How the hell did customer service get so bad?

They used to say the British didn’t complain. We were known for our sense of reserve. But the apparent death of customer service in the UK has moved the national conversation on from talking about the weather. Today, we’re more likely to bond over our gripes with banks, energy companies, online delivery firms, airlines, car insurers, retailers, dodgy broadband providers, the taxman . . . Everyone, it seems, has a problem that urgently needs resolving.

If you have received very poor levels of service from any of the above, your gateway to obtaining redress will almost certainly involve interacting with a digital chatbot or automated phone line that fails to recognise your accent.

It: “What are you trying to do today?”
Me: “Speak to a human being who cares.”
It: “I’m sorry, I don’t understand.”

Sound familiar?

Data from multiple consumer and regulatory bodies shows that this digital fobbing-off on a grand scale has coincided with rising complaints and plunging levels of customer satisfaction. It cannot be a coincidence. But could artificial intelligence improve this level of dumb insolence? Or, as we move further into the digital era, will customer-service levels diminish even more?

Having experienced the quickest and most emphatic “yes” when I pitched this piece, I sensed I was on to something. Everyone I spoke to in our offices is fighting some kind of private war with a barely contactable company. And as the FT’s consumer editor, I felt it was my duty to override the chatbots and investigate what was really going on.

My first port of call was the Institute for Customer Service, an independent professional body that campaigns to raise standards. I was not surprised that the ICS’s latest data shows a record plunge to a nine-year low in customer-satisfaction levels across all sectors of the UK economy.

What’s going wrong? It’s not quite as straightforward as blaming the fact that everything’s gone digital, says chief executive Jo Causon. “In a cost of living crisis, customer problems are more complex and organisations need staff who are trained to deal with a wider range of issues,” she says. “Yet every organisation I speak to is struggling to recruit and retain the right people.”

If firms want to cut costs by using chatbots or other technology to filter out simpler queries, the staff they do employ need to be capable of solving increasingly complex issues. After wasting time exhausting a chatbot’s doom loop of questions, the sight of three flashing dots usually signifies that your problem has been shunted up the chain to an actual person. Yet how often do you get through to this person only to find that they stick rigidly to a script?

At the same time, Causon believes we are now more likely to complain. Every penny counts for cash-strapped consumers, and the mass cancellation of flights and holidays during the pandemic educated us all about our rights, such as Section 75 refunds on credit cards. If we don’t get value for money or the level of service we believe we have paid for, we’re now prepared to get very un-British about it indeed.

Of course, technology is not all bad. It’s easy to forget the transformative convenience of banking apps, online shopping, takeaway food delivery and taxi ordering. It’s notable that Ocado and digital banks First Direct and Starling are some of the highest-ranked businesses by their customers in the ICS’s UK Customer Satisfaction Index. “Technology can be a force for good if it’s designed with the customer in mind, rather than designed by the tech team to cut out costs,” Causon says.

But it’s also a case of horses for courses. Nationwide Building Society has been attracting customers by pledging to keep branches open where rivals are shutting them down at a rate of knots, contributing to its high ranking.

So who are the worst offenders? According to the ICS, it’s the energy companies. This tallies with separate data from Which?, the consumer campaign group, that also found the energy sector had the highest number of dissatisfied customers, followed by telecoms.

A total of £2.6bn in energy debt is owed by more than five million customers in the UK, as prices rise and people’s ability to pay falls, squeezed by the cost of living crisis. This is a problem too big for a contact centre to resolve; many believe a social tariff, offering affordable rates to those on low incomes, is the only long-term solution. “People are in a desperate state financially. If they can’t pay their energy bills, they probably can’t pay their rent,” says Causon. Nevertheless, some energy firms rank much more highly for customer service than others. She points to Octopus, which trains its staff to signpost other forms of help for customers. “It’s a wider conversation about helping a customer rather than focusing on the transactional element,” she says. A string of awards show that customers love the company, but few firms in the wider utilities sector are prepared to invest or train staff in this way.

Organisations that enjoy an effective monopoly appear to have the least incentive to improve, knowing full well that unhappy customers cannot vote with their feet. For example, it’s not possible to switch water companies — who you get depends on your postcode. A train company might be the only operator that can take you from A to B (though some days you might be quicker walking). And as for HM Revenue & Customs, it’s not like you can go on the Money Saving Expert site and switch to an alternative, more efficient tax authority that doesn’t close its telephone helplines.

In February this year, MPs rebuked HMRC as customer service levels hit an “all-time low”, warning that it was “struggling to cope” with rising numbers of taxpayers and increases in complexity. With public services in Britain seemingly grinding to a halt, it would surely make sense to properly fund the one department attempting to collect the money needed to pay for all of the others?

