Customer Service Software Economics
This is Part 2 of a 4-part series about what is wrong with the customer service software industry and what we can do about it.
In the first part of this series, I explained why The Customer Service Software Industry is Fundamentally Broken. In this post, I will go into a little more detail and explain how the economic incentives behind customer service software can adversely affect customers.
The incentives are different depending on whether the software is geared toward companies or consumers. Let’s talk about each in turn.
Customer Service Software for Companies
There are many different reasons why customers get frustrated by the customer service provided by companies. For the purpose of this article, however, it’s important to distinguish between issues the company is incentivized to improve (i.e. customer and company incentives aligned) versus frustrations purposely caused by the company (i.e. incentives NOT aligned).
Types of Customer Service Issues
- Customer needs information — incentives aligned
- Customer reports a bug — incentives aligned
- Customer makes standard operational request — incentives aligned
- Customer wants to cancel service, reduce rate or perform any action that goes against standard policy — incentives not aligned
Aligned Issues
I’m not saying there aren’t challenges today with fulfilling customer service requests in the first three categories. There are. I’m just saying that it’s in the best interest of the company to resolve those challenges and therefore customer service software vendors will likely continue to innovate here.
Non-aligned Issues
The much more problematic area in the long term is #4.
Customer service software built for companies will never make it easy for customers to do something the company doesn’t want them to do.
Any significant improvement for this category of customer service issues will have to come from the other side of the fence (i.e. software built for consumers).
Customer Service Software for Consumers
In theory, consumer software should be built to favor the consumer at all times. In reality, however, this largely depends on answers to the following questions:
What‘s the relationship between the software and the company?
A customer service issue is by definition an issue between a consumer and a company. In order for consumer software to help resolve that issue, the software product has to jump in the middle of that interaction. When that happens, the software has one of two choices:
- Remain 100% completely independent from the company to ensure the consumer’s interest is always favored.
- Establish integrations/relationships with the company in order to enable certain features and/or solve certain types of customer service issues.
These options are, in most cases, mutually exclusive. The tighter the relationship with the company, the more the independence and integrity of the consumer software is compromised. However, in many cases, some sort of relationship with the company is needed in order to service the customer.
In short, there is no perfect answer here and most consumer software is forced to walk a fine line between the customer’s interest and the requirements needed to integrate with the company.
How does the software product make money?
Nothing in life is truly free. Consumer software has to make money at some point in some way. That means consumer software is faced with a second difficult choice:
- Charge the consumer
- Charge the company
- Charge a third party (i.e. ads)
Each of these options have advantages and disadvantages.
Charging the consumer ensures the highest likelihood the interest of the consumer is prioritized, but as I have (painfully) learned during my 6 years at GetHuman:
Most consumers will not pay for customer service
Charging the company is usually the most profitable option, but it has the obvious strings attached.
Charging a third party that is not involved in the customer service transaction (i.e. in most cases, ads) seems like the most viable option except that you often need to attract a A LOT of users in order to make significant revenue.
For example, with ads my general rule of thumb is that you need 1m+ monthly users to have any chance. Even then, the software won’t be much more than a side lifestyle business unless you can continue to increase one or two orders of magnitude (i.e. 100m+ monthly users) beyond that.
Up Next…
So, consumer software is clearly a better candidate to fix the fundamentally broken part of customer service. However, as alluded to earlier in this article, consumer software can be tricky. Part 3 of this 4-part series goes a little deeper into the different categories of consumers software.
