Confidential. Copyright © Enkata Technologies, 2005. All right reserved. 1 “When You Outsource the Service, Make Sure You Don’t Lose Track of the Customer”

Confidential. Copyright © Enkata Technologies, 2005. All right reserved. 1

“When You Outsource the Service, Make Sure You Don’t Lose Track of the Customer”

UCSC Service Engineering Course Presentation

February 2011

Professor Vijay MehrotraSchool of Business and Professional Studies

University of San Francisco


Agenda

• Who is This Guy?

• Why Do Companies Outsource Customer Service?

• Rewards and Risks

• How to Successfully Capture Outsourcing Benefits and Minimize Customer Losses

• Conclusion / Q & A


About Vijay: “Academic or Real World?”

• PhD in Operations Research, Stanford University

• 1994-2002: Co-Founder and CEO of Onward Inc.• Operations Management Consulting Firm

Grew from 3 founders to 30 consultants

• Special Emphasis on Call Center Operations and Business Analytics

• Clients Included Intuit, Charles Schwab, Wells Fargo Bank, HP, IBM, Advertising.com, GE, Cisco, Cadence, and Applied Materials

• Call Center Practice Acquired by Blue Pumpkin Software (Witness)

• Analytics Practice Acquired by Advertising.com (AOL)

• 2002-2003: Vice President of Solutions, Blue Pumpkin

• 2003-present: “Retired” to life as a University Professor• Academic Research on Customer Service Operations, Probability and Statistics,

Business Process Improvement

• Operations Management Consulting Practice


Agenda







The Customer Perspective


The Management Perspective

• MORE Technical Complexity

• Skill-Based Routing

• Multiple Customer Channels

• Inbound/Outbound Blended

• MultiSite / Outsourcing

• MORE Demand Uncertainty

• New Policies/Processes for Existing Businesses

• New Businesses/Services

• M&A Activity

• New Operating Hours

• Increased Service Level Goals

• Cross-Channel Dynamics

• MORE Pressure / Urgency

• Tighter Budgets

• “Solve the Problem Now”


Why Do Companies Use Outsourcers for Customer Service Operations?


Why Do Companies Use Outsourcers For Customer Service Operations?

•“Get more for less”

• To reduce costs

• To increase capacity and flexibility

• To accelerate expansion

•“Not our core competency”

• To obtain expertise, skills, technologies, and ideas

• To deploy internal resources and capital in other ways


Do you really “Get more for less” ?

•Gartner Analysis: “Outsourcing will cost you more”• Average In-House Cost Per FTE is 30% Lower than Average

Outsourcer

• Best-in-Class In-House Cost Per FTE is 41% Lower than for Best-in-Class Outsourcers

•Why?• Start-Up costs can be significant• Additional in-house resources (IT, relationship management,

training, etc) to support outsourcer• Outsourcers’ costs (marketing, capital, staff turnover and training)

are also growing• Offshore cheaper, but both salaries and attrition soaring for

overseas service providers


“But all the kids are doing it”

•Ventoro Study

• 10,000+ outsourcers worldwide

• 95% of Fortune 500 has offshoring strategy

• Others will follow their lead

•Hard to convince execs not to consider offshoring

• Peer pressure – fear of losing edge to competitors

• Price pressure – too enticing to not consider


Agenda







The Customer Service Exec’s Dilemma

•“Outsourcing/Offshoring Can Save Us Money…

•…but how can I maintain and enhance our customer relationships when someone else – at another company! – is interacting with them on my behalf?”


It All Starts With the Customer

• Outsourcing Contracts Usually Based on Traditional Operational Metrics (“How Many” and “How Fast”)…

• …But Customers Value More Than Just Speed

• Accenture Study• Waiting on Hold is Definitely Frustrating, But Not Significantly

More ThanHaving to Repeat Info Over to Multiple AgentsAgents Who Could Not Effectively Solve Problems

• Key Drivers For Switching Providers1. Poor Service/Product Quality2. Lower Prices3. Lack of Knowledgeable Agents


Why This Matters – A Lot!