The problem is not only that we’re getting poor service, it’s that it has also become harder to complain about it. Businesses are taking longer than ever to resolve complaints, with half of customers who experienced a problem telling the ICS it took longer than expected to resolve, up 11 percentage points on the previous year. Complex problems require more lengthy conversations, yet staff shortages mean we’re having to wait longer and longer to get through to the only people capable of resolving them.

Think of the last time you received great customer service. Might it have been from an independent retailer? In London, the working-from-home boom has invigorated urban neighbourhoods. I am a proud customer of my local indie bookshop, coffee shop, corner shop, bottle shop, deli and numerous cafés and restaurants.

Yes, in some cases I could get what they are selling for cheaper elsewhere. But nothing unfastens the purse strings faster than the feeling of walking into an establishment in which you are known and warmly welcomed. Owner-managers are also closer to their customers, so they can learn from them and respond to their needs more quickly. But when you scale up a business, the distance between customers and those in charge increases.

The article I wrote last year that elicited the most emails and comments from the best customers of all — our dearly beloved FT readers — was a column titled “Are you an ex-John Lewis customer?” The embattled retailer has just returned to profit after three years of losses, and is something of a special case. Both John Lewis and its sibling company Waitrose have long been famed for their higher than usual level of customer care. This expectation makes it all the more jarring if we find that standards are slipping — in my case, being told by the customer services desk at my local Waitrose that I couldn’t have a trolley as I lacked a pound coin to release one. When I threatened to complete my £200 shop for a family party in the M&S Simply Food nearby, a plastic token was swiftly produced.

Unlike utilities, retail is a sector where there are plenty of alternatives, and the dip in profitability at John Lewis shows it has a lot of work to do to win customers back. While it still features in the ICS’s top 10, the partnership is said to be considering cutting 11,000 roles over the next five years as part of a wider turnaround plan. Not paying a bonus to its staff this year will also rankle. As the people providing the service to customers, much of our satisfaction rests on theirs.

Up and down the high street, if shoppers do venture into a store, it’s getting harder to find decent service. Many chains have morphed into glorified online fulfilment centres, devoid of staff capable of making decisions. “When organisations look at reducing their costs, people come into that pretty quickly,” says Richard Hyman, the veteran sector analyst and partner at Thought Provoking Consulting. There is, he says, “serious oversupply” in the retail market — too many businesses vying for our custom — and, as recent retail collapses have demonstrated, not enough consumer spending to sustain them all. Yet separate ICS data shows that over 30 per cent of people would pay more for a product or service if they received exceptional customer care.

“It takes huge guts, vision and financial strength to say to the market, ‘We’re going to make our costs bigger next year’, but if you receive great customer service, you go back,” Hyman says. “Retailers have to rediscover the enormous benefits of that virtuous circle.” He points to the M&S turnaround as one successful example: “After years of cost cutting, cheaper fabrics and poor design, they invested in the product.”

Others are also bucking the trend. Booths, which is often referred to as the “Waitrose of the North”, has now, in my humble opinion, surpassed that distinction by ripping out self-checkouts from the majority of its supermarkets, a decision it made after . . . guess what? Listening to feedback from customers.

Last week, I played grocery Tetris in Sainsbury’s, balancing items on a too-small and oversensitive oblong metal scale until everything fell off. An assistant, who had been standing by watching me struggle, stepped forward. “Can I not just pay at the checkout?” I wailed. “We can only do that if customers ask,” he replied. Lesson learnt.

Scores of readers who wrote to me about John Lewis made similar points about British Airways. It was once a beacon of quality, but many readers feel it has become just another budget airline. I had a run-in with BA last year when I found I couldn’t spend a pandemic-issued voucher online. Having battled to obtain it, I wasn’t going to let its system defeat me. So I called up and booked our flights, only to be slapped with a telephone booking surcharge that wiped out the value of the voucher. The overseas call-centre operative and his manager doggedly stuck to the script: refunding this charge was impossible. Recognising the futility of losing my temper with them, I put the phone down and offloaded on to my husband.

I offloaded on to him again recently when BA’s parent company IAG revealed record annual profits.

When levels of service go down, volumes of complaints go up. But the next battle that consumers face is getting firms to address and respond to these complaints (let alone resolve what has actually gone wrong). It often seems as though they are hoping that if they ignore us for long enough, we will give up and go away.

One common problem is that firms don’t actually know what we’re so angry about: many of them are not directly exposed to our complaints, which are instead fed back via a third-party contractor who may not be completely honest with the truth. “Complaints statistics are very easy to fiddle,” says Martyn James, the consumer-rights expert. You might think you’re hanging on the phone to complain, he says, but unless you make it clear that you wish to raise an official complaint, it may not be counted as such.

