Tim holody NCOF 2011 Presentation

Both Sides of Outsourcing – Meet & Talk with a Successful Outsource Client & Provider

NCOF – April, 2011Timothy J. Holody, COO/General Manager

Seta Corp (Palm Beach Jewelry)[email protected]

Darcy Tudor, Executive VPMarketing Alternatives, Inc

[email protected]

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mailto:[email protected]

mailto:[email protected]

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Guarantee: You will review an actual case study of a

successful outsource program from a client and provider point

of view.

Who is Seta/Palm Beach Jewelry?

• Seta Corporation of Boca is a family owned company that has been around since the mid-1950’s. We sell jewelry and fragrances under the name Palm Beach Jewelry.

• We also have syndicated partnerships with major catalog and retail companies such as Swiss Colony, the Redcats’ family of titles (Roaman’s, Metrostyle, Woman Within, BCO) Spiegel, Newport News, Amazon, Overstock and many others. We ship over 1.5 million units per year.

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Who is Marketing Alternatives, Inc?

MAI is a family owned and operated full service organization that provides services in the following areas:

• Call Center (inbound calls, outbound, e-mail, chat, special projects)

• Fulfillment and distribution• IT – order management and web design/hosting• Advertising agency and support services

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Who is Tim Holody?

• Currently COO of Seta Corporation (Palm Beach Jewelry)

• 30+ years of Industry experience including:

President/CEO – Total Fulfillment Services, IncVP-Operations, OrvisPresident – Home Shopping Network FulfillmentVice President – Stuart McGuire/MarketechsPresident – Carefree Professionals, IncDirector of Operations, Ambassador Leather Goods

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Who is Darcy Tudor?

• Executive Vice-President, Marketing Alternatives, Inc. • 15+ years of Industry experience including:

Coordinate and implement continuous process improvement for increased client/customer experiences

Responsible for delivery of contractual obligations New Business Development / RFP responses Script development Transition Manager Telecommunications Manager Prior experiences as front-line agent, supervisor, training, call center

operations

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Let’s start with “why did we outsource”?

• In 2002, we faced a loss of 50% of our overall business due to the bankruptcy of one of our key marketing partners. As a result, we were faced with the need to cut costs dramatically.

• We operated 2 call center locations – 1 in Boca Raton, FL and 1 in Cincinnati, OH

• 1st choice to reduce costs was to consolidate the 2 centers into one as they were both operating at less than 40% capacity at peak volume.

• After the consolidation was complete, we then faced the worry of not having a back-up site (particularly a problem with the hurricanes in south Florida). We looked to secure a back-up site with an outsourced provider.

• The success we found with a backup outsource provider as well as my own industry experience as an outsource provider caused us to seriously consider closing our Boca call center and outsourcing 100%

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What happened next?

• Once we decide to outsource, we did a detailed cost analysis to determine exactly what we were facing.

• It was crucial to be sure we captured ALL of our costs. We determined that we would save in excess of $500,000 per year AND establish our costs at a per transaction rate.

• We developed a DETAILED transition plan.

• We had to figure out the “right” way to announce the decision

• We determined which functions specifically were going to be outsourced – our conclusion was to

go…………………………… “all outsourced – 100%”

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Let’s address – “why not outsource?”

• Because I will have better control in-house

• Because my costs will be lower in-house

• Because my customers will get better service in-house

• Because outsource companies are unreliable

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Let’s address – “why not?”

NO – NO – NO - NO

Any other objections/roadblocks you can think of?

(I will address these in more detail later)

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What are we going to cover today?

How did we outsource?

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What is the Overall Purpose of your Call Center?

• Handle your customer calls with proper care• Handle your customer calls within established

service standards• Handle your customer calls within acceptable

cost/budget standards

• Whether in-house or outsourced, these are the 3 major things you must accomplish

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Setting expectations and installing proper measurements

When we had our own call center in-house, we had these key measurements:1. Labor cost per call

2. Total cost per call (including all overhead)

3. Service levels

4. Upsell success

The same measurements needed to be in place as we outsourced.

Let’s review our overall volume and service needs……….

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CUSTOMER CARE OPERATIONS

Volume Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09

1 Phone Order AOV $194.96 $167.01 $165.73 $156.87 $166.81 $156.38 $186.37 $173.55 $172.98 $155.33 $161.82 $158.79

2 Total # Calls 27,398 20,173 21,227 18,420 19,702 15,087 24,125 18,476 16,963 15,218 19,005 18,488

3 Total # Phone Orders 8,748 5,284 6,197 5,232 6,310 3,986 8,667 5,793 5,300 4,757 6,672 5,353

4 Call:Order Ratio 3.13 3.82 3.43 3.52 3.12 3.78 2.78 3.19 3.20 3.20 2.85 3.45

5 Chats Handled 557 438 298 340 294 236 508 580 568 642 710 816

6 E-mails Handled 1,744 1,804 1,925 1,910 1,636 1,524 1,614 1,889 1,528 1,642 1,706 2,083

7 Web Calls Handled 3,582 3,641 3,500 3,468 3,251 3,083 3,117 2,926 2,951 3,171 2,924 4,167

8 # web orders 7,230 7,331 7,463 7,055 7,063 6,117 7,281 6,391 5,795 6,254 7,535 7,822

9 Web calls/order ratio 0.50 0.50 0.47 0.49 0.46 0.50 0.43 0.46 0.51 0.51 0.39 0.53

10 Upsell % of AOV 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%

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CUSTOMER CARE OPERATIONS

Considerations

1 Phone Service Level 95% of all calls should be answered. Max of 5% abandons.

2 % Calls Handled on 1st CallWe estimate that 95% of calls can be handled by the 1st line rep. Only 5% need

to be escalated.

