CRM BUYER SPECIAL REPORT
Is Self-Service Really Reaping ROI?

Once upon a time, the corner gas station was more than a place to fill up your car's tank and grab some coffee on the way to work. It was a full-service experience, with attendants who checked under the hood, cleaned the windshield and clamored for a good tip.

But when gas prices skyrocketed in the 1970s, customers discovered they were willing to pump their own gas in return for a price break. A couple of generations later, labor costs still drive the cost-cutting equation. More businesses are jumping on the self-service bandwagon, with many local grocery stores and hardware stores allowing self-checkout.

According to a July study conducted by research firm IDC for NCR Corp., nearly 70 percent of customers in five different countries said they would be likely to use self-checkout. In the United States, this proportion was even higher, at 78 percent.

However, truly powerful self-service begins -- and sometimes ends -- on the Internet, where customers routinely seek in-depth sales information, user manuals and technical help. In fact, some customers even seem to prefer self-service. They want to research purchases at their leisure, get answers to technical questions 24-7 and make decisions on their own time.

The hardest thing for businesses tempted by this seeming golden opportunity is to remember that self-service is not a cure-all. As they consider investing thousands or even millions of dollars in self-service solutions, companies must answer a key question: Can self-service systems produce quantifiable, positive return on investment (ROI), or are they simply one more expensive toy to enhance the customer experience?

Pumping Out ROI

"Providing self-service is becoming a very standard way of dealing with customers," Rebecca Wettemann, vice president at Nucleus Research, told CRM Buyer. Nucleus is an IT analyst firm that focuses on how customers can achieve positive ROI.

Wettemann said she has seen some firms achieve ROI of nearly 1,000 percent by implementing self-service offerings on the Web. These systems include e-mail customer service, live chat with customer service representatives, and online libraries of company information.

By taking a phased approach to implementing self-service solutions, companies can begin to recoup their investment costs immediately, Wettemann added.

"One goal is to cut first-tier calls to the help desk by directing customers to the Web site," she said. "Start with that and see how good of a handle you have with the way people interact with the company.

"Don't spend a million dollars and three years of developing to create the perfect customer-service solution," she added. "Hit places where you can really get returns, get some technology up and running, and expect that this is going to evolve as your relationship with the customer evolves."

Getting Results Fast

Wettemann cited the case of nanoCom, a developer of Internet communications software. The company grew its customer base from zero to 1 million in just three years, making it difficult to provide a high level of customer support. And this support was expensive, at $7 per customer-service phone call and $3 per e-mail .

To solve its problem, nanoCom installed RightNow's (Nasdaq: RNOW) eService Center, an online FAQ (frequently asked questions) solution. As a result, at least 45,000 fewer calls came into the nanoCom call center in 2002, saving $315,000. E-mail savings totaled at least $135,000.

The end result, according to Nucleus, was ROI of 978 percent, with payback of the initial investment in just seven weeks.

Returning the Right Answers

In a nutshell, to provide effective online self-service, companies must get into their customers' heads. Rather than forcing visitors to browse through numerous pages to find answers to their questions, Web sites must make it easy for customers to ask questions and locate the right answers, said Michael Murphy, CEO of InQuira, which provides technology to enable natural-language searches on Web sites.

Unsurprisingly, Murphy told CRM Buyer: "The key ingredient that's been holding self-service technology back is the language the customer speaks. You've got to have a dictionary that truly understands language. Rather than matching words, you have to match concepts."

InQuira, which has been named by Jupiter Research as the top vendor in the space, boasts an 85 percent accuracy rate for search responses. This can create immediate positive ROI for clients, some of which spend up to US$40 to answer each customer call, Murphy said.

Even more valuable is the ability to drive revenue, he added. Murphy cited client Bank of America. When a customer searches for information on the bank's Web site, they receive answers to their questions -- as well as information on relevant financial products, which can be cross-sold and up-sold on the site.

Serving a Captive Audience

An end-customer focus is not the only manifestation of this type of technology. Some of the most common self-service solutions are targeted toward corporate employees, who often are expected to manage their vacation, benefits and other previously paperwork-intensive matters online.

Linda Miller, vice president of marketing at HR and payroll software provider Ultimate Software, told CRM Buyer that human resources self-service solutions can have an immediate impact on the bottom line for companies of all sizes. Currently, she said, many mid-size and large businesses rely on service bureaus to cut paychecks for employees. Such services can cost more each month than the cost of a Web-enabled self-service solution, which includes payroll services.

With self-service, human resource departments can push the responsibility for paperwork out to managers and front-line employees. Almost all information can be completed online, drastically reducing the error rate, according to Miller.

"In addition to productivity gains, companies can greatly reduce the hard costs associated with printing and distribution of forms, employee directories and manuals that would normally be printed and sent out," she said.

Ultimate Software charges client companies $5 per employee per month for its human resources system, which includes payroll, human resources functions and Web-based self-service applications.

The Price of Poor Self-Service

The stakes are high when implementing self-service. Lousy applications can generate more than ill-will. In some cases, they can send customers packing to competitors.

For example, Bill Jelen has made a business out of what he describes as someone else's poor service. On his Web site, mrexcel.com, Jelen provides in-depth technical support for users of Microsoft's (Nasdaq: MSFT) Excel software.

"I'm essentially stealing money from Microsoft, because they don't want to deal with the hassle of providing support," Jelen said.

Microsoft offers Excel support for $35 per call, with the price skyrocketing to $199 per call for difficult questions regarding use of Visual Basic programming modules within the software. Such high prices, combined with the difficulty of searching Microsoft's Excel bulletin board, have allowed Jelen to launch a consulting firm centered on answering questions, he said.

It seems clear that self-service is a double-edged sword. It can produce stunning ROI, but if not properly implemented, it also can anger customers and prove to be nothing more than a money sink. To ensure they benefit rather than suffer from this promising technology, IT executives should plan carefully and roll out self-service in small, manageable chunks, rather than in a sweeping customer-service overhaul.