Tele-profit centers Featured

7:00pm EDT February 28, 2007

The business case for any investment must include a reasonable return on investment (ROI). That holds true for call center business as much as for any other aspect of a company’s operations.

Smart Business spoke with Chris Wagner, vice president of marketing at Info-Cision Management Corp., to get tips on creating a solid return on a company’s call center business.

Is the bottom line on ROI simply sales?

In a call center, there are a lot of considerations, and it is not always a straight line to sales. The key is to look at costs outside the call center.

The importance of media cost. For example, if I am a company running ads on TV, the largest cost I have is the advertising that drives calls to the call center. If it costs $5 to handle a call, the cost of driving that call to the call center is likely $15 or $20. Some people say that a cheaper per-minute cost in the call center is key. But if you are not maximizing your return on the cost of driving the call, you will lose out.

The importance of conversion and abandon rate. If I run an ad that drives 100 calls to the call center — at $10 a call, I’ve spent $1,000. Of those, the abandon rate (inability to handle a call) at this particular call center is 10 percent. So I end up with only 90 opportunities to sell. If I sell them at a 50 percent rate, I’ll make 45 sales. If each sale generates $20 of profit, my return is only $900; I actually lose money.

A better call center operation might lose only 2 percent of its calls, leaving 98 chances to sell. If their employees are better at selling, I can get 60 percent of the callers to buy, meaning 58 total sales. At the same $20 profit per sale, I now make money.

The only things that changed were the result of the call center’s ability to handle the calls, the quality of the people on the phone, and the quality of the training, not in the product or the profit per unit. Remember, the biggest cost is usually driving the caller to the call center.

Should the call center be the focus when maximizing ROI?

ROI is not necessarily reflected in the revenue generated by a call to the call center. Studies show that poor call handling can reduce a customer life cycle by as much as 30 percent … all for the cost of improperly handling a $10 phone call.

Additionally, you can benefit from up-sells and cross-sells. We have a utility client who has many customers calling with billing questions. It costs them $7 to handle each billing call. But when we make a $10 per month up-sell to only 5 percent of those customers, we net them $70 annual profit. That eliminates 50 percent of their cost of handling calls. In short, one transaction pays for 10.

The call center should not be a drain on the budget. When properly executed, a call center should — at worst — break even. A well-run customer call center will get you additional sales at no added acquisition cost.

What are some overlooked areas that are ripe for exploring?

Look at customers who called but did not buy. Build a database and handle them specially. Offer them a slightly sweeter deal on the callback. They were half-convinced.

Look at your own customer base and sell them product upgrades, cashing in on brand loyalty.

Traditional metrics focus on reducing call time or handling time. In many cases, the opposite is true. One added minute on a phone call can add ROI. After all, if the customer called in, he or she has some time set aside. You can use that time to up-sell or cross-sell.

Should I expect my call center to suggest ways to maximize returns?

At a lot of companies, the call center is an afterthought. In a partnership, information is shared back and forth. This requires good, open communications. Both the client and the call center need to understand the client’s customer model. Then you can build a strategy that treats the customer in a way that will maximize the return on investment. It lets you create value on each transaction.

If a company doesn’t feel like it is getting this kind of service from its current outsource partner, I would strongly encourage it to have discussions with other competitors. Finding the right fit is the key. If a company has internal call centers that are not performing at this level, I would always encourage split-testing of that center against an outsourced partner. A great way to pick up the creativity on your program is to challenge them against competition. It is also a great way to share best practices.

CHRIS WAGNER is vice president of marketing at InfoCision Management Corp. InfoCision is a privately held teleservices company and is a leading provider of inbound and outbound marketing for nonprofit, commercial, religious and political organizations. Reach Wagner at (330) 668-1400.