Does Outsourcing affect Customer Loyalty?

A recent study by researchers at University of Michigan and University of Richmond shows that outsourcing/offshoring certain aspects of your business can affect customer loyalty. The research, titled “Does Offshoring Impact Customer Satisfaction?” and posted on the Social Science Research Network, points to collected data that shows:

offshoring of front office processes that interface directly with the customer has a negative association with customer satisfaction, customer loyalty, perceived quality and customer expectations. On the other hand, we find that offshoring back office processes that do not interface directly with the customer has a positive association with customer loyalty.

Well…I could have told you that myself…and many of you probably could have guessed this was the case.  It is good to have some academic research to back up my ‘gut’ feeling.  I’m still reading through the article, but so far the research methods seem fair and sound.

Hat tip to ArsTechnica for the link to this research.

BTW – You can download the paper in its entirety at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1010457

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Web Support Agent
12 years ago

Great!very interesting post.. If you have a great customer service representatives with good communication and English skills, customer loyalty would not be affected of this issue.

Ria Garcia
11 years ago

In the Philippines outsourcing is now becoming a major trendsetter in outsourcing and yes they are effective as well.

webmin
11 years ago

Though outsourcing / offshoring affects certain aspects of a customers loyalty it helps other countries with their business processes.

TryBPO Outsourcing
11 years ago

This is a wonderfully applicable study we going to forward to a client of ours. Here's the scenario: A long-standing customer of ours currently has a very large portion of their back-office processes through our outsourcing company. As they plan for expansion, they were considering moving more of their customer facing positions overseas as well. While we explained this is something we could handle for them, they may lose their cost savings through lost loyalty and repeat business. Chat support and email support can be effective, but direct phone contact via sales or service with US based clients can still… Read more »

Philam
10 years ago

I agree with web support agent comment. Customer loyalty will remain the same to your company if you have good representatives whom with excellent skills in handling customers/clients. Reps should have high communication and English skills.

James
9 years ago

I strongly believe that off shoring is the best alternative if there is an experienced bunch of professionals ready to tackle the customer problems.
Great post.

conorology
conorology
8 years ago

Personally, I think it does affect customer loyalty. Outsourcing, especially in the Philippines has a good effect on the company. I don’t mean to be bias, but most Filipino employees are patient, honest and is very willing to do their job well.

But what I can say for employers who are thinking of outsourcing, that to be able to gain your staff’s respect, you should make sure you’re all accountable. Make sure you’re just as accountable as everyone else. I’ve recently bumped into an article that I think would give you additional info. <a href=”http://www.timedoctor.com/biz3.0/why-100k-developers-are-dead/”><b>Click Here!</b></a>

🙂

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