The conventional, transaction-based contact center is going the way of the pay phone: fast disappearing. Whereas the recent wireless boom has made coin-operated telecommunications virtually non-existent, evolving business needs have enabled the contact center to shed its black-and-white, service-based platform. Companies in every market of the retail industry are wise to embrace the changing face of the contact center and the opportunities this presents for the organization as well as the consumer.
The shift away from the traditional contact center involves using technological and human resources to better understand and service the customer and, in turn, to measure the return on the investment companies are making in their customers. In essence, the concept of the “value exchange”—a concept more than a decade old—is now rooted in the contact center. One phone call, one e-mail or one chat session can lead to significant, potentially long-term value for all of the principals involved.
Take, for example, the case of a leading retailer of consumer goods. With a handsome Website and colorful catalogs to mark its brand, the retailer can establish a loyal customer base that identifies with the supreme quality of the company’s products. But this can often lead to a rift between the organization and its customers because the company focuses squarely on building the brand and ignores the importance of strengthening existing customer relationships.
In this example, the retailer can leverage its contact centers—whether they are inhouse or outsourced to a third-party vendor—to amend this rift. Effective customer relationship management (CRM) technologies and strategies provides a view of the customer across all channels and product lines and ensures that every customer interaction is tracked into a centralized database and presented to the contact center agent via a universal desktop. This represents an investment into the customer by enabling more effective customer interactions, providing information for more thorough analysis and creating the opportunity to mine customer information. All of these activities strengthen relationships with consumers and increase a company’s return on customer investment.
As a result of building this customer repository, the retailer is able to determine the buying habits, characteristics, and associated spend for each customer. Using classical segmentation methodology, customers are categorized based on their economic relationship—both current and potential—with the company. Subsequently, the company determines the appropriate investments to best serve each customer segment. For example, for the most avid consumers, the objective is retention rather than cultivating cross-sell and upsell opportunities.
This example illustrates a retailer that epitomizes the return on customer investment concept and recognizes the important role that the contact center plays in this process. While contact center success—especially that which is outsourced—is often measured strictly by cost-savings or revenue-generation, the shifting role of the contact center introduces the importance of expected return in terms of customer experience and satisfaction as directly related to loyalty and spend.
Shifting Market Dynamics – from Customer Cost to Customer Growth
The service-dominated contact center is recognized not only as a key channel for customer service and technical support, but also for creating and delivering value through full sale and service customer interactions. Companies are not satisfied with simply reducing costs; they expect to use this powerful channel for customer communication to improve their return on the investment they make in the call center.
More and more, retailers are outsourcing their customer service and technical support activities to third-party vendors to reduce operating and administrative costs, acquire specialized capabilities or expertise and reduce long-term capital investment.
Companies that outsource are wise to understand the evolution of the client-provider relationship that all too often is viewed only in tactical terms. This is typically only measured by traditional metrics such as “average handle time” or “first call resolution.” Customer-centric metrics take an integrated approach to interactions with customers, enabling organizations to better understand customer behavior. Truly effective customer relationships can deliver superior economic results if the right relationship interactions—aided by the right human and information resources—are allowed to flourish.
Outsourcing can be about creating greater value than is already present in many customer relationships. This value is extracted through more targeted channel investments in areas with the potential to pay dividends in terms of retention, loyalty,and additional sales. Retailers must view the contact center as holding greater customer potential because of the opportunity to mine the growth opportunities that are explicit or implicit in deep relationships with profitable customers. By focusing on strategic investments in the most productive areas, drivers of return and key channel processes, retailers can derive greater value from the contact center.
What is Return on Customer Investment?
Profitability is a function of the relationship between cost and revenue, and return is the larger-picture economic benefit derived from the overall investment. Reducing cost or increasing revenue each appear to be compelling objectives, but if they are the only goals for the contact center, they may lead to undesirable outcomes, including loss of customers or short-term unprofitable operations.
If contact centers are only committed to reducing costs and/or increasing revenue, companies are missing a tremendous opportunity to execute more strategic initiatives, including those that relate to increasing shareholder value, a concept that is typically of utmost concern to corporate management and its constituents. What’s more, contact center strategies that focus on maximizing return on customer investment inherently embody an effective blend of cost-reducing and revenue-generating activities.
