Humans versus AI in Customer Service, and Our Reasons for Investing in StellaService

Customer Service

By Hunter Hartwell

Any visit to TechCrunch, VentureBeat, or even the Wall Street Journal will leave the average reader with a sense that AI is taking over a different part of the economy every week. There are an almost endless number of funding press releases and pitch recaps that read “Company XYZ is using AI and machine learning to automate repetitive tasks in the [insert name] industry.”

Within the constant stream of stories on AI, though, one task or function seems to stand out as a particularly frequent target – customer service. A number of early stage companies have set out to eliminate or greatly reduce human involvement in the customer service process using text chat bots, email scripts, and, in more recent years, increasingly lifelike voice assistants.

The reasons for the amount of attention by AI specialists and founders on customer service are varied but straightforward. First, customer service is a fairly large cost center within most consumer-facing businesses, so the value proposition for AI solutions is often a simple cost reduction discussion. Second, most company executives are willing to try new, innovative approaches to customer service based on the fact that consumer complaints rarely stop – essentially, there is a common mindset that things can always be better. Finally, but perhaps most importantly, many customer service interactions can be similar in nature from consumer to consumer or fall into specific categories (e.g. process refunds or exchanges, handle questions about product details, etc.), which give companies confidence that automated solutions, even those with rudimentary AI, can improve customer satisfaction.  A simple example of the latter is the fact that so many people will use the ATM machine at their branch bank to withdraw funds, even when the bank is open, and tellers are available.

While continued innovation and improvements to customer service AI are expected, and the implementation of these technologies will radically alter certain industries, our team at Forté Ventures is betting that the human element of customer service is not going away any time soon. In fact, we’re betting that, as AI solutions continue to be adopted, the role and importance of human customer service professionals will change and become an increasingly important source of differentiation for companies.

The first thing we looked at in taking this position was history. The various reasons that make customer service a ripe target for AI solutions above are not new. In fact, they have been true for several decades and have been the driving factors behind past innovation, namely phone menus and pre-recorded responses. Thus, there’s a clear precedent for automation, albeit different levels of automation than are possible today, falling short of replicating the personal touch necessary to turn a bad ordering process into a great one (here is an entertaining read on Amazon’s quest to tackle one of Alexa’s biggest struggles – small talk). Efforts by companies to reduce the level of human involvement in their customer process have consistently been met in the past by increased time spent by consumers screaming “Operator!” into their phones.

The second thing that we examined was the future of consumer preferences. As consumers spend less and less time making in-person purchasing decisions, whether that be in brick and mortar stores for retail goods or in bank branches for financial products, brands are having to find new ways to differentiate themselves from competitors. One approach to this problem is to create a highly customized customer service experience in which consumers interact with both AI-generated content (e.g., data-driven product recommendations) and expert product advisors, both before and after a purchase. Brands like Warby Parker and Bonobos have perfected this by offering a blend of light-touch online shopping and heavy-touch in-store or over-the-phone experiences. In this scenario, as brands like Warby Parker do the vast majority of their business online, a customer service agent might be the only human point of contact a customer has with the company, and therefore one of its more important points of differentiation – relative to the levels of customer support provided in years gone by. 

A more extreme example of the above ways in which online-first retailers are deploying customer service is Amazon. Prior to their acquisition of Whole Foods and the opening of certain concept book stores and bodegas in recent months, Amazon was a pure online retailer, and an enormous one at that. How did this online behemoth handle what Jeff Bezos called “defects” in his online shopping customer journey? Several thousand customer agents responding to customer complaints via phone, text, and video chat. Amazon has had to deploy a “small army,” as The Seattle Times put it, of front-line customer service professionals to keep its customers happy, and there is no reason to believe that they will be the last to do so in this age of online everything.

Our belief in the increasing value of customer service was a major factor in our decision to invest in Jordy Leiser and his team at StellaService. StellaService started as a company that enabled their customers of all shapes and sizes to measure the performance of their customer service organizations against industry benchmarks through mystery shopping and traditional survey mechanisms. Over the past two years, the company’s current offering, Stella Connect, has created a more direct feedback loop that engages consumers and gathers meaningful, actionable information on their interactions with individual customer service professionals. The information provided is helpful for customers, customer service professionals, managers of customer service teams and the companies they work for, as it has been shown to improve performance, reduce churn, reduce costs and improve customer satisfaction. In short, Stella Connect helps companies run happier and higher performing customer service teams.

On speaking to some of the companies that StellaService has helped in recent years, which fall into a number of industries, from direct-to-consumer e-commerce to financial services to telecommunications, and which, collectively, employ thousands of customer service professionals, the positive changes that they say were enabled by Stella Connect have been impressive. Some companies say that, with Stella Connect, customer service professionals are less likely to burn out and change roles based on more consistent positive feedback gathered from customers. Others cite that managers are able to more effectively train and encourage ongoing improvement of their team members based on specific comments from customers, as opposed to generic survey scores. All companies stated that Stella Connect had improved ongoing engagement with their customers.

As the role of customer service professionals continues to evolve into the handling of more complex tasks that are beyond the current scope of AI (or not an appropriate application of the technology), it will be increasingly challenging to appropriately train and retain talent in this area. We believe that StellaService can play a critical role in helping companies meet that objective.