Four Ways to Turn Your Customer Service Center into a Profit Center

Feb 28, 2006 8:55 PM  By

Customer service has always supported corporate growth by keeping customers happy and ensuring their ongoing loyalty. But the challenges of today’s business environment demand that customer service take advantage of its unique capabilities and opportunities to make a more substantial contribution to the top line.

Your customer service department can drive sales, shed the stigma of being a cost center, and make customer relationships more profitable. The key is to execute the right strategy and choose the right tools.

Strategy 1: aggressive mining of customer service data
One strategy you can use to boost revenue is to aggressively mine your customer service data to pinpoint and capitalize upon specific sales opportunities. With the right tools, you can uncover a wide range of such opportunities—including accessories, add-ons, up-sells, cross-sells, service contracts, and training.

This strategy may be attractive as a first step because it is the least intrusive. You don’t have to retrain your customer service staff or modify existing contact center processes. With this strategy, the sales cycle itself is initiated and fulfilled by other parts of the company. Customer service simply provides the data necessary to generate the revenue opportunities.

Here is a typical example of how this strategy works. A customer calls a software company with a technical question. While gathering the information needed to solve the problem, the customer service representative notes that the customer is using an older, somewhat obsolete version of the software. The service rep completes the call as usual. Over the course of the month, customer service receives many such calls. So at the end of the month, the company sends a special upgrade offer to every customer who called in and was found to be using an older version of the software.

There is actually a triple benefit with this type of strategy: * The company realizes additional revenue from the upgrade sale. * Customers are more satisfied, because they have a better product. * Customer service costs are reduced, because newer products have fewer problems and are less expensive to support.

A similar approach can be used to proactively capitalize on time-based market opportunities. For example, a toy company typically gets lots of calls in January about toys received as Christmas presents. With the right software, such a company can create a list of customers who asked questions about a toy for a two-year-old in January—and send them an offer for toys appropriate for three-year-olds the following holiday season. This example points out just how valuable the data captured by customer service can be.

When footwear company Skechers began doing business with customers via the Web, it discovered that the Internet was a great channel for customer service. As part of its e-service strategy, it initiated a variety of “recovery” policies to turn customers with problems into customers who were highly engaged and highly satisfied.

For example, customers who came to the Skechers Website because of an error in their order were subsequently offered a deep discount on related Skechers products. This way, in addition to solving the customer’s original problem, Skechers could tangibly demonstrate that it was interested in maintaining the customer’s business over the long term.

What started out primarily as a recovery strategy, however, soon proved to be a powerful revenue generator. In fact, during the past few years, Skechers has generated about $200,000 annually in sales through these post-incident discount offers.

“When a customer comes to you with an issue, you actually have a great opportunity—after you first solve the problem, of course—to initiate a highly engaged relationship with that customer,” declares Geric Johnson, who led the implementation of this strategy at Skechers. “So you can realize incremental revenue at the same time as you convert unhappy customers into highly loyal ones.”

Strategy 2: context-sensitive online promotions
There is another effective strategy for generating revenue that does not require your customer service staff to modify their work processes at all. It does, however, require some modification of your online service channels. This strategy is based on the use of context-sensitive online promotions.

Customers often look on your company’s Website for answers to questions. The Web self-service channel has become extremely popular as Internet connectivity has become pervasive and as companies do a better job of making answers easily accessible online. When customers ask these questions online, however, they also provide companies with clues about the products and services they need. That’s why smart companies are capitalizing on these clues to make relevant—and perfectly timed—offers to targeted site visitors.

For example, a power tool company may get questions from customers about working with specific types of materials such as plastic or sheet metal. At the same time this company answers such questions online, it also makes sense to inform the customer about specific tools or attachments specifically designed for these materials. To encourage these customers to make an immediate purchase decision, it may even be a good idea to offer them a discount or other special offer on the specific product they need.

Similarly, a telephone company’s customers may come to its Website looking for information about where to pay their bills. In this context, it makes sense to advise the customer about the company’s online payment options. This may not generate additional revenue per se, but it will increase the profitability of the account by eliminating the cost of processing a mailed check.

Such highly relevant, context-sensitive offers should not be confused with pop-up ads, which are generally neither well targeted nor well timed—and can be annoying to customers. Instead, context-sensitive offers are presented as part of your online answers and/or in response to a keyword entered by the customer, appearing to the customer as an advised solution, rather than an unsolicited promotion. The Internet has radically transformed the air travel market. Buyers can go online and quickly compare their prices and itinerary options. So with the competition only a click away, airlines have to do everything they can to drive bookings and avoid abandonment by online shoppers. That’s why British Airways has enhanced its online customer service system to maximize the number of customers who book flights on its site. When customers get the answer to their question on the company’s site, they are also presented with a strategically placed hyperlink that directs them to book the flight they’re researching or manage their active bookings. This ensures that all online service interactions are fully leveraged to drive revenue.

“A certain percentage of customers who get distracted from the main flow of the online purchasing process by a question will wind up abandoning that purchase,” explains British Airways technical editor Chris Carmichael. “The links we’ve placed with our online answers counteract this tendency and thereby keep site visitors headed toward a completed transaction—which helps us increase our total online sales.”

Strategy 3: real-time lead generation and referral
This third strategy generates highly qualified sales leads in real time by taking advantage of the information that customers provide your agents during a service interaction. Specific customer attributes qualify different customers as sales leads for different products or offers. With appropriate integration between your customer service and sales automation systems, your sales organization can quickly act on these qualified leads.

