Is Customer Service Dying?

If you've ever heard the phrases, "Please hold to listen to our menu of options," "That's not my area," or "We'll be there sometime between 8 and noon," you might wonder that you ever get any service at all.

That America is a service economy is one of the great truisms of recent decades. And there's little doubt the service sector has become one of the dominant engines of the U.S. economy.

Where once manufacturing jobs outnumbered service jobs, the reverse is now true. And for the first time this year, a service enterprise extraordinaire — retailer Wal-Mart — topped old-line economic giants Exxon Mobil and General Motors as No. 1 on the list of the Fortune 500 companies.

Yet in some industries, customer service has been waning.

This is especially true of the transportation, communications and utilities sectors. Customer satisfaction in these areas has dropped 7 percent since 1995, according to the latest University of Michigan Business School's American Customer Satisfaction Index.

Some states have noticed this trend firsthand. Texas' consumer protection division, for example, says the number of complaints it receives has skyrocketed since 1996, reaching 39,776 in 2001. California has also seen a rise, with around a third of the state's 31,345 complaints related to customer service issues.

"There's been a skyrocketing number of complaints, especially about telephone companies, since deregulation," notes Janee Briesemeister, senior policy analyst with Consumers Union's southwest regional office.

Complaints Pile Up

So what are consumers complaining about?

Some of the most frequent complaints received by the California Public Utilities Commission are from customers unable to reach a person on the phone, or about telecommunications companies that aggressively market new services and then don't deliver on their promises to customers.

"They do seem to focus around two areas — billing problems and customer service," says Briesemeister.

Dwindling customer service is especially prevalent in companies that have had financial difficulties or whose stock price has suffered, according to the latest consumer satisfaction index, known as the ACSI.

Among the companies that saw the largest drops in satisfaction or showed low scores in the first quarter index were WorldCom and Qwest Communications, two telecom firms currently under investigation, and cable companies Charter Communications, Comcast and AOL Time Warner, whose stocks have all declined sharply in the past year.

"Declining customer satisfaction may well be a warning signal about many things gone wrong in a company," warned Claes Fornell, the University of Michigan Business School professor who heads up the ACSI index. "It is the customers, after all, who represent its ultimate economic asset. If that asset is treated poorly and deteriorates in value, one wonders how other assets are managed."

Cost Cuts Lead to Service Slump

A key part of the problem in this weakened economy are deep cost cuts, which often result in layoffs and automation of some customer services, which in turn has resulted in less attention to customer service for some companies.

"I think it's a natural outcome of cost-cutting and job-cutting that has gone on for the last several years," agrees Kristin Anderson, president of customer service consulting firm Say What? Consulting in Minneapolis and co-author of Customer Relationship Management. "When you have a reduction in force people can continue to perform well only for a limited time."

Other critics blame deregulation in some industries, like the telecommunications and cable loosening enacted by the federal government in 1996. They argue that deregulation has ironically led to less of an emphasis on customer service as companies focus more on their bottom lines than on pleasing the customer.

"Levels of customer service are a very big issue and they're much more of an issue now with the advent of competition in some parts of the industry," says Carl Wood, commissioner of the California Public Utilities Commission. "The marketplace is supposed to correct these problems, and maybe in the long run it does, but in the short run it hasn't been doing a good job of it."

Signs of Improvement

For their part, many companies say they're constantly trying to improve customer service, despite any financial hardships they may face.

A Qwest spokesman, for example, says that company has made many strides to improve its customer service in the past two years. In the first quarter of 2002, almost 99 percent of the company's installation requirements and more than 96 percent of repair commitments were met on time, according to the company's internal measures. The company is also trying to resolve customers' problems in one phone call so they don't have to keep calling back.

AT&T has also started using "natural language" technology in its customer service lines. Callers simply say what their problem is into the phone and a computer will automatically direct them to the information that they need. If the problem is too complex or the system doesn't understand what the caller is saying, a customer service representative will answer the phone.

The company says it has seen an 80 percent decrease in customer complaints and a 30 percent reduction in repeat calls during the first four months of use.

Anderson thinks that perhaps an upswing in better customer service could be under way. "I think we are at the very bottom of that trough, but I won't guarantee that it can't go a little further," she says. "We're going to start to see again a focus on how do we manage customer service and do it in a way that doesn't have to add a lot of additional cost."

Indeed, some companies' ACSI scores have posted dramatic gains. Reliant Energy and Xcel energy were among the companies that have shown improvements.

And a most surprising gainer: The U.S. Postal Service. Perhaps there's hope after all.