The Contact Center: Low-Cost Driver or Strategic Differentiator?

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1 The Contact Center: Low-Cost Driver or Strategic Differentiator? Prepared by: Telerx 723 Dresher Road Horsham, PA TELERX

2 Contact center work has historically been viewed as non-core to the business and, as such, contact center providers have been considered a commodity. This perception is changing as customer care evolves into a strategic enterprise-wide initiative with bottom-line impact. Yet, many executives still contend all vendors are created equal they re just a means to achieving a corporate objective of generating increased efficiencies and driving costs down. After all, today s business mantra is do more with less. The truth is all vendors are not created equal. Some subscribe to the low-cost, transactional model. Other higher-priced providers more than compensate for upfront incremental costs by transforming the contact center into a strategic differentiator. Neither business model is right or wrong which is why the selection of the best-suited vendor must evolve from the goal of the customer care program and corporate business objectives. If building relationships is key, a strategic customer care specialist is best. If name and address capture is the objective, a more transactional-focused commodity player is a wiser choice. Commodity vs. Strategic According to Merriam-Webster, commodity denotes a good or service whose wide availability typically leads to smaller profit margins and diminishes the importance of factors (as brand name) other than price. A commodity service bureau is typically transactional and driven by efficiency metrics. Its focus on costs often disables the relationship management function of a contact center operation. Strategic is defined as of great importance within an integrated whole or to a planned effect. A strategic partner is more consultative, embracing a global view of each client s business. A strategic contact center partner is skilled at brand and loyalty building and, thereby, revenue generation. It is a true business partner that because of the insights, expertise and enterprise-wide value it brings earns a seat at the client s table to help craft win/win business strategies. 2 The Contact Center: Low-Cost Driver or Strategic Differentiator?

3 Determining if a contact center provider is commodity or strategically focused is critical to the development of a customer-centric business. The differences between the two are significant as are the implications of having each as part of a virtual organization. Transforming the Contact Center into a Strategic Differentiator Customers and brands are the most important assets a company owns. This year alone, market leaders will spend hundreds of millions of marketing and product development dollars to build brand value. These investments encourage trial and ongoing purchases and ultimately, long-term brand and company loyalty making customer relationships the product of brand investments. Customers who contact a company provide the opportunity to encourage increased spending and repurchase intent. How these VIPs are managed, protected and nurtured can determine the ROI of a company s brand-building expenditures. As a corporation s front line to its consumers, the contact center is a critical touch point for building customer relationships that result in brand loyalty, lifetime value, and bottom-line impact. How costs are continually reduced and efficiencies are improved while doing that is a strategic corporate initiative with even greater bottom-line impact. This focus on customer-centricity is what turns a contact center into a strategic differentiator. The ability to make this transformation marks the difference between a commodity provider and a strategic partner. The Cost of Relationship Management Versus The Return When cost is the primary focus, customer-centricity is difficult to achieve and strategically leveraging the contact center is nearly impossible. This leads to the enormous potential of the contact center being overlooked. The key lies in finding the appropriate balance between cost and return. The effectiveness of best-in-class customer care investments cannot be determined without evaluating the return on relationship. Often, the cost is more than justified by the incremental increases in revenue generation that brand loyalty and lifetime value bring. 3 The Contact Center: Low-Cost Driver or Strategic Differentiator?

4 Also consider that effective customer service is not linear to cost. Each incremental improvement in service does not require a proportionate incremental increase in cost, which means an effective contact center need not be exceptionally high-cost. Effectiveness yields higher-level efficiencies, information vital to strategic decision-making, timely notice of problems, first-contact resolution, and the like. Metrics That Translate Into Relationship Management Instead of evaluating the effectiveness of a contact center solely on efficiency metrics like average talk time and percent abandoned, customer-centric organizations measure customer metrics such as perceptions. After all, perception is reality. Through the practice of relationship management, a customer interaction can be turned into direct value as an impression whether positive or negative that is captured, evaluated and acted on. It can be a point of consistency with a brand or a point of dissonance confusing the customer and undermining branding and marketing messages. The contact center that is a strategic differentiator listens to the voice of the customer to produce metrics that are statistically valid and reflect continuous improvement. It looks for opportunities to personalize service and create a positive image of the organization. The goal of metrics becomes quantifying consumers assessments of quality, of satisfaction with the service interaction, the company and future purchase intent. The Financial Impact of Quality Customer Care Managing customer relationships and protecting a company s assets should be a core contact center function. That means converting from simple transactional interactions to higher-value interactions that delight customers and generate the return. The contribution a customer service representative can have on the lifetime value of a consumer and, therefore, an organization s bottom line can be considerable. When a communicator nurtures a good rapport with a consumer, quickly and efficiently handling the situation at hand without straying from policy, what is the return on relationship and financial reward for excellence? 4 The Contact Center: Low-Cost Driver or Strategic Differentiator?

