Outsourcing may present a better solution than continued insourcing.
Posted Mar 1, 2005
Most companies are naturally cautious when they decide to outsource. They typically start by outsourcing only a portion of their calls, and typically select calls that they believe are less valuable, assuming that this will minimize the negative impacts if service is poor. This is especially true when the call center has sales responsibilities. But is this the best course of action? And, if so, what is the best way to determine how valuable each call type is?
One commonly used measure of the value of a call is the lifetime value of a customer and/or the total number of relationships that the customer has with the company. These callers are rarely sent to an outsourcer. This might not, however, be the most effective way to leverage call value in an inbound sales environment, as it focuses on the overall historical value of customers, rather than the value of a specific call that is being received. An example of this dilemma is the recent boom in mortgage refinancing. So many people called to refinance their mortgages that many call centers had long queue times and overall poor service, often leading to abandons and, therefore, the loss of many sales opportunities. And the poor service was experienced by all callers, except callers who had been identified as extremely high value.
The actual value of these calls should be measured not by the overall value of the callers, but by the size of the mortgage that the callers hope to refinance. And the difference is material, as the difference in mortgage value between the first and fourth quartile of mortgage size was seven times. That is, if a call center has to choose between serving a call that is from the overall most valuable customer versus a call from the customer with the largest loan that they wish to refinance, the caller with the highest value loan should be served first. Similarly, if a company has to select which group of calls should be sent to an outsourcer initially, the answer might be based on something other than general measures of customer value but, more effectively, on the value of the sale that can actually be made on that call.
Another assumption typically made by people selecting which calls to outsource is that the outsourcer will not be able to match the sales rate of the company's current call centers, again reinforcing the idea that lower value calls should be outsourced. This is a reasonable assumption, but it avoids the issue that many companies have hired large call center staffs and, over time, have found themselves with a broad spectrum of agent effectiveness, from excellent to barely passable, with the less effective agents especially hard to remove. The difference, in terms of sales effectiveness, can be 300 to 400 percent. This is a large variance and can significantly reduce the overall effectiveness of a call center. Yet for many reasons the companies may find it difficult to upgrade or replace the less effective CSRs and find themselves extremely limited in how much they can improve sales results.
This is where outsourcing, with its ability to require high levels of performance, may actually present a better solution than continued insourcing. If a company can identify the most valuable calls that it receives, it can require outsourcers to select and/or retain only those agents who perform in the highest quartile. They could then send the high-value calls to this highly effective call group.
The benefits of such an approach should be obvious. The most valuable calls would then be sent to the people with the greatest ability to convert them, potentially increasing sales by hundreds of percent. In the remortgage example a bank could do a data lookup on all its customers who call its remortgage line, and select those who are calling for the largest mortgages. It would then send these calls to the specially selected high-effectiveness group at the outsourcer. This approach essentially turns the traditional strategy of sending the least valuable calls to an outsourcer on its head.
About the Author
Hobart Harris, Ph.D., is a senior advisor at TPI, where he focuses on assessing the potential value of outsourcing for TPI's clients. Dr. Harris, whose Ph.D. is in social and industrial psychology, has worked with leading multinational banks, manufacturing companies, and telcos, as well as with smaller service companies and technology firms. www.tpi.net
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