Report: Online Customer Service Tops IT Shopping List

Corporations will spend more to upgrade online customer service than on any other information technology effort in the next two years, according to a report released by Jupiter Media Metrix (Nasdaq: JMXI).

Twenty-six percent of corporations said they plan to spend US$500,000 or more on customer relationship management (CRM). This spending surge seems logical, in light of Jupiter's prediction that the total number of online customer service contacts will explode from 870 million in 2001 to 4.7 billion by 2006.

"The overarching theme is the desire of businesses to cost-effectively improve customer satisfaction," Jupiter senior analyst David Daniels said.

Barrier to Growth

Past studies have found that technical shortcomings hampered online customer service -- and dampened the growth of e-commerce.

For example, an earlier study by the Yankee Group found that customer service efforts were largely haphazard, mainly because most software offerings at the time did not address the total customer experience.

In fact, Jupiter said, spending alone still is no guarantee of good online customer service.

"Businesses must realize that investing in CRM technology does not alone ensure that they will be able to implement the organizational changes needed to gain a competitive advantage," Daniels said. He recommended that companies appoint a "CRM guru" to oversee all customer relationship efforts.

While just 2 percent of all customer inquiries were handled on the Web in 2001, nearly 10 percent will take place online by 2006, according to Jupiter.

Analyze This

Spending on customer contact centers will begin to slow as the market matures over the next three to four years, the research firm found. Meanwhile, spending on analytical programs designed to help predict customer behavior will increase rapidly and will make up half of all CRM spending by 2006.

Financial services firms, which collectively spent more than $3 billion on customer service improvements in 2001, will be the heaviest spenders in the near future. In fact, one-quarter of all financial services firms polled by Jupiter said they plan to spend $1.5 million or more in the next two years.

Retail companies, which follow closely on the heels of financial services firms, spent $1.7 billion in 2001 and intend to spend more than $3 billion by 2006. Telecommunications firms will be the third-place spenders, according to Jupiter.

"Many companies are still missing opportunities to capture their intellectual property, such as product information and answers to routine service questions, and automate the sharing of it with customers," Daniels said.

Money Isn't Everything

One danger, Jupiter said, is that companies may focus too heavily on the cost savings associated with online customer service.

Doing so "will not ultimately improve customer satisfaction," the research firm noted. On the other hand, efforts aimed at collecting and analyzing customer actions will enhance the customer experience.