You determine which attributes qualify customers as leads for which corresponding products and offers. In some cases, you may decide to offer a special limited-time discount to virtually every caller. In other cases, you may narrowly define the type of customer who will be sent as a qualified lead to sales—and do so without any accompanying discount or other incentive.

You can define your qualification criteria based on all sorts of attributes: the type of problem the customer calls about, purchase historys, demographic parameters such as age or gender, ownership of a competitor’s product, etc.

Unlike the two previously described approaches to revenue-enhancement, this strategy requires the active participation of your customer service staff. It also requires that your staff have a lead qualification application on their desktops—especially since both offers and qualifying criteria are likely to change on a fairly dynamic basis. You may also need to modify training and incentives, since the imperative to get customers off the phone quickly will have to be balanced against the extra time it takes to ensure that customers are appropriately qualified.

Though this strategy requires your CSRs to actively note specific customer attributes or ask qualifying questions, it does not require them to close a sale. Ideally, your CRM software will automatically forward the leads to your sales or marketing group. Typically your service reps will ask a question such as “May I have someone call you about Product X?” or “May we send you some information on Product Y, along with a coupon that’s worth $40 if you make a purchase within the next 90 days?” If the answer is “yes,” your software will capture the lead, route it to a salesperson for follow-up, and initiate the appropriate sales automation workflow.

One of the great things about this strategy is that it makes it possible to precisely quantify the amount of business generated by leads originating in customer service. These leads can be closely tracked as the customer proceeds through the rest of the sales cycle. So at the end of the month or the quarter, customer service can say with certainty that it sent $250,000 worth of leads over the wall to sales—or that the leads it generated led directly to $150,000 in incremental sales.

Strategy 4: contact center transactions
In this last strategy, your CSRs qualify leads and actually complete the transaction. This strategy is particularly appropriate for “impulse” buys that customers are willing to put on their credit cards without too much thought, as opposed to more-considered purchases, which will more likely lend themselves to the lead referral strategies described above.

For example, an appliance manufacturer can “flag” all customers whose service contracts expire in the next 60 days. Whenever any of those customers call with a question, the CSR can offer them an extension of their contract.

Similarly, many cell phone companies have implemented a process by which their customer service agents will upsell customers who have gone over their allotted monthly minutes to a higher-end calling plan. This can improve customer satisfaction and loyalty while it locks in higher revenue for the company.

This type of strategy requires a bit more investment by the customer service department. Service reps have to be provided with the necessary offer/qualification information on their desktops and may even require complete sales scripts for certain types of offers. They also have to be given the tools necessary to complete transactions, including access to credit-card authorization systems. Typically the marketing department will create and define these offers as well as determine the appropriate qualifying criteria.

With this strategy, your customer service department will directly and independently generate quantifiable revenue, improving the company’s overall business performance and enhancing the service department’s strategic position. As service agents become more adept at selling—and as you learn what kinds of sales opportunities can most efficiently be capitalized upon during service interactions—the amount of revenue generated in this manner will continue to grow.

Four steps to revenue generation
Many customer service departments are actively implementing one or more of the above strategies, enabling their companies to achieve healthy growth in the face of challenging market conditions and intense competition. If you’d like your customer service department to make these same contributions to your company’s performance, then consider taking the following steps:

Define your strategy
The first step in creating a revenue-generating customer service organization is to determine which strategy or strategies are most applicable to your business today. Some organizations start with the simplest approaches and build from there. Others are more aggressive and launch major initiatives that have customer service agents taking credit-card orders from the very beginning.

It’s a good idea to zero in on the types of opportunities and offers that make the most sense. Does your company have accessories and add-ons that lend themselves to service-driven sales? Are you in a competitive market where discounting is a useful tactic? Is a primary objective to increase the number of customers participating in an existing loyalty program? By answering these questions, you can make sure your revenue strategy starts off with the right focus and objectives.

Assess your technology needs
Customer service departments are most effective at generating revenue when they have the right technology. To provide the customer data necessary to fulfill an aggressive mining strategy, for example, it’s vital to have a CRM system in place that captures relevant information across all communication channels. To ensure that leads generated by a real-time referral strategy are used to maximum effect, integration between your contact center system and your sales management system is essential.

Prepare your staff While customer service departments can drive significant revenue opportunities without any staffing changes, companies seeking to maximize top-line gains typically wind up modifying their training and hiring practices to one degree or another. Hiring practices, for example, may shift as you start looking for people who have good problem-solving skills and some evidence of sales aptitude. Supplemental training may also be required to help staff recognize lead opportunities or to teach them how to close transactions. Again, the extent of these changes will depend largely on the specific strategy you implement and the aggressiveness of your initiative.

Restructure your incentives
As noted earlier, revenue-producing customer service departments have to be managed differently from conventional cost centers. One common change is incentive structure. Traditional customer service departments typically focus on metrics such as talk times and first-call resolution rates. When revenue generation becomes part of the picture, however, you’ll probably want to add incentives based on lead generation or the dollar volume of completed transactions.

These new incentives don’t replace your old ones, since the quality and efficiency of customer care will remain a top priority. But you should restructure incentives to support whatever revenue strategy you put in place.

Because revenue generation is a new territory for many customer service departments, it may also be advisable to enlist an experienced partner to assist you with your implementation. Such a partner can help you benefit from lessons learned at other organizations that have adopted similar strategies—and avoid the mistakes that others have made. With that assistance, you can keep your revenue initiative on track more quickly.

Greg Gianforte is CEO of Bozeman, MT-based RightNow Tecnologies, a CRM solution consultancy