5 Figure 1: Per-Representative Contribution to Consumer Lifetime Value** ** Based on per-consumer average annual purchase by industry. * Data Source: The Center for Client Retention, Customer Care Performance Report To determine this, a recent independent survey* analyzed the primary drivers of consumer lifetime value including establishing relationships, addressing issues, and solving problems. A per-representative contribution to lifetime value was then calculated for each market-leading company included in the study. Calculations were based on a per-consumer average annual purchase by industry, consumer satisfaction research and satisfaction rates. The potential bottom line contribution of just one customer service representative based on the current consumer satisfaction level at each respective company was substantial. Multiplied by the number of customer care professionals on a team, and the bottom-line impact of customer care can be very significant. Motivate the team to even greater excellence, and just an incremental improvement in consumer satisfaction will yield millions of dollars in additional revenue. Becoming a Revenue Generator To achieve results like these, contact center management must lead the way to positioning the center as a critical business function. This starts with putting less emphasis on efficiency metrics that focus on cost and redesigning centers to build, nurture and protect consumer relationships thereby, generating revenue. 5 The Contact Center: Low-Cost Driver or Strategic Differentiator?

6 The right contact center partner can help do this by: Repositioning efficiency metrics and integrating customer quality measures Providing strategic input throughout all levels of the organization demonstrating the enterprise-wide value of customer data and the contact center Providing the strategic perspective, operational and technical expertise as well as best practices needed to deliver cost-efficient, customer-focused customer care Generating revenue by developing customer-focused approaches that increase satisfaction, retention and brand loyalty Reducing costs and increasing efficiencies using systemized processes and state-ofthe-art technology Investing in high-quality customer representatives, the training and policies that empower them to be customer stewards and relationship managers. Investments in these front-line people and the assets they manage are investments in the survival of the company. Continuously improving by providing the voice of the customer and actionable intelligence that leads to process, product and service enhancements. Aligning its leadership team with the client s, working side-by-side with a commitment to delivering strategic solutions that provide long-term excellence to the client organization. An Outsourcer Can t Be Both Because of the inherently different operating models that dictate the level of investment made in each of these areas, an outsourcer cannot be both commodity and strategically focused. The key is understanding the business need at hand and partnering with the vendor whose business model is the best match. Oftentimes, this only occurs when the partner steps up to the plate and turns business away because it isn t the best fit for them or the client. 6 The Contact Center: Low-Cost Driver or Strategic Differentiator?

7 Portions of this white paper have been excerpted from The Contact Center Is Your Competitive Weapon, March 2, The 2005 Customer Care Performance Report*, a groundbreaking study evaluating the customer care programs of leading consumer packaged goods companies, revealed: Outsourced contact centers outperform their internal counterparts when it comes to creating overall consumer satisfaction. Many market leaders maximize and rely on their customer care programs to breed, nurture, and sustain loyalty. Others, typically those that view customer care as a commodity, place loyalty at risk. When loyalty is up for grabs, particularly during the moment of truth when a consumer initiates contact, defection and a negative impact on a company s bottom line are potential outcomes. The bottom-line impact of customer care can be significant. Motivate a team to greater excellence, and just an incremental improvement in customer satisfaction will yield millions of dollars in additional revenue. Companies that invest in best-in-class capabilities and use their contact centers as a strategic weapon generate the highest financial contribution to consumer lifetime value. *Independent research by The Center for Client Retention About Telerx As a strategic outsource partner that provides world-class customer care, Telerx helps leading Fortune 500 companies achieve bottom line results by maximizing customer, consumer, and employee relationships. With a focus on customer centricity, utilizing best practices and emerging technologies, Telerx s customer care specialists help companies interact with their customers, build brand loyalty, and increase lifetime value. We manage interactions, strengthen relationships, and provide actionable analytics that offer valuable intelligence that can influence your marketing strategy, product development, and process improvement. Telerx offers flexible options, advanced technology, and tailored solutions that fit each client s unique business goals, market, and budget. Contact Telerx at TELERX or solutions@telerx.com to see how we can help you deliver world-class customer care, or visit the company s website at Dresher Road Horsham, PA TELERX 7 The Contact Center: Low-Cost Driver or Strategic Differentiator?