3 SystemsAll orders will be entered onto the Seta AS400 system. All inquiries will be

handled within our system.

4 E-mail Ave Resp Time (hours)All e-mails should receive an immediate acknowledgment to the customer.

Specific customer answers must be provided within 4 hours.

5Chat Response Time

(seconds)All chats must be responded within 30 seconds.

6 Hours of Operation 7 days/week, 8am - 11pm, 364 days per year. Only closed on Xmas day

7 Phone Numbers All phone numbers shall remain under the ownership of Seta

8 PricingPlease feel free to quote in whatever pricing format with which you are most

comfortable. We will do our own internal pricing pro formas for comparing various providers.


1. Labor cost per call

– All direct labor costs (reps and support staff)– All direct management costs– All payroll related taxes and expenses

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2. Total cost per call (including all overhead)

– All the labor costs from the previous slide– All telephony costs– All building related expenses (rent, utilities, etc)– All IT related costs

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3. Service Levels

– 95% of all calls had to be answered. This means that we allowed a 5% abandoned rate (calls not answered). All calls not answered by a human agent are counted as abandoned, regardless of how short or long the timeframe.

– ZERO blockage (busy) calls are allowed.

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4. Upsell success

– We have an extensive upsell program that provides added revenue as measured on a per order basis.

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• Handle your customer calls with proper care• Handle your customer calls within established

service standards• Handle your customer calls within acceptable


• Whether in-house or outsourced, these are the 3 major things you must accomplish

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Who did we outsource to (and why)?

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• We actually started with a well known Call Center provider in south Florida. However, it became clear that they could not meet the 3 major goals we had for our call center.

• We then moved to a 2nd outsource partner in the Midwest. Worked well for awhile, until they were acquired and the whole relationship suffered as a result of the new ownership’s change in style and philosophy.

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As we prepared to move to our 3rd outsource partner, we were careful to be sure that the problems we faced with the previous 2 providers could and would be avoided with our new partner. After careful consideration, we moved to a great partner – Marketing Alternatives, Inc.

What did we miss with the 1st 2 providers?

OWNERSHIP that was committed to our core principles.

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Once again, we focused on the purpose of the Call Center:

• Handle your customer calls with proper care• Handle your customer calls within established service

standards• Handle your customer calls within acceptable


What we found with MAI was a company where the OWNERSHIP was as committed to these goals as we were.

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HOW do we manage our Outsource Partnership?

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We had to be sure that the ownership of MAI was committed to our core principles. We do so not only in a series of meetings and discussions, but by taking the time to align our goals with MAI:

• Pricing – the classic “win-win” pricing was established• Service – MAI and Seta both benefit from improved

service

• Upsell success – both MAI and Seta benefit from improved upsell success.

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In the simplest of terms, we aligned our goals with the goals of MAI. Period.

Plain and simple.

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The basics of managing our outsource partnership:

• Daily reporting of key metrics – service and sales• Focus on MTD performance – don’t nitpick daily

fluctuations.• Recognize the responsibilities we have as the

client partner.• Regular and consistent communication with all

levels of MAI.

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HOW do we manage our outsource partner?

Here’s the daily report:

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Here’s the upsell report:

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Date Phone orders

% of orders with upsell

# Attempts AOV Upsell $Upsell $ per

AttemptUpsell % of AOV

Q1 2008 9,703 97.06% 9,418 $137.01 $127,444 $13.53 9.9%

Q2 2008 9,377 99.41% 9,322 $133.58 $101,219 $10.86 8.1%

Q3 2008 9,113 99.97% 9,110 $141.35 $134,092 $14.72 10.4%

Q4 2008 9,539 99.97% 9,536 $145.03 $149,604 $15.69 10.8%

Q1 2009 9,435 99.96% 9,431 $137.21 $145,378 $15.41 11.2%

Q2 2009 9,168 99.97% 9,165 $135.39 $136,321 $14.87 11.0%

Q3 2009 8,065 99.93% 8,059 $133.53 $111,301 $13.81 10.3%

Q4 2009 10,283 99.86% 10,269 $130.26 $165,836 $16.15 12.4%

Q1 2010 10,686 99.36% 10,618 $122.77 $156,561 $14.74 12.0%

Q2 2010 8,376 99.79% 8,358 $128.36 $150,994 $18.07 14.1%

Q3 2010 7,259 99.85% 7,248 $126.99 $108,072 $14.91 11.7%

Q4 2010 9,055 99.92% 9,048 $121.81 $178,474 $19.73 16.2%

Jan/Feb 2011 5,510 99.91% 5,505 $123.08 $90,672 $16.47 13.4%


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The responsibilities of Seta:

1. Provide accurate and timely volume forecasts

2. Provide a clear and consistent policy message

3. Provide clear and consistent levels of authority

4. Inform MAI of anything that might impact the business

5. Engage the floor team (leads, reps)

6. Focus on clearly established metrics of success

7. Provide the necessary system support

8. Be available for questions, ideas, feedback

9. Be REASONABLE

Let’s go back to – “why not outsource?”

