In American society, the service sector, which generally produces intangible rather than tangible goods, rules the U.S. economy and accounts for about 80 percent of the nation’s gross domestic product. Service is in the eye of the beholder, and Americans have spoken loudly concerning their level of satisfaction with “service” in the U.S. economy.

For example, the American Customer Satisfaction Index (ACSI) (comprising a cross-section of U.S. industries), based in the Ross School of Business, University of Michigan-Ann Arbor, tracks quarterly the overall satisfaction level of company performance by U.S. customers (ranking it from a low of 0 to a high of 100). Since recording a survey result of 77.0 in the third quarter of 2018, U.S. customer satisfaction has declined continuously to 73.6 in the first quarter of 2021, a ranking not surveyed by the ACSI since 2005. Interestingly, according to ACSI, “manufactured goods tend to score higher for customer satisfaction than do services.  … Typically, the more service required, the lower the customer satisfaction.”

In today’s digitalized global economy, companies are using technology to attract customer attention. Servion Global Solutions, a customer experience management firm, forecasts that by 2025 as many as 95 percent of all customer interactions will be through channels supported by artificial intelligence (AI) technology. Why the nearly unanimous embrace of AI? Ostensibly to improve positive customer experiences and influence repeat sales of their product or service brand.

In February 2019, cognilytica, an AI, machine learning, and cognitive technologies market research and intelligence firm, reported 62 percent of businesses were using AI in customer service operations. With the emergence of the COVID-19 pandemic in 2020 and the resulting shut-down of many in-person commercial experiences, the acceleration toward AI adoption (or at least early-stage, narrow AI) has presumptively intensified among those American businesses concerned with interacting with their customer base during the pandemic.

Yet what if the increased usage of firm-level AI is not to enhance the customer experience – but to discourage negative customer interaction while reducing company labor expenses? Such discouraging forms of customer service practice could include a customer being placed in an endless, sequential AI loop of options; or the call volume is so high that the customer is advised to call back another time to speak to a company representative: or the ability to speak to a customer service representative is unavailable.

On the surface, this business behavior toward customers would be contrary to what would occur in a competitive business environment, as customers would explore switching their purchasing allegiance to another product or service brand. But in a U.S. economy of continuing market consolidation (and alleged reduced competition) across multiple goods and services industries, certain tacit industry business practices can become the new normal for what is deemed the standard for acceptable industry-level customer satisfaction.

Despite the optimism driving the adoption of AI into service delivery, studies have found cautionary patterns. Consumers make several sacrifices when engaging with AI-enabled services, including lack of human interaction, loss of privacy, loss of control, excess time consumption, and negative feelings of irritation, all of which can drive negative effects of AI-enabled service experiences. Similarly, research finds that in the hospitality industry, AI-enabled digital assistance, voice-activated services, and automatic data processing can have negative effects on customer loyalty, whereas human dimensions of employee service quality have positive effects on the same.

Some firms may also be more deliberate and ambitious about incorporating AI into service delivery due to the Pratfall Effect, where robots that commit errors are viewed as more attractive than ones that do not, (and consequently appear more distant). This may support the notion of enhancing anthropomorphism (or human-like traits) in AI-driven service deliveries. However, even anthropomorphism in chatbots has been found to backfire on enhancing satisfaction when customers are angry.

American business must recognize that customer satisfaction can be enhanced by certain applications of AI to the consumer experience, but still needs to be tempered with an understanding that not all customer solutions are applicable to the existing level of AI technical sophistication – or to customer time constraints. When it comes to certain customer problems, their complexity requires the human component to resolve the issues. Inevitably, even in less competitive industries, businesses adept at understanding and meeting their customers’ needs (in a timely fashion) will be the companies that will retain their customers in an AI customer service environment.