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Beyond price: expect outsourcing to transform your business

30th June 2014

In the early days of customer management outsourcing, cost reduction was the only show in town. The mantra was simple: hand over non-core processes to a specialist provider and leverage their economies of scale to maximise efficiency. It’s a reasonable approach, except that it completely ignores the customer. Here he outlines a more evolved approach to outsourcing; one in which the need for economy is balanced by a revenue-enhancing focus on the customer. Expect outsourcing to deliver benefits on both sides of the balance sheet, and look beyond price for opportunities to transform your business.

Through the 1980s and 90s cost reduction was the primary goal of most outsource customer management relationships. Performance was driven by tough productivity targets and suppliers routinely compromised quality to avoid the financial penalties incurred if they weren’t met. Beyond question, customers suffered. Clients suffered too, because customer discontent leads rapidly to disaffection and revenue loss.

Generation oneToday, we live in a more enlightened world. Ninety per cent of organisations now see the drive for customer satisfaction as intrinsic to their strategy. 63 per cent view customer experience as a commercial differentiator*. Recognising that customer management operations drive the customer experience, they are looking to outsourced service providers (OSPs) to add value rather than reduce cost. In turn, progressive OSPs are aligning their performance against business outcomes that matter – increased customer satisfaction, loyalty, advocacy and spend.

Of course, OSPs still have the economies of scale that were so attractive in the early days. Which means their clients should expect them to achieve efficiency in line with value. The common mistake in early outsourcing contracts was to penalise poor productivity without rewarding the creation of business value. It’s time to turn that situation around, so that OSPs are financially motivated to deliver transformation around four key factors: cost, revenue, customer experience and advocacy.

We’ll look at each of these four factors in turn, but first let’s consider one development that is inevitably changing the OSP-client relationship: the rise of alternative communication channels.

Channel Challenge

For decades OSPs have sold a commodity: banks of people to handle quantities of telephone calls for an agreed price per seat or hour. That was fine while the telephone dominated. It works less well in today’s multi-channel environment. Mature OSPs are positioning themselves to manage multiple interaction channels and to advise clients on the way their customers might select and use them. With a contracting model based on agent seats alone, this simply isn’t achievable. When the financial relationship is based on transformational achievements related to cost, revenue, customer experience and advocacy, it certainly is.

Brave outsourcers will link their remuneration to the delivery of those benefits. The ability to deliver transformational change in a multi-channel environment depends on an understanding of customer behaviour and how it can be influenced. Recent technology advances have made it possible to hear the voice of the customer by capturing data from interactions across all channels but, of itself, data has little value without the ability to interrogate it effectively and turn it to good use. This is an area we have invested in heavily to create one of a set of “SMART” methodologies that underpin our transformational approach.

We have built a team of customer insight specialists who turn data into intelligence, then use it to reduce cost and to build revenue for our clients, and to create a customer experience that drives advocacy. It is my conviction that, in the future, an OSP’s currency of value will be actionable insight rather than agent hours.

Source of cost savings

Three generations of outsourcing: generation twoCost savings in today’s customer management environments won’t be found by waving the productivity stick, but by managing contact demand across channels. By using analytics to understand why customers make contact, an OSP can identify those contacts that are avoidable because they are caused by mistakes or broken processes elsewhere in the business, and support customer-focused change by producing irrefutable evidence of the value it will deliver in terms of improved customer experience and reduced business cost.

Equally, it is possible to focus on first-contact resolution, identifying the broken processes within the customer management operations that prevent customers from getting the right answer first time.

TIP: Challenge your OSP to eradicate sources of unnecessary cost within the customer management operation and to provide insight that will help the rest of the organisation to resolve issues that frustrate customers.

Revenue win

Just as analytics and customer journey mapping can identify opportunities to resolve issues, they can also identify sales opportunities and inform an understanding of how they are won or lost. Again, this is a multi-channel process. A customer may research a product on a company’s website, evaluate reviews via social media then phone the contact centre to check information before buying. Across that complex customer journey, barriers to the eventual purchase can be understood and removed, and the right sales propositions – either for first-time purchases, cross-sells or upgrades – presented at the right time.

In the voice-channel environment in particular, we have worked intensively to enable agents to interpret buying signals and present the right cross or upsell propositions at the right moment.

TIP: Ask your outsourcer to boost sales performance by removing the barriers to purchase and translating service conversations into sales opportunities
Experience factor
There has been a lot of talk in customer management circles recently about customer experience. But what makes an experience “good”? To my mind, a “good” experience is one that is easy for the customer and profitable for the organisation. To that end we have adopted the “Customer Effort” measure with enthusiasm. Making it easier for customers to make contact, resolve their issues and complete their purchases can only have two outcomes: it will cost less to serve them and they will be more likely to spend.
TIP: Establish Customer Effort as a key performance measure in your outsourcing relationships ahead of traditional productivity measures.
Achieving advocacy
Outsourcing generation 3Elevating an “easy” experience into a “delightful” one is the source of customer advocacy – the Holy Grail pursued by every sensible organisation. It requires empathetic agents empowered to deliver informed, relevant responses. Psychological research has repeatedly shown that direct behavioural experiences (contact centre conversations not least) have the greatest impact on people’s attitudes towards brands. To my mind, it is for this reason that Customer Effort must be supplemented by “Customer Satisfaction” (CSat) and “Net Promoter Scores” (NPS) as key measures within an outsourcing relationship. To capture precisely the impact of the customer interaction on advocacy, we have developed “Touch- point NPS”. Contacting customers immediately after an interaction – via any channel – and asking about its impact on their likelihood to recommend the company, gives a true measure of how brand value is being built or destroyed.
TIP : Use Touch point NPS to gain a precise measure of your OSP’s contribution to brand value and advocacy.
All to be gained
We have talked at length here about evolution towards value-focused customer management outsourcing. For several years now, the Global Contact Centre Benchmarking Report has reflected this evolution, reporting an increased focus on value generation in outsourcing decisions. It is sad then that, in last year’s survey, the number of organisations quoting the need to “save money” as their principal motivation to outsource had doubled*. A knee-jerk reaction, perhaps to several years of recession and economic stagnation. If it signals a return to the bad old days of “productivity at any price”, customers will vote with their feet. As I hope I have convinced you here, there is so much more to be gained than a penny pinched from the cost of call. Expect outsourcing to transform your business and it will transform your cost base, too.
Contact Craig Gibson on LinkedIn with questions or comments.
* 2012 Global Contact Centre Benchmarking Report
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