Insourcing vs. Outsourcing Customer Care: The Pros and Cons

Paraphrasing the bard: To outsource or not to outsource your customer care operations, that is the question. And unfortunately, the answer is a resounding, “it depends.”

Colin Taylor, CEO and Chief Chaos Officer of Taylor Research Group, and William Pocock, senior operations manager for Dick’s Sporting Goods, brought their combined expertise to bear on this subject at Ecommerce Operations Summit 2019, and shared some tips for retailers when weighing this important decision.

To start with, Taylor and Pocock agreed, the pros and cons of outsourcing customer care are relatively straightforward:

  • Pros: rapid scaling, you don’t have to pay for infrastructure, generally cheaper, turnkey support, eliminates most incremental overhead, larger geographic reach
  • Cons: vendors are profit-motivated and may not always act in your best interest, you don’t know what experience level you’re necessarily getting, lack of visibility to results, lack of control

But this list won’t necessarily help you make the final decision. The real question isn’t whether outsourcing is better than insourcing, but rather, whether it’s better for you.

According to Taylor and Pocock, these are the top 3 reasons companies outsource customer care:

  • They don’t see themselves as an expert in that area, i.e. running a contact center. In reality though, the type and level of service you want from a provider may not be their core expertise either.
  • They want operational “best practices,” and feel a BPO can lead the way. Unfortunately, whatever success a provider experiences with a client is more often a result of the client, and they may not be able to replicate that process with you.
  • They want to save money by eliminating internal costs on direct labor. With outsourcing, you get what you pay for. You’ll still need to set aside resources to closely monitor quality and manage the ongoing relationship.

So, every upside has its caveat. However, customer care outsourcing remains incredibly popular because if done correctly, it can be of huge benefit to you and your company.

While there are no definitive answers, these 8 steps suggested by Taylor and Pocock will help you frame up the decision in a considered fashion and ensure the project is a success.

Clearly Identify Why You’re Outsourcing

What do you aim to achieve and how will you measure success? It sounds simple, but over half of all outsourcing initiatives fail, most from lack of clarity and planning. Set performance goals with your vendor, review them regularly and never assume that they’ll just figure it out. Pocock said he calls them 3-5 times a day in order to manage operations and maintain quality.

Mandate the communication process you’ll need to hit your goals. If you let the vendor drive, you’ll get inconsistent communication, confusion over roles and misalignment of goals.

Audit a new vendor to ensure they have the competencies you need, then do so again every three months for the first year to track improvement and erosion.

Make Customer Experience a Deciding Factor

When there is low customer sensitivity (think freight shipping), outsourcing is a great option. But as sensitivity increases, such as crafting messaging and customer service, it can impact your bottom line.

The higher the sensitivity, the higher the impact. Ask yourself: Do you want someone that close to your valued customer if they aren’t directly from your company?

Set Up Your Decision Criteria

Evaluate a potential partner on 5 criteria: scalability, culture matching, areas of expertise, expectations, and teamwork.

  • Scalability: Can they handle your seasonal booms while maintaining quality? Consider geographic footprint, infrastructure, expertise, etc.
  • Culture: Do they match your core company values and culture? If not, they aren’t necessarily a bad company, but they will be a bad fit for you as a partner.
  • Expertise: Do they have a retail background? What specific skills do they need to meet your goals?
  • Expectations: As you do your site visits, make your expectations abundantly clear. Don’t be afraid to ask tough questions. It’s all about finding the right fit.
  • Teamwork: Is this a partner you can have strong communication with? Will you be able to hold them accountable? From the other side, will they be upfront you aren’t holding up your end of the bargain?

Optimize Existing Customer Care Processes

Assuming you can magically solve a customer care operations problem by outsourcing it is foolish. Vendors specialize in scaling the process you give them, so if it’s flawed, you’ve just compounded that problem. Review your processes, optimize and automate, THEN outsource.

Negotiate a Win-Win Contract

This creates a foundation of partnership and quality service. “Winning” a contract negotiation is not always a win in the long run. If you beat them down on price, you’re removing their ability to fund added services or improve quality. Starting the relationship by taking away their ability to invest in it will ultimately lead to disappointment.

Choose the Right Performance Metrics

This will ensure your vendor is focused on the right priorities. Ultimately, they will focus on the metrics in the contract. If it’s all service metrics, no amount of talk about customer delight will get them to care about it. You don’t want to accidentally divert their focus with haphazard metrics.

Be as Transparent as You’re Comfortable With

If something’s coming down the pipe, tell your vendor. If you can’t reveal all of it, share what you can. Transparency builds trust, which you’ll need in order to make them feel comfortable sharing information with you as well. Remember, you’re building a partnership. More transparency equals fewer surprises and more success for everyone.

Build Unity, Teamwork and Cultural Alignment with the Vendor

Get creative in this area. You could offer discounts to vendor employees, invite them to off-sites or take them through your regular employee onboarding. One wine company went as far as putting a wine cellar in the office and hosting wine tastings.

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