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Web Extra: Four Arguments Against Outsourcing--and Why They're Wrong
Several of the common concerns about outsourcing providers are unfounded.
For the rest of the September 2001 issue of CRM magazine please click here
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Outsourcing providers are one of the hottest commodities in telemarketing today. The total value of sales generated by outsourcing providers has grown to more than a quarter trillion dollars a year. Still, many remain uneasy about outsourcing. They are hesitant to turn over a telemarketing program, whether it be customer service, claims processing, lead generation, or a retention service to an outside resource.

They're right to be nervous. After all, in many cases, the only direct person-to-person contact a customer may get with your business is with someone in a contact center, and that first impression is laden with huge responsibilities.

Outlined here are four common concerns about outsourcing. While they are all valid, they can be dismissed with a little information.

1. Outsourcing costs too much. Isn't it cheaper to do in-house?

This is a common concern. The owner of a business can balk at paying a Customer Service Representaive (CSR) a substantial hourly fee, especially if they've never met him or her. Add to that the set up fee, and many employers start to look internally for resources they already pay for.

But in reality, it can cost a great deal more to turn your staff into CSRs. While you might save money in the short run, those savings dry up in a New York minute when all the factors are added in. First of all, each rep's workstation will need to come complete with a phone, desk, chair, and the proper software and network access to properly connect with the customer. You will also need to shell out the necessary cash for the necessary conference rooms and break rooms, not to mention the actual salary for the actual employee, plus the health benefits you would not ordinarily pay for when you outsource.

There's more. Since you'll be using your own facility for telemarketing, there's the added cost of office for the office space (several thousand for each CSR), and additional costs per square foot for leaseholder improvements. Where are the savings?

In addition to saving money for the employee's pay and environment, outsourcing allows you to obtain the latest in cutting-edge technology (such as equipment to make your contact center Web-enabled, meaning employees can interact with customers through the Internet) without having to invest in an ever-changing technical world. You also never have to worry about signing on too many or too few employees when you outsource; you can adjust the levels as the job progresses, meaning you have greater control over the costs.

2. With direct mail and today's technologies, such as automated answering services, I don't need to outsource.

It's true that many businesses are opting for direct mail over telemarketing, feeling direct mail is less obtrusive, as well as a good deal cheaper. But when without prior research obtained through supplemental market research, direct mail can be a disaster.

Here's an example: A company offering a non-branded, flat-rate long distance service started a direct mail campaign. Without brand awareness and with all the competitive clutter surrounding long distance marketing, this company had an abysmal response rate, less than one half of one percent.

Seeking help, a new program was put in place that started with reps calling prospective customers before the mailing and asking five profiling questions to customize the direct mail message. The result? An estimated 70 percent of those called participated in the survey, and the total cost per sale was cut in half, even with the added telemarketing expense.

As for automated answering services, not only do they tend to annoy customers more than help them (especially when they're looking for someone to talk to about a specific problem), but nothing can replace live one-on-one conversation. Just by speaking to a prospect, a live CSR can configure the message, offer or incentive to fit that prospect's needs.

3. I don't want to lose control of the program.

In many cases, managers choose to have little interaction with an outsourced telemarketing program. As long as the goals are being met, it's usually hands-off. And for many managers, that's fine. But for those who are used to keeping close tabs on their programs, this could be seen as unacceptable. These managers don't have the time or resources to set up or closely monitor an outsourced program-which is why they're outsourcing to begin with. But they still require accountability, and rightfully so.

The solution is to have a third-party expert evaluate the telemarketing program. A good evaluator will schedule and attend weekly status calls, analyze reports thoroughly, monitor calls at least once a week, and carefully track "costs per" metrics.

Even in programs where the goals are being met, evaluation programs that can drive reps to make only one more call per hour can pay off. For instance, take a contact center where the average conversion rate is 10 percent. Keeping in mind the costs of a telemarketing program, a rep making six contacts an hour translates to about $50 a sale. But if an evaluation program can drive that rep to make seven contacts an hour, the cost per sale drops to $43--a drop of 14 percent. All for just one extra call an hour.

4. I can't measure the success of our marketing initiatives if a third party carries them out.

OK, let's say that you can accept giving up control of an outsourced program, and you find a third-party firm to monitor the contact center's success. Still, how do you know when the program is any good to begin with, never mind worth outsourcing?

It's sometimes difficult to tell, especially since the company who designed the promotion in the first place is more removed from the process than the company who is now charged with carrying it out. But outsourced contact centers can provide you with several tools to analyze the effectiveness of your program.

One such tool is a Barrier/Lever analysis, which allows you to identify the objections that are the most frequent and difficult to overcome. Another is a yield/loss analysis, which outlines the entire marketing process, from list selection to enrollment, and identifies where the greatest percentages of prospects fall out. In the end, a yield/loss analysis helps you pinpoint key weaknesses and strengths in the contact strategy.

Finally, contact centers can provide a "testing phase," wherein different messages and offers are disseminated, with their results compared. By limiting the number of elements that differ from call to call, you can find out what specifically impacts results--which offer, even which phrasing of an offer, is the most effective.

Concerns about outsourcing a telemarketing program are not without merit. But with the proper planning, specification of goals, and a willingness to delegate responsibility, outsourcing can be a less expensive, profitable venture.

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