Economics of customer service

Two great stories in last week's WSJ about management decisions regarding customer service.  One focuses on decisions in the private sector regarding "how far customers can be pushed before their heads explode."  This is a classic case of optimization using economic logic: reduce spending on customer service up until the point that the savings are offset by lost revenue from angry customers.

Specific examples: How many registers are open?  How many branches and nodes to put in the automated phone answering service?  How long does it take to talk to a real person?  Will the real person be empathetic and speak English well?  Firms are using the data they collect in real time to answer these questions.  One thing I learned is that companies are now using artificial intelligence to match the angriest customers (based on voice tone, syllables per second) with the agents who have the best conflict management skills.

The other story focuses on an institution where customer service has gone from poor to horrific: the Internal Revenue Service.  This year only 33% of calls dealing with compliance penalties got through.  The IRS budget has been cut and one of the responses under Presidents of both major political parties has been to degrade customer service.  Of course the IRS only looks at the situation from a cost standpoint; they do not have to worry about their customers going elsewhere.