Botched AI transformations lead to customer experience decline

14 November 2023 5 min. read

UK brands are backing AI to help boost flagging customer satisfaction rates – but may actually be making things worse for themselves. However, financial services operators also show that there could still be a future for AI in customer services – with the highest rates of investment and use cases in AI at present, and also hosting higher average rates of satisfaction.

In the last 18 months, the hype surrounding the “game-changing tool for businesses” of AI has reached feverish new levels. The reality has often failed to live up to that grand billing, though, with an estimated 85% of AI-related business projects failing. As with cryptocurrency, blockchain, the metaverse and many other eternally nascent ‘breakthrough technologies’, proponents of AI often argue these failures are simply because businesses are not ‘finding the right use cases’ – but a new study from KPMG suggests that firms have finally settled on at least one area where it can play a key role in improving performance.

AI has increasingly been championed as the future of customer services work. At a time when consumer satisfaction is falling fast amid a sluggish economy, being able to more quickly serve consumers or forward issues to relevant departments via technologies, companies looking to make the most of their existing customers see AI as a huge opportunity. The reality may be much less straight-forward than that, though.

Botched AI transformations lead to customer experience decline

Source: KPMG

According to KPMG, 2023 saw the fastest collapse in ‘customer experience excellence’ (or how happy consumers are with the service they receive from companies they spend money with) in a decade. While 2017’s average score of 7.08 out of 10 for customer satisfaction remains the lowest point of the last 10 years, the 3.4% fall from the previous year is less severe than the 3.8% decline from 2022’s satisfaction figures. Some operators might see that as a clear case for change – and sinking investment into AI. But that would be to overlook a number of key factors at play.

The UK research examined overall experience received from the 376 UK organisations, polling 13,000 consumers in the process. Looking more closely at those results, KPMG found that the decline in satisfaction had partially been driven by a marked fall in customers feeling they had been dealt with empathetically. To some degree, the researchers contended that this was an unavoidable consequence of the extra care exhibited for customers during the pandemic, now reverting to ‘business as usual’. But there is a further reason. As much as it is still talked about as some starry-eyed ‘future’ technology is already being deployed as a substitute for human interaction.

KPMG’s study explains that customers have more regularly “been deflected into low-cost channels, whether emotionally they require human contact or not”. In many cases, while firms assert that investing in technology is to help customers get the services they expect and need, in many cases, technology and AI are doing the opposite – “putting a barrier between the customer and the help they were seeking”. For example, the initial implementations of bots, even equipped with machine learning, routinely leave customers underwhelmed and frustrated – contributing to an overall decline in customer sentiment hitting brands’ perceived ability to empathise with customers hit hardest, at a drop of -6.4%. Botched AI transformations lead to customer experience decline

Source: KPMG

This backs previous research from Capterra UK, which warned at the end of 2022 that treating AI as a panacea for customer service transformation would be a mistake. While allowing companies to reduce costs by downsizing headcounts and undercutting the pay of remaining call-centre staff, customers were not shy in rubbishing the technology – with more than half saying that chatbots and AI-powered customer services tools “never understand” requests or problems. KPMG’s study further shows the dangers of this, finding that net-promoter scores may crash on this front – making it even harder for them to retain or attract customers amid the cost-of-living crisis, as they continue to have to cut back on non-essential spending.

In spite of this, several leading industries seem more determined than ever to sink funds into AI customer service offerings. At present, the financial services sector is leading on AI adoption, with KPMG putting together an index scoring industries for their maturity across six pillars. Averaging 3.8 out of five, the financial sector was ranked top for investing in AI, as well as using it for projects and data management relating to customers. Showing that there are ways of doing this that don’t necessarily irk customers, the top performing CEE firm, with a score of 8.16, in KPMG’s study was first direct – whose ‘Dot the Bot’ received as positive feedback as its human co-workers.

Examining what might set financial services operators apart, Marty Herbert, head of experience transformation at KPMG UK, said, “Given the ongoing cost-of-living crisis, retaining customers has become an even greater challenge for brands, as consumers are compelled to cut back on spending. The clear winners in this year’s report are financial services firms who have offered customers support and reliability during these challenging times. Too often, AI deployment is erroneously seen as the remit of solely the IT function. If used properly, AI offers a clear path to increasing customer loyalty.”