•Example

# Calls / Year In-House Cost / CallOutSource Cost / Call Annual Savings

2,000,000 $10 $5 $10,000,000

Customer Base Lifetime Value of Customer Churn Rate Increase Lost Revenue

1,000,000 $1,000 2% $20,000,000


Agenda







• Tightly Integrated Data From Outsourcer(s)

• The Right Metrics for Outsourcer(s) Service Quality

• Clear Expectations & Incentives For Outsourcer(s)

• Responding Quickly to Emerging Problems

• Systematically Eliminating Customer Issues

• Building Real Partnerships

How to Win With Outsourcing:Strong Ownership of Customer Experience


True First Contact Resolution Rates are Major Driver of Customer Loyalty

Successful Resolution on First ContactLoyalty Maintained Very Successfully (90%+)In Some Situations Even Enhanced

• Unsuccessful Resolution on First ContactRepurchase Rates PlummetNegative Word of Mouth Grows by Factor of 2

• Customer Defines “Successful Resolution”Most Service Ops Claim Overly High FCR RatesUniprise Story


Tightly Integrated Data From Outsourcer(s)

•Outsourcers see individual encounter in isolation

• Was their a callback that went to a different site?

• Did that customer go back to the web site or send an email about a related problem?

• How did that customer respond to a customer satisfaction survey?

• How frequent was that issue?

•Without data integration with outsourcer

• Unable to analyze customers’ experience over time

• Unable to analyze content to drive call prevention










“Measuring and improving quality is significantly more difficult the farther you are from the home base”

Bill Price, Former EVP for Customer ServiceAmazon.com

•Traditional Metrics (# Handled, SL, ASA) For Outsourcers Focus Mainly Quantity and Speed

•Customer Relationships Also Hinge on Quality

The Right Metrics - Measured Right


The Right Metrics - Measured Right

• Key Quality-Based Metrics for Outsourcers

• First Contact Resolution RateShows how effectively outsourced agents are solving customers’ problemsEasy to miscalculate, either by relying on agents’ classification or by ignoring customer perception & behavior Requires integrated data to see customer behavior over time and channels

• Customer Sat Scores By Call/CaseImmediate customer satisfaction surveys to capture customer feedback (often done by another outsourcer)Must be connected to call detail records for evaluating Calls/Agents/Teams/Issues










Money Talks

• Outsourcing Contracts must include explicit targets for quality metrics with incentives and penalties

• Measurement of quality must be driven by customer behavior!

• This is the only way to ensure that quality is taken as seriously as quantity and speed










Rapid Response to Emerging Problems

•Rapid detection is critical• Drives continuous improvement • Enables crisis prevention

• It doesn’t happen by accident or through email • Disciplined, structured analysis is key• Tight Communication with Outsourcer’s Staff

Builds Knowledge Base, common way of thinkingUnderstand just who is managing the operations

• Lost time means • Lost customers• Potential embarrassment (internal or public)










Eliminating Customer Issues

•You all understand the value of call prevention, as do (all of) your customers and (some of) your prospects

•Eliminating customer problems is NOT part of an outsourcer’s job. In fact, customer problems provide outsourcers with job security!

•Expectations must be set for outsourcers for both the quality of the data captured and the frequency with which this data is delivered

Without good detailed data from outsourcer, call prevention is seriously hinderedIt’s your problem, not the outsourcer’s…


Huge ROI Opportunities Through Regular, Structured Data Analysis

ACD / WFM

Data

Contact Data

From

Outsourcer

SQM

Survey

Survey Data

From Outsource

r

IVR and Web

Data

Billing

Data

Service Operations Data Store

Firewall










Building Real Partnerships

•Outsourcers have much to learn…

• …about your business (all of them)

• …about their business (many of them)Outsourcing industry has grown fastShortage of managerial talent across industry

•Good outsourcers also have much to offer your operations team

• It doesn’t happen overnight – don’t outsource just for the quick operational savings because you may not see them quickly

• Invest time and effort

• Put people on site, respond quickly to the unexpected


Agenda







Outsourcing is Not a “No Brainer”

•Is it a “good thing”?

• Cost savings not guaranteed

• Customer service quality not guaranteed

•Is it a “bad thing”?

• Not necessarily – but must follow best practices to succeed

• Requires executive and managerial focus


Questions and Ideas? Please Ask Away (or Call / Email)!

Professor Vijay MehrotraUniversity of San Francisco

[email protected] 650-465-8443

Professor Vijay MehrotraUniversity of San Francisco

[email protected] 650-465-8443

Documents

Confidential. Copyright © Enkata Technologies, 2005. All right reserved. 1 “When You Outsource the Service, Make Sure You Don’t Lose Track of the Customer”