Analyzing the Impact of Customer Service Outsourcing on Quality

This essay, a literature review, investigates the impact of outsourcing customer services on service quality and customer satisfaction. It begins with an introduction to the topic, highlighting the growing trend of outsourcing in customer service and its implications. The literature review explores key concepts like Customer Relationship Management (CRM), the SERVQUAL model, and the relationship between customer service and satisfaction. It delves into the advantages and risks associated with outsourcing, including cost reduction, scalability, and potential issues like miscommunication and loss of quality control. The essay examines the impact on corporate brand image and provides examples from different industries, such as hotels and call centers. The conclusion summarizes the key findings, and the recommendations suggest strategies for mitigating the risks and maximizing the benefits of outsourcing customer services. The essay is supported by a comprehensive list of references.

Student Name
INSTITUTIONAL AFFILIATION(S)
QUALITY AND CUSTOMER
SERVICES

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Outsourcing customer services impacts service quality and customer satisfaction
Abstract
This paper will resolve the challenge possessed by customer services providing firms
by studying how service quality and customer satisfaction gets impacted due to outsourcing
customer services. This paper proposes to make an analysis of current literature comprising
customer service features and outsourcing functions that are undesirably allied with customer
satisfaction. The literature review will be conducted after collecting data from scholarly
articles following which a series of recommendations are made before the conclusion. This
paper will assist customer service providing companies while implementing outsourcing
customer services functions to understand the advantages and risks behind it.

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Table of Contents
Introduction................................................................................................................................3
Literature review........................................................................................................................3
Conclusion..................................................................................................................................7
Recommendations......................................................................................................................7
References..................................................................................................................................9

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Introduction
Outsourcing customer services is one key management strategy which helps
organization gain competitiveness by allowing them to focus upon key areas and capabilities.
Since more companies are considering superior quality in their customer services,
outsourcing is gaining much prominence presently. It is apparent that to remain competitive,
satisfying customers is very important which may even go beyond expectations. Such trends
have been seen in many national and international firms where they are putting in more effort
to outsource their customer services to gain customer satisfaction and enhanced service
quality ( Ahn, Kim, Park, Choo, & Choi, 2011). However, in literature, such a trend is
attributed as a dislike among customers due to reasons like cultural acceptance, technological
gaps, and difficulty in understanding by few customers that leads to reduced customer
satisfaction.
Literature review
Customer relationship management (CRM) in firms requires integrating marketing
capabilities and cross-functional information technology including activities that can
facilitate or enhance the sale of customer services. CRM further promotes customer retention,
reduced customer acquisition costs and creating opportunities for the firms due to customer-
focused innovations. Therefore, customer service centers handling product inquiry and post-
purchase service through email, phone, chat or website including processes related to
collection, interpretation, evaluation, and diffusion of customer information. Customer
service companies respond to web-based inquires inbound calls and provide customers with
outbound calls and messages for making direct marketing and providing quality customer
service (Whitaker, Krishnan, Fornell, & Morgeson, 2019). According to Aftab, Sarwar,

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Sultan, & Qadeer (2016), “Service quality (SQ) is defined as the difference between
expectations of customers and perception regarding services provided by the firms" (p. 162).
Given such premises, it can be said that customer service and customer satisfaction are
interrelated. Using the SERVQUAL model for assessing customer perception, five key
dimensions related to customer service quality can be identified including responsiveness,
tangibles, reliability, empathy, and assurance. This is the reason maintaining quality in
customer service has become an integral part of many organizations and is considered as an
effective revenue system.
Customer satisfaction significance has been cited as an important factor in literature
especially for firms that deal in the customer service industry. Enhanced customer
satisfaction has a positive impact on the firm's profitability. For instance, if a customer feels
that the service provided was good, he/she will typically inform others to use that service
providing company. Therefore, many firms implement various customer satisfaction
programs which helps them in measuring and tracking customer satisfaction, developing
organizational strengths and determining specific performance aspects that increase customer
loyalty. However, traditional customer satisfaction measuring programs may not prove
adequate for service providing companies due to complaints made promptly while using the
service, or dissatisfied customers complaints not reaching top executives at all. Such
communication gaps result in a selective feedback process within the firms that makes it
necessary for management to provide a consistent customer satisfaction indicator (Ilieska,
2013). Arguably, Nasr, Burton, Gruber, & Kitshoff (2014) states that because of dialogic and
direct interaction made between customers and service companies, the dynamic nature of
services proves to be substantial for the companies. Service entities include organizations,
employees, offerings, and processes whereas consumer entities include collectiveness,
ecosystem, and individuals. Thereby, whenever a consumer entity communicates with any