Improving return on customer investment refers to both the company’s investments as well as those made by its customers. Ultimately, consumers provide the reason and revenue that drive all of a retailer’s activity. If organizations embrace this concept, they will realize that greater value and return is embedded into sound contact center operations and their investments will begin to increase.
To better understand the concept of return on customer investment, companies must examine the relationship between three essential drivers: cost, revenue and return.
In order to realize revenue from products and services, most non-commoditized organizations must invest in building a brand with customers, acquiring new customers and servicing all customers. Investments in brand and marketing acquisition are made because of the expectation of direct immediate revenue or its short-term potential. The costs associated with service are typically viewed differently. Many organizations view the cost of service as an indirect investment and it is perceived generally as par for the “cost of doing business.”
Across the retail industry, the typical organization has little to no expectations for deriving true cost-center value by delivering customer service or technical support. Costs are not viewed as investments, but as economic factors that must be minimized either through live agent interaction restrictions or automated solutions. There is no expectation that the service contact center can provide organizations with profitable customer relationship building.
The expected outcome of brand and acquisition investments is new, profitable customer relationships. Organizations make these investments because they can see direct results. Contact center service is starting to be viewed as providing direct revenue potential whereas it has traditionally been perceived to provide little direct revenue opportunity.
Not all customers are profitable, and not all service interactions will result in direct revenue. But the ability to recognize the existence of opportunities can transform a contact center from a cost center to a cost-neutral business process or ultimately, to profit center. Organizations are also looking at how differential investment in customer segments opens up new possibilities of revenue and return. The ability to implement these new approaches to customer interactions takes dynamic technologies and skilled personnel that must be constantly evaluated and updated to reflect the current state of each individual customer or customer segment.
Because not all customers are of equal economic value to an organization, it makes most sense to regard customers based on a perceived value relative to their past, present, and projected future transactions. For example, technology is one way to lower service costs on all transactions but it can be applied more heavily to marginally or unprofitable customers to reduce the cost of service for those segments even further. The higher-potential customer should have the option of interacting with the organization in a manner that is most convenient for them, whether it is via a live agent, a fully automated solution, or an integrated hybrid construct of live agent and technology.
Differential service investment in customers individually or by segments defines the core of the return concept. Service investments in the contact center channel should be approached similarly to the decisions to put operations on the “right-shore” to take advantage of favorable labor rates, unique or evolved capabilities, and the benefits of globalization.
Obtaining customer profitability is the ultimate goal of all for-profit enterprises and the contact center can play a significant part in achieving this outcome. Within the contact center, investments are typically made in agents and their management, technology, and customer experience processes:
- Agents and their management: By recruiting and staffing more experienced agents and managers or increasing the ratio of managers to agents, companies that deliver and directly support the customer interaction are ultimately most able to maximize the customer value. Investments in this area, when applied effectively, will always have the greatest impact.
- Technology: Many companies have vast amounts of usage and behavioral data about customers. Using this information to supplement each interaction can help to elicit and achieve the profitability that often remains untapped. Technologies exist that allow clients to provide different levels of service to different customer segments, thus reducing cost of service to less profitable segments and providing higher service levels to more profitable segments. Technology is never a substitute for agent effectiveness, but when applied in the right areas, it can enable data-driven decisions at levels of consistency that otherwise are not easily obtainable.
- Customer experience process: An effective training program and a positive learning environment for customer service and technical support associates—as well as for first-line supervisors—are essential to facilitate the transformation of a service-only culture into a service and sales culture. This includes communicating with customers so that the true value of each customer and individual interaction is captured and cultivated.
Companies across all segments of the retail industry continue to pour countless dollars into building powerful brand images, but they often overlook the value of customer investments. One of the most effective channels through which an organization can improve its customer relationships is the contact center. Every customer interaction can, in some way, directly affect the company’s bottom line, illustrating that the concept of “value exchange” is now rooted in the contact center.
By re-evaluating call center strategies and associated processes, retailers can establish customer-centric metrics that ultimately lead to truly effective customer relationships and positive economic results.
Sam Bloomfield is senior vice president of professional services at Nashville, TN-based ClientLogic, a global business process outsourcing provider.