Why? Legally, firms have to respond to official complaints within a set time period. But if your complaint is not officially registered as one, they can drag their feet. He refers to this modern-day phenomenon as “the boomerang complaint”. “A month goes by, nothing’s sorted out, so you have to call up and start all over again,” James says. Consumers tell him that, too often, call centres have no record of their original complaint.

This is why I like to put things in writing, but that is becoming increasingly difficult. “Finding the ‘Contact Us’ page on most websites takes five to 10 clicks before you even get close,” James says. Googling the name of a brand and “customer service” is invariably faster, but a webchat or an automated phone line, rather than an email address, is usually the portal. In James’s experience, “every single sector has reduced its capacity for email contact”. Even if a firm emails you, it will probably come from an address that doesn’t accept replies. Emailing complaints would be more convenient and efficient for the customer, but less so for the business that has to read, reply and, one suspects, register them.

Our time does not cost them money. So we are forced to exhaust the automated process, then doggedly hang on to speak to a remote operator under huge pressure to pick up a certain number of calls per hour and who may or may not log our interaction as a complaint. Causon does not doubt that this kind of statistical massaging occurs, but asks: “If an organisation games its scores, then who is it kidding? Why wouldn’t you want to know where the issues and problems are?”

Dissatisfied customers might choose to complain loudly and publicly on the company’s social media feed (I have found this to be very effective), or get the bosses’ contact details from the excellent website ceoemail.com and go straight to the top. If complaints are still not resolved, consumers can recourse to the relevant ombudsman or industry dispute resolution service — if there is one. But the mushrooming number of complaints means a long wait for redress is inevitable. This has been a particular problem in the budget-airlines sector, with consumers forced to resort to the small claims court to get refunds to which they are legally entitled.

Online delivery problems are a complaints category all of their own (if you ever run out of things to talk about on a date, this is a sure-fire winner). James has spoken to people who cancel orders if an email informs them that Evri or Yodel is delivering their parcel, based on previous bad experience. “It sends a message to the retailer,” he says. But part of the problem is that delivery is a service we expect to get for free. If retailers are paying peanuts for parcel delivery, no wonder we complain that the service is rubbish.

As someone who lives on a one-way street on the top floor of a block of flats with a dodgy intercom, online delivery is a total lottery. Instead, I make use of online discount codes and get clothes delivered to the store, then go there to try them on in a proper fitting room, where I can get a refund or alternative size sorted swiftly.

The best service I have received on the high street is from Hobbs. It’s one of the few shops where sales staff have the confidence to say, “That style doesn’t suit you as well as this one.” How ironic that telling me not to buy something is the reason I keep going back.

Whether you’re buying a dress, doing battle with energy or broadband providers, amending a direct debit or chasing up a missed delivery, one thing is certain: good customer service stands out for its rarity. Plenty of firms get away with providing frankly shocking levels. The question is how to fix this.

Is money the only language that companies understand? Consumer campaigners want regulators to be able to levy much tougher fines on the worst offenders. Investing in better customer service clearly has a cost. But so too does dealing with our complaints in such an inefficient manner. Across all sectors, the monthly cost to UK businesses of the time that employees spend dealing with customer issues is £7.1bn, according to the ICS. If firms started measuring the impact like this, would it strengthen the business case for investing in better service?

Financial-complaints handling is one of the brighter spots in the troubled world of customer service, as regulation is much tighter. The Financial Conduct Authority’s new Consumer Duty is being hailed as a game-changer, raising standards of consumer protection (and jargon removal) across the sector. I never thought I’d say it, but let’s hope other regulators take a leaf out of the FCA’s book.

Nevertheless, the volume of complaints is still high. The UK’s Financial Ombudsman Service expects to receive more than 181,000 consumer complaints in the coming financial year — about 10 per cent more than levels seen in 2022-23.

There is a cost of living impact: the majority of complaints are driven by what it describes as “everyday financial concerns”, including rising interest rates on credit cards and a growing number about being dumped by your bank (we can thank Nigel Farage for that). Yet the share-price collapse brought on by high numbers of client complaints at wealth manager SJP shows that some of the richest consumers are also taking umbrage at the poor levels of service they have received from financial advisers, and rightly so.

Vehicle-related complaints currently make up a quarter of cases that the FOS is investigating. Whether you drive a Beamer or a banger, the soaring cost of motor insurance may have caused you to gasp when your policy came up for renewal. I lost a day of my life searching for cheaper cover. But you never find out how good your insurer really is until you need to make a claim. Worryingly, the FOS data shows that drivers who have suffered a prang are kicking up a fuss about valuation disputes and delays in payouts.

