Is your call center really a ‘profit center’?

Chris Selland, Reservoir Partners

As customer relationship management (CRM) has emerged and evolved over the past five to ten years, we have heard a great deal about ‘enlightened’ approaches to customer service. In particular, much has been made of the idea of using customer service to cross-sell and upsell new products and services to existing clients—or in the parlance of CRM vendors ‘turning your call center into a profit center.’

Yet, while CRM catch phrases remain as prevalent as ever, true success stories have been much more difficult to come by. Reservoir Partners has conducted surveys revealing (unfortunately, but unsurprisingly) that the vast majority of companies are still managing their customer service operations based on traditional efficiency-based metrics—and many companies are pulling back on their CRM dollars to accomplish more tactical, specific goals.

Is the CRM dream a fool’s errand? I suggest that it’s not—and that the goal of turning your call center into a profit center is possible. But, having followed and participated in this market sector for the last dozen or so years, it is clear to me that in order to succeed, companies must step away from the noise and hype, and pursue along a more linear, commonsense path. So what are the steps necessary to accomplish this goal?

Saving money is making money

Perhaps the biggest disservice that the CRM industry has delivered is the idea that technology sells—i.e., deploy our wonderful CRM application and you will gain more revenue. It rarely works. But technology is effective at boosting profits the other way—by streamlining operations and saving costs.

Looking for ROI on a CRM project? Look at cost savings, not revenue enhancement. Much easier to find, and more straightforward to attain. Less exciting perhaps, but much more credible with your CFO.

Often I still hear customer service executives stating that their customers need ‘the human touch.’ At times yes—but probably not to the degree you think they do. Think of a few examples:

“- withdrawing cash from an ATM machine;
“- self-service gasoline; and
“- parcel tracking on the web (FedEx, UPS, etc.).

In each of these cases, these technologies/services were deployed with the goal of saving money via lower labor costs—but companies found that customers liked serving themselves if it saved them money and/or time.

Apply the same dynamic to your call center. Figure out where there are opportunities to move customers from assisted service to self-service. This will lower costs dramatically and at the same time will make many customers more satisfied. A true win-win.

Align your strategy

Decide how you want your customer relationships to look before you start implementing specific plans—and before you even think about software. Sounds simple, but think about it—many of the greatest success stories in business (Wal-Mart and Dell spring to mind) were not built on great CRM, but rather on being the low-cost provider of goods and services. If you gave your customers a choice, would they prefer that you greet them by name on the phone, or give them lower pricing? Ideally of course, you should do both. But think about where impact would ultimately be greatest.

In addition, and I cannot say this strongly enough, CRM is not an IT project. It is a business initiative aimed at improving customer-facing operations (and per above, lowering their costs). Technology plays a supporting role, not a leading role. In other words, the path to CRM success involves making the critical business decisions, and then backing them up with technology.

The term “failure” has circulated around CRM for a number of years—and it is no accident that “CRM failure” is mentioned most by firms who consult to IT, not business, executives. Organizations that have approached CRM as an IT project—and there are many—have witnessed dramatically higher failure rates than those who have taken a business-first approach.

Integrate your data

Of course, at the end of the day CRM works best when customer data is systematically organized so it can be analyzed and acted upon. Unfortunately, for most companies the inverse is true. Their data is a scattered, disorganized mess—and by continuing to layer more applications (CRM or other) on top of disorganized data, they are simply making the problem worse.

Stop spending on CRM applications and start organizing your customer data. Our advice to most companies these days is that you need fewer applications, not more. Building a data warehouse is the traditional way to integrate data, but XML web services offer new opportunities to radically lower the cost and increase the effectiveness of these efforts. This is no small challenge, but it’s absolutely critical if you intend to succeed.

Put CRM buzzwords in context

We’ve all had the experience of calling a company with a problem and having them try to sell us something else. Not pleasant, is it? There is a time and a place for cross-selling—but it is not every call.

Again, simplify. Use CRM to be more responsive to your customers, not to put more offers in their face. Yes, cross-selling/upselling is a worthy and highly profitable goal, but if efforts are too aggressive or ham-handed, the opposite of what you’re aiming for will be achieved. Initial CRM efforts should be aimed at streamlining and simplifying customer service operation. Once this is achieved, loyal customers will begin to tell you when they’re ready to be sold to—and they will do just that.

Finally, take a cold, hard look at how you compensate the managers (and representatives) that staff your customer service operation. It is consistently stunning to me how many companies talk about enlightened, profitable service, but then effectively pay their reps to hang up on customers.

Much of this is about metrics and

the associated topic of benchmarking. Traditional call center metrics such as dropped calls and average handle time are valuable, but if they are used to exclusively manage your operation, any effort to increase CRM effectiveness will be a waste of time and money.

The reality is that reps will do what you pay them to do. Pay them to hang up, and they will. Pay them to sell, and they’ll do that. The answer is not in the system; it’s in the compensation structure.

All of this boils down to a fairly simple set of CRM rules:

“- Simplify and streamline—build your business case on lower costs, not enhanced revenue.
“- Help the customers help themselves.
“- Put business requirements before technology—CRM is a business initiative, not an IT project.
“- Incent the behavior you want to achieve.

Bottom line: CRM can work and your call center can become a true profit center—if you align your goals and clarify your thinking.

Selland founded Reservoir Partners in 2001. He has a track record in helping companies define, prioritize and execute highly successful customer-facing relationship management strategies. He may be contacted at cselland@reservoirpartners.com. For information about Reservoir Partners, visit www.reservoirpartners.com.

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