By Daniel Hunter

International research from business software and services provider The Sage Group has revealed that competition around customer service is set to intensify with over half of firms (53%) stating that it has become more important to their company over the past 12 months.

The study also highlighted a clear correlation between organisation size and increased investment in customer service over the coming year, as mid and large-sized businesses look to try and win back the initiative social media has handed smaller competitors.

The survey of more than 10,000 business owners from across Europe, North America, Africa, and Asia for the third instalment of The Sage Business Index, underlined the link between customer service and success. Sixty per cent of owners and managers who have increased revenues in the past six months stated that going the extra mile in customer service was more important than ever at their firms.

Similarly just under two thirds of owners who are very confident about the prospects of their business (60%) and the performance of their country’s economy (59%) believe customer service will be more important to the their company this year than in previous years, highlighting its crucial role in underpinning growth.

Nil points for service

The research shows show that customer service has become an increasingly important point of differentiation for more than half of firms in the US (55%), UK (53%) and Germany (53%). However, in France less than one in three firms (32%) believe customer service will be more important to their business’ success this year which explains why only 24% of French owners are committing additional spend to enhancing service compared with 43% in Germany, 41% in the UK and 39% in the US.

Across the countries, the most common reasons cited amongst businesses not committing additional budget or resource to customer service were that they already met or exceeded customer expectations (70%) and that improving customer service was not a priority (14%). The only notable deviation from these figures came from owners in France, for whom a significantly lower proportion (50%) believe their service is excellent and for whom a higher proportion (23%) it is simply not a priority.

In the UK customer service has long been seen as a key differentiator for small and medium sized enterprises (SMEs) and this is a trend that looks set to continue. Almost half of the polled UK sole traders (44%) believe the importance of customer service is increasing and that figure rises to 53% for SMEs, with 29% of sole traders and 41% of SMEs increasing budgets and resources in this area in 2012. The level of investment by these UK firms is almost double the one in ten (12%) and one in four (25%) of their French counterparts.

Valuing the extra mile

In late 2011 Sage commissioned some research into consumer purchasing behaviours amongst 2,000 UK residents, and the study revealed that the squeeze on personal finances had made people more selective with their purchases, and that customers placed a higher premium on the customer experience companies offer. Furthermore, the research highlighted that one in three consumers (30%) would never interact with a company again after one poor experience.

Driven by this rising consumer expectations and economic pressure on purchasing decisions, customer service has become a key battleground for business this year. The Sage Business Index has found a strong relationship between the percentage of organisations investing in customer service and customer size. At the sole trader level just one in three firms (35%) are investing resource in this area, and this figure steadily increases to more than half (57%) for businesses with 250 — 499 employees, as larger organisations seek to deliver the extraordinary customer experience traditionally associated with smaller businesses.

When respondents were asked how they will use the additional budget to enhance customer service the most common response was by investing in more training for sales and support staff (35%), followed by investing more into the company’s website to add customer service functionality (31%) and investing in more customer service staff (23%). Interestingly the UK business owners have identified technology as their path to successful customer service, with the highest proportion of owners from any country set to invest in social media (23%) and just under half investing in their website (42%) and one in five (21%) purchasing customer relationship management software.

“Any company that takes a laissez faire attitude to customer service is seriously hampering its ability to compete in today’s environment," Gary Young, Head of Customer Operations at Sage UK said.

"Consumers know it’s a buyer’s market and they, quite rightly, want more than just a product when they make a purchase. They want the company to recognise and treat them as an individual and for the business to prove that they value their custom by going the extra mile on their behalf.

“Delivering an extraordinary customer experience used to be the exclusive preserve of small businesses, but over the coming months we’re going to see more and bigger businesses encroach in this space as firms seek to win the hearts and minds of consumers, as a new route to their wallets.”

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