Complaints about car finance have hit a five-year high, and are likely to accelerate now the financial regulator is investigating how commission was applied to car-finance contracts going back to 2007. Money Saving Expert’s founder Martin Lewis reckons this could be a mis-selling scandal on the scale of payment protection insurance (PPI), reporting that more than one million drivers have already downloaded a template complaint letter from his website. It gladdens my heart that he’s making it easier for customers to complain directly, rather than lose a chunk of their payout to the growing number of claims-management companies touting for trade. Incredibly, there is now a separate ombudsman to handle complaints about them.

Better regulation is and will continue to be part of the solution, but it is also in companies’ interests to be proactive in addressing the problem of bad customer service. Rather than hire more people to deal with questions and complaints, investing in artificial intelligence could prove a more attractive option over the longer term. But given our experience with chatbots, will AI be any better?

“In essence, understanding your customer is no different than in the 1950s. There are just different methods and means,” Causon says. “Back then, you might see your customer daily. The challenge for organisations now is they’re not as close as that. But AI should mean that firms get better at understanding customer needs and personalising services to a greater degree.”

AI-powered systems should enable customer-service agents to have the relevant information at their fingertips faster, and result in better conversations. Yet James fears systems will only be as good as the quality of the data they’re running off, and that poor data will result in one-sided communications devoid of human logic. “Right now, the vast majority of complaints that require investigation stem from logic gaps, where the business fails to understand what the customer’s problem actually is,” he says.

Still, Causon is aware that firms are already using AI in ways we might not realise, such as monitoring levels of emotion or raised voices on contact-centre calls — a marker that could prompt a higher-level supervisor to start listening in.

And chatbots are badly named. In reality, they are typebots. In the future, could we speak our query to an online customer-service avatar? This would help people who struggle to type quickly, but public acceptance will rest on whether such innovations make people’s lives easier. “What AI can’t do — currently — is replace the sentiment,” Causon adds. “If organisations don’t get it right, there’s a risk it could feel creepy and inauthentic.”

If AI currently has limitations, and regulators won’t force firms to invest in treating customers better, could the shareholders be persuaded? As well as estimating the huge cost of rectifying complaints, the ICS has also had a stab at calculating the “return on investment” that better customer service produces. Put simply, there is evidence that investing in customer service produces outsized returns.

Based on data it has collected between 2017 and 2023, firms with customer-satisfaction scores at least one point higher than their sector average achieved average compound-revenue growth of 7.4 per cent. This compared to flat revenue growth for firms with average satisfaction scores at least one point below average. The impact was even greater on EBITDA (earnings before interest, taxes, depreciation and amortisation — a measure of profits), which averaged just over 20 per cent at the leading firms — twice the rate of those with below-average scores.

There is also evidence that happy staff equal happier customers. In its rankings, every 1 per cent improvement in employee engagement generated a 0.4 per cent increase in customer satisfaction. “If you look at the top firms in our rankings, employee satisfaction is twice the average level,” Causon says. You would think this would send a signal to their competitors, but sadly the highest-ranking firms are all “pulling away from the pack”.

As I think back to the origins of service culture, to the close relationship between the customer spending money and the independent shopkeeper who has hit on a formula that keeps people coming back to spend more, I wonder, “How hard can it be?”

Bosses cannot and should not rely on technology or statistics to do the job of telling them about the customer experience. They should regularly be “on the shop floor” (or in the contact centre or with the tech team) listening to staff and customers, asking questions and understanding precisely where they’re able to delight us, and frustrate us. In an online world, the need to make these human connections becomes more vital.

With years of high inflation forcing consumers to buy less stuff, getting value for money has never been more important. But this does not mean a race to the bottom with pricing. A third of customers say they will pay more for better service.

Investing in customer service has proven benefits, but I fear it will take a while for the penny to drop. The best organisations will have someone on the board whose job title is customer service, but the ones who really need to improve are unlikely to do so. So let’s all resolve to make shoddy service a board-level problem by being more active with our custom.

Receive service you don’t rate? Complain (making sure it is registered properly!) and, if it’s not resolved to your satisfaction, make good on your threat to take your business elsewhere. But if you have received good service, I would encourage you to spread the joy and tell other people about it. In the deluge of complaints, one imagines embattled CEOs would be delighted to receive a letter, email, online review or social media post praising their team for doing something right. Judging by the existential threat facing many customer-facing roles in the service industry, this could ensure their future preservation. We’ve learnt to share our frustrations, but sharing our praise is also key to redressing the balance.

Claer Barrett is the FT’s consumer editor

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