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service entity, a value-creation is established in the process where potential well-being is
required by both the entities such as satisfaction, respect, happiness, power, and quality.
Outsourcing, on the other hand, is described as a practice in which organizational
activities are transferred to third-party service providers within or outside the country.
Outsourcing is an old phenomenon through which many firms strategize for bringing down
business operations costs ( Iqbal & Dad, 2013). Furthermore, information technology has
made many customer service firms conduct businesses globally in a speedy way. Although
low-cost locations often attract outsourcing, it can be noted that it brings additional issues and
risks to the service quality which necessitates managers to enhance their observation skills to
make a fit between organizational requirements and service provided through outsourcing
activities. Many outsourcing customer service-related projects fail due to
miscommunications, less involvement by service providers and misunderstanding of key
terms that impact the business environment adversely. For example, a peculiar service
industry, call-center is entirely based upon making voice calls to customers on the opposite
side of the calling line. Generally, it is seen that customers show less satisfaction when they
receive calls form service centers other than traditional face to face encounters or brick n'
mortar ( Chicu, Pàmies, Ryan, & Cross, 2019).
The strategic reason service providing companies outsource includes scalable staffing
especially when the economic position of the company does not allow hiring full-time
employees or demand and supply remains below the breakeven point. However, literature
states that outsourcing enables job cutting within the firms and subsequently reduces skilled
staff due to which the economy becomes more robust and critical. Further, if the outsourcing
agents provide undesirable services that may cause unsatisfactory results impacts the overall
organizational image publicly. The reasons behind such failures include lack of expertise or
knowledge, particularly tacit knowledge about customers' way of speaking and perceptions

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that cannot be avoided by today's businesses. Undoubtedly, outsourcing brings various
advantages to global firms, but in the customer service industry, it proves to be regretting due
to loss of quality control measurements of services provided ( Iqbal & Dad, 2013). Corporate
brand image is another factor that is highly impacted by outsourcing decisions taken by
customer services providing firms. According to Wamoto (2012) brand image in service
providing companies refers to anything such as a corporate name or perception held by the
customer's mind. Since corporate brands are regarded as intangible assets, it is difficult to
imitate and remains indifferent from other brand values which reveals that a positive brand
image not only enhances business competition but also boosts customers to make
repurchases.
A study made by Espino-Rodríguez & Ramírez-Fierro (2018) on outsourcing
customer services in the hotel industry finds that outsourcing provides hotels with financial
gains and productivity by allowing them to focus on core business strategies and latest
technologies. Conventionally, outsourcing is viewed as a contractual agreement grounded on
transaction cost theory where the success behind outsourcing is depended upon transaction
attributes. Nevertheless, many hotels experience difficulties while forming and maintaining
such agreements with outsourcing partners majorly due to lack of skills and dedication shown
in tackling intense situations while providing customer service. This further impact customer
satisfaction besides impacting the relationship between hotels and their clients which reveals
how outsourcing can impact hotel businesses negatively concerning quality customer service
provision. Another significant example has been provided by Agburu, Anza, & Iyortsuun
(2017) which reveals that outsourcing customer services can be categorized into a common
type and principle type. The common type includes information technology outsourcing like
call centers and human resources functions whereas principal type denotes traditional
outsourcing such as routine job performed by service providers. Without hiring permanent

