Here's what to know before outsourcing customer service
What if you didn’t correctly estimate that demand for your product?
Imagine this situation with me: Your product gets an incredible feature in your dream publication and demand for your product is going off the charts.
Who wouldn’t want that?
On one hand, it’s a great problem to have. On the other, how could you have correctly estimated the demand for your product? With all the new interest, your voicemail is filled with messages, emails are going unanswered, no one is managing all the live chat inquiries, and you’re missing opportunities to capitalize on the demand and grow your business. Before social media, all you had to worry about was some bad word of mouth coverage, but now with Yelp, Facebook, Google, and more giving customers the platform to share their frustrations, a poor response time to inquiries can really sink your business. You really don’t want to be lumped in with the US companies that are letting $62 billion slip away due to bad customer service.
So, how do you get ahead of this customer service bottleneck problem? Should you outsource your customer support?
During my 12+ years within the Business Process Outsourcing (BPO) industry, I’ve seen the do’s and don’ts of taking on an outsourcing option. Before jumping into an outsource solution, I ask you to consider the 5 following questions:
#1: Are you really saving money?
There are nuances to understanding the total cost of ownership such as team utilization and additional overhead costs. But let’s start with a simple step-by-step to get a directional estimate:
- Resolutions handled by your team. Remember that touches do not equal resolutions. In a typical e-commerce retailer, there are typically 2-3 touches per resolution. At the end of the day, it’s resolutions that really matter.
- Cost of your team. Total the wages of your team. Also add the benefits, and allocated facilities, technology and overhead cost of maintaining your customer service function.
Got those pieces of data? Now, take total cost (wages + benefits + overhead) / resolutions.
Now that you have that estimate, it’s time to think about the outsourcing options. So, what really are your costs for outsourcing?
As a former insider who priced and negotiated outsourcing deals, I know where the best outsourcers make their margin. First, they increase the utilization of customer service staff. A smaller business will achieve a utilization of about 40-50% at best. Inquiry volume never comes in on a consistent basis, plus, humans are humans - they need breaks, training and vacations. Second, the outsourcer is able to stretch the overhead across more reps just because they handle more clients. It’s the basic rule of economies of scale. Third, outsourcers pay lower wage rates, potentially at the expense of quality or affinity for the local preferences for the consumer. I recommend that you strongly scrutinize efforts to locate staff in lower cost geographies and leverage tools like the Simplr cost calculator to see if you’re really saving money.
#2: Can you afford the time and staff to integrate a partner?
When I was negotiating and onboarding new clients, the typical lead time from inquiry to go-live was 2-3 months. While the outsourcer would supply an integration team, they also need client counterparts to properly execute the onboarding. Here are the typical steps and timelines for an account worth 20 full time equivalents (FTEs) of work and is largely email and chat based:
- Contract (9+ weeks)
- System connectivity (9-12 weeks). Heavy on client resource involvement.
- Hiring & Recruiting (8 weeks)
- Training (1-4 weeks). Heavy on client resource involvement
- Ramping to performance levels (8-12 weeks)
That totals at least 35 weeks! When you are growing at break-neck speed, do you have time to take your eye off the business?
#3: Do your business conditions and needs change frequently?
Like most fast growing businesses in uncharted territory, you may experience fluctuations in demand, inquiry volume and supply. In fact, on the simple notion of inquiry volume, we often see major peaks and valleys in customer demand in e-commerce.
I believe the traditional outsourcing business model is at odds with the realities of an unpredictable and changing business. The more intense the outsourcer integration, training, etc., the more an outsourcer invests upfront in your business. You will pay for this in many forms including contract terms (like fixed durations) and minimum volumes to ensure they recoup their investment.
Pretend you are in a summer lull - lower sales and hence lower customer inquiries. You only have enough work to keep 1 FTE busy but your minimum is 2 FTEs. That’s just not enough work to justify two people, but you have your hands bound and have to keep both employed.
Or, imagine you hit a peak Back-to-School season and there is 4 FTEs worth of work but you did not forecast that the season would start 3 weeks earlier than last year. You only have 2 FTEs so they are overloaded with volume, first response times increase by 3x, and customer satisfaction scores drop from 4.5 to 3.5 (out of 5). You ask for more resources, but your outsourcer tells you that everyone is tapped out and it would take them 8-weeks to bring on new reps. Unfortunately, that would be too late to help alleviate the problem NOW.
Besides volume minimums and long lead times for scaling up support, watch out for these other restrictive conditions:
- Seasonality/post holiday /abnormal volume spikes
- Outsourcer attrition around back to school and the start of a new year that impacts your staffing
- Hours of operation constraints and call “bunching” (when all calls come in at the same time)
#4: Are you overwhelmed by the sheer volume of customer inquiries that you miss the really critical ones?
We have all been there before. Your business is humming with a new product launch but then you realize you have 1,000+ unanswered emails from the last couple of days. The vast majority are inquiries that are simple with predictable answers such as product specs, material or ingredient composition or delivery options. Many of the answers are in your FAQs, knowledge base, and your website, but customers aren’t looking there - they want to hear it directly from YOU, the brand. All you are worried about is that your customers be answered quickly and correctly so that they will buy your product.
On the flip side, there will be a smaller percentage of inquiries that are super-vital for the health and learning of your business. You don’t want them to be lost in the shuffle. They include product feedback, customer complaints and very detailed product questions. You want special attention for these inquiries which require deeper business judgement. By handling these inquiries yourself, you employ one of the advantages of being a smaller, nimbler business - being close to your customers and cultivating a feedback loop that is many times faster than a big lumbering competitor.
Just like most things in business, I often see an 80:20 mix of high-volume simpler inquiries vs. low-volume complex nuanced inquiries. Do a pulse check on your own business by checking your email box or helpdesk system for one week worth of inquiries and comparing the breakdown.
You can get the best of both worlds with fast, high quality and affordable handling of the 80% and specialized, personal attention for the 20%. By employing a flexible contact center partner, you should find someone that can triage and handle the easy stuff while flagging the hard stuff for you. Beware of the outsourcers who are not flexible enough and who approach deals with a “Nickle and Dime Attitude” or “its everything or nothing” operating model.
#5: Do you gain anything else from outsourcing, beyond cost savings?
It has to be more than just cost savings. Here are some good reasons that other entrepreneurs have pursued in outsourcing customer service:
- I “outservice my competitors” and offer extended after-hour and weekend support
- I significantly shorten my response times which I know is a main driver of customer satisfaction
- I increase online conversions and revenue by providing highly-available and delightful support when customers are making buying decisions
- I broaden my addressable customer base by adding more language options than just English
- I gain more flexibility for my operations by keeping all customer service infrastructure highly variable and scaleable
Once you work through each of these questions, you can start to see if it is in the best interest for your company to outsource customer service or start to explore alternative options.
I believe that the money you save on customer service can be put into furthering your company. It’s not about cutting corners - it’s about bringing top quality customer service to your customers.
Ready to see if outsourcing is a truly a money-saving option for your business? My friends at Simplr have created an easy to use cost calculator, which you should check out here.
Jon Malinowski has an impressive resume when it comes to understanding how and if outsourcing customer support works. With 12 years of experience in the Business Process Outsourcing (BPO) industry, helping manage over 1,000 lines of businesses, Jon has seen the good, the bad, and the ugly with outsourcing customer call centers with brands like Microsoft and Hewlett-Packard.