"You're looking for operational efficiency and a way to enhance a customer's experience," says Bob Smith, senior vice president of Cincinnati-based Convergys Corp. And enhanced sales, not simply operating cost savings, are at stake.

But "best-of-breed" call center operations go one step further, and find ways to divert large amounts of traffic away from the call center. Quality customer care is still the main objective. But service providers increasingly want to concentrate scarce and expensive call center resources on revenue generation. To do that, carriers need to understand why customers call in the first place.

And carriers are right to focus on sales support. By some estimates, as much as $700 billion worth of goods and services are sold each year through call centers. According to the American Telemarketing Association, the total sale of products and services sold by call centers grew from $100 billion in 1983 to more than $650 billion in 1995, the most recent figures available, says Ken Buda, vice president of Information Management Associates Inc., Shelton, Conn.

Call center outsourcing conceivably could become a product line for CLECs as well. According to New York-based Frost & Sullivan analysts, $15.4 billion was spent by firms on call center services in 1996. That spending also is growing at about a 16 percent annual rate. And though nobody seems quite sure how many call centers or call center employees may be at work on any given day, some analysts estimate as many as 1.6 million people.

If one adds in informal call centers and help desks, perhaps 7 million agents can be counted, working from 70,000 U.S. call centers, according to Westford, Mass.-based Davox Corp. executives. Stephen Kowarsky, executive vice president of CosmoCom Inc., Hauppauge, N.Y., thinks the total may be closer to 5 million. In any event, call centers may represent the sale of "5 percent of U.S. gross national product," Kowarsky says.

New Functions

Call centers, argues Buda, are redefining how companies relate to customers. "Nearly all service and retail industries, for example, use call centers to supplement their sales organizations," Buda says. "Call centers allow businesses to market more efficiently and at lower costs than a large, dispersed sales force or a costly branch office," notes Buda.

So call centers become a proactive way of retaining existing customers and generating more business from them. And since few CLECs can afford to put direct sales teams into the field for small business accounts (five lines and under, for example), call centers ultimately must be part of the sales channel mix.

At the same time, CLEC customers generally have an expectation of more personalized service and attention. And that expectation has to be reflected in the quality of service customers experience when interacting with a CLEC's own call center personnel. Indeed, competitive carriers increasingly are viewing call center experiences as key components of the overall customer experience, "from the time they sign up until the time they leave you," says Stan Jasinski, corporate marketing director, Richardson, Texas-based IEX Corp.

Keep in mind that possibly 70 percent of all customer interactions with businesses occur over the telephone, say Stamford, Conn.-based Gartner Group analysts. And "best-of-breed" organizations, including Delta Airlines, Eastman Chemical, Texas Instruments, Toyota Motor Sales, USA Today and USAA, benchmark themselves on the ability of the agent to resolve problems 85 percent of the time on the first contact, and the first call.

Churn Management

Just as important, the call center often will be the last chance a company has to "save" a customer account that is about to move into "former customer" status. And customer defections will be an increasing problem for all service providers.

"Wireless churn, for example, has really been growing a lot the last 10 years, largely because of increased competition," says Rich Beyermond, director, LightBridge Inc., Waltham, Mass.

Where cellular telephone network operators once could reasonably expect 25 percent to 30 percent annual churn, by 2001 or 2002 those rates will skyrocket up to 45 percent to 55 percent, argues Beyermond. And that means a wireless carrier has to remarket and acquire virtually 100 percent of its customer base about every two years. That is a key driver of operating expense, since "the cost to acquire a new customer ranges from $300 to $600, while the cost to retain a customer runs $50 to $60 a customer," he notes.

So call center personnel quite often are the last line of defense, the last chance to save an account when a customer calls to disconnect. Cost savings often is where carriers will look first for call center value, argues Terry Boyle, manager for New York-based Ernst & Young International Ltd. "Then you want to shift to revenue generation." And one of the best ways to do that is when call center personnel are actively equipped to save accounts and implement 'win back' programs, Boyle says.

Indeed, customers who have problems and can contact a call center remain loyal at far higher rates than when no call center contact occurs. And customers with major and minor difficulties are highly likely to remain loyal when their problems are handled quickly.

In fact, argue researchers at Boston-based Forum Corp., customers switch suppliers about 15 percent of the time for product quality reasons, 15 percent of the time for price reasons, and a whopping 70 percent of the time for service quality reasons.

Customer loyalty, in turn, is directly related to profitability. Over a seven-year period, for example, loyal customers add value because they pay premium prices, send along referrals, require less-costly support and use more of a firm's products, says Robert McIntosh, president of Dallas-based McIntosh & Associates.

The profit boost varies from one industry to the next, but "reducing customer defections 5 percent boosts profit 25 percent to 85 percent," McIntosh suggests.

Technical Support

Call centers also are an increasing factor for service providers seeking to provide high-quality technical support. Dataquest, San Jose, Calif., for example, estimates that technical support costs are rising at a rate of 20 percent a year, driven by both increasing call volume and increasing call duration. The length of a support call has increased from eight to 13 minutes in recent years, for example.

The good news is that even technical support calls have patterns. And once service providers understand the problems, support tasks can be automated to some degree. Up to 80 percent of personal computer problems are reported by more than one user, argue analysts at Seattle-based Primus Knowledge Solutions Inc.

And technical support is expensive. In the PC industry, for example, hardware companies spend 3 percent of retail sale price, and software firms 10 percent of sale price, on technical support, say Primus analysts. In fact, as many as one in six software employees works in technical support.

Framingham, Mass.-based International Data Corp. analysts estimate that worldwide software support expenses grew nearly 12 percent between 1995 and 1996 alone, and will grow at nearly a 15 percent rate until 2000, when support expenses will cost firms $31 billion annually.

The vise grip in which software and hardware firms find themselves is the need to support expensive, quality support services, while at the same time dealing with shrinking profit margins. So one obvious solution--hiring more people--is not practical. Instead, firms must find ways to use existing resources more effectively.

And telecommunications costs are not the key issue, at least for technical support processes. As Andersen Consulting LLP, Chicago, has estimated, call handling and tracking represents only about 20 percent of the labor cost of a call. About 62 percent comes from solving the customer's problem, not handling the call itself.

Diverting Traffic

As crucial as call centers are, carriers sometimes find high volumes of calls that could be handled some other way, or avoided altogether, if business practices are retooled. As analysts at Sterling Information Group, Austin, Texas, have argued, there are only