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service providers, firms can hire imminent companies that can execute customer service-
related tasks which cannot be done internally by the firms. However, such classifications
remain confusing for many SMEs that result in losing a significant number of customers.
Conclusion
Literature suggests that outsourcing customer services have been blamed for
disregarding, damaging and mistreating customers' well-being in various ways either by
under deserving groups or patronizing quality during service delivery. In this regard,
measuring customer feedback becomes very significant as it can help service providers in
ascertaining the quality of services provided along with determining strategies that can
enhance satisfaction within customers. The literature review documents some key reasons
why companies outsource customer functions such as cost reduction and easy availability of
required resources. However, issues like unsatisfied customer service and degradation in
quality require managers to entail below-provided recommendations which can assist them
while outsourcing their customer service function to third party vendors.
Recommendations
Although outsourcing has many advantages for contemporary firms, the above
literature review finds that for customer service-related companies, it may prove
disadvantageous as it impacts customer satisfaction along with mitigating trust and loyalty
from them (Ilieska, 2013). If outsourcing of customer services is still implemented in the
firms, it must be made only after promoting sufficient training and education to comprehend
the factors behind customer satisfaction alongside understanding organizational objectives.
Secondly, service providing firms need to establish customer satisfaction indicators to
identify whether the services outsourced is performing well or not and if required, can be
changed accordingly. Thirdly, outsourcing processes must be reconsidered when issues are

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exposed to the firms. Increasing the number of staff will prove to be a better option than
managing irregular ones in the outsourcing firms that can impact service delivery
substantially ( Ahn, Kim, Park, Choo, & Choi, 2011).
References

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Aftab, J., Sarwar, H., Sultan, Q.-u.-a., & Qadeer, M. (2016). Importance of Service Quality in
Customer Satisfaction (A Study on Fast Food Restaurants). Entrepreneurship and
Innovation Management Journal, 4(4), 161-171.
Ahn, S., Kim, C., Park, D., Choo, S., & Choi, J. (2011). A case study on the change in
customer satisfaction caused by outsourcing ticket sales. Journal of Advanced
Transportation, 45, 196-206.
Agburu, J. I., Anza, N. C., & Iyortsuun, A. S. (2017). Effect of outsourcing strategies on the
performance of small and medium scale enterprises (SMEs). Journal of Global
Entrepreneurship Research, 7(26).
Chicu, D., Pàmies, M. d., Ryan, G., & Cross, C. (2019). Exploring the influence of the human
factor on customer satisfaction in call centres. Business research Quaterly, 22, 83-95.
Espino-Rodríguez, T. F., & Ramírez-Fierro, J. C. (2018). Outsourcing Performance in Hotels:
Evaluating Partnership Quality. Sustainability, 10, 1-19.
Ilieska, K. (2013). Customer Satisfaction Index – as a Base for Strategic Marketing
Management. TEM Journal, 2(4), 327-331.
Iqbal, Z., & Dad, A. M. (2013). Outsourcing: A Review of Trends, Winners & Losers and
Future Directions. International Journal of Business and Social Science, 4(8), 91-107.
Nasr, L., Burton, J., Gruber, T., & Kitshoff, J. (2014). Exploring the impact of customer
feedback on the well-being of service entities: A TSR perspective. Journal of Service
Management, 25(4), 531-555.
Wamoto, E. (2012). The Role of Business Process Outsourcing on Customer Satisfaction in
Public Universities in Kenya: A Case Study of Laikipia University. International
Journal of Science and Research, 3(10), 2172-2177.

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Whitaker, J., Krishnan, M. S., Fornell, C., & Morgeson, F. (2019). How Does Customer
Service Offshoring Impact Customer Satisfaction? Journal of Computer Information
Systems, 1-40.