• Because I will have better control in-house

• Because my costs will be lower in-house

• Because my customers will get better service in-house

• Because outsource companies are unreliable

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Let’s address – “why not?”

NO – NO – NO – NO

Proper planning, aligned metrics and a shared responsibility will assure a successful outsource partnership. You cannot expect more from your outsourced partner than you can from your internal call center. But…….you should never expect less.

Let’s go back and review our upsell program…….

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PBJ AGENT BONUS JANUARY 2011

Agent NameUpsell per

order# of

orders Total

BonusQuality Score

Total Calls Monitored

LIMP SALLY $29.73 36 $36.00 95.00% 4

GRIGG SARA $26.10 179 $179.00 95.70% 9

KINSER TIA $24.18 174 $174.00 95.60% 10

EDWARDS TIFFANY $21.90 21 $21.00 96.60% 10

PLUMMER WILLIAM $19.87 129 $129.00 94.00% 11

TOLLE ANGELA $16.91 152 $152.00 97.60% 10

JONES RANDI $15.64 57 $57.00 99.00% 10

LEVAULT TIM $15.44 89 $89.00 95.70% 9

TOBERMAN KARI $15.03 125 $125.00 95.60% 10

BILBY DODIE $14.45 120 $120.00 97.60% 10

TOTALS 1082 $1,082

Incentives in the Call Center

The typical staffing rule of the Call Center:

• ACD staffing – give the next call to the agent who has been idle the longest – NO – break this rule – give next call to your BEST agent. This goes against the DNA of most call center managers.

• Let’s look at that upsell data from January again - which rep would you like taking more of your calls?

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PBJ AGENT BONUS JANUARY 2011

Agent NameUpsell per

order# of

orders Total

BonusQuality Score

Total Calls Monitored

LIMP SALLY $29.73 36 $36.00 95.00% 4

GRIGG SARA $26.10 179 $179.00 95.70% 9

KINSER TIA $24.18 174 $174.00 95.60% 10

EDWARDS TIFFANY $21.90 21 $21.00 96.60% 10

PLUMMER WILLIAM $19.87 129 $129.00 94.00% 11

TOLLE ANGELA $16.91 152 $152.00 97.60% 10

JONES RANDI $15.64 57 $57.00 99.00% 10

LEVAULT TIM $15.44 89 $89.00 95.70% 9

TOBERMAN KARI $15.03 125 $125.00 95.60% 10

BILBY DODIE $14.45 120 $120.00 97.60% 10

TOTALS 1082 $1,082

How to avoid the BIG mistake

The “BIG” mistake is outsourcing any function and forgetting about it. Your outsource company is not just a vendor – they are a partner. In 3 decades of outsourcing, both as a provider and as a client, the most successful outsource relationships occur when BOTH

parties treat the relationship as a partnership.You can’t turn it over to your outsource company and forget

about it. Nor can you have unrealistic or unattainable expectations from your outsource partner.

Work as a team and SUCCEED as a team.

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Why does MAI have a successful relationship with Seta?

• Frequent interaction between MAI and Seta at all levels from ownership to operations

• MAI makes a point of understanding Seta business and the catalog industry

• MAI believes there is always room for improvement, we are not satisfied with merely achieving acceptable performance

• MAI and Seta engage in frequent conversation regarding how to make changes for the better

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Do Not

• Allow your client to dictate HOW you will achieve their goals (service level, upsell, conversion, etc.)

• Provide a price structure which is not profitable for the sake of winning business

• Provide services which are not being requested and then ask the client to pay for labor expense

• Agree to non-matching service level goals (70/30, 3% ABD)

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Do

• Be clear about what the terms “dedicated, semi-dedicated and shared” agent pools represent in your call center

• Agree to how call volume will be forecasted and who owns responsibility for its accuracy

• Be upfront about what other types of programs “shared” agents may be handling• Define, with examples, how the pricing structure will work, especially in a per minute

pricing agreement – what’s included: ACD (talk) + ACW (wrap) + hold + outbound + ???

• Agree on what information regarding daily operations will be shared, require client input/approval

• Plan on weekly, monthly, quarterly and annual business reviews with various levels of operations and management to ensure all client needs are being met

• Represent companies whose goals and values inherently align with your company• Be knowledgeable about the company and industry your client is in

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Our Case Study - Summary

Our case study has and continues to be a huge success:

• We saved big money and stabilized our costs on a “per transaction” rate

• Our customers continue to receive service better than we could provide in-house.

• We have aligned our goals with our outsource partner.

Is it time for you to consider outsourcing?

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