believes so, as he stated in a recent reader sound-off: "Companies are in business to make money. So if you reduce the product price, you have to reduce production cost, service, or profit. If you reduce the production cost, you'll raise the level of after-sale support needed. Thus, most producers try to cut service."

A logical argument, for sure, but a recent survey of customers and vendors in the communications and high-tech markets suggests otherwise.

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The report, which was conducted by Accenture, did find that consumers are scaling back, with 21 percent of consumers and 26 percent of enterprise customers cutting spending in the past year. Sure enough, that pain was echoed by those selling products and services in this sector, as executives reported that one-fourth of their customers reduced spending on their products and services in the past 12 months and about 15 percent stopped doing business with them completely.

But instead of trimming service, vendors appear to be spending more in that area, and 62 percent of vendors said they are investing in service infrastructure during these hard times. They aren't putting it all in ill-conceived, budget, outsourcing schemes either. In fact, only 1 percent said they were spending that way. Most said they are putting the money into knowledge management (13 percent), business process improvements (13 percent), or Web support portals (15 percent), or they're merging with or acquiring another business with superior customer service operations (19 percent).

So what's going on -- altruism? Well, let's not go that far. Bruce is still right to a degree. The reason companies are spending on customer service is that competition is tough, and good service builds customer loyalty in a way nothing else can.

Moshe BenBassat is CEO of ClickSoftware, a company that helps companies provide better service, largely by leveraging technology to improve efficiency. I spoke to him about the survey, and from his point of view, all this investment in service is a good business decision. He's also in a great position to talk -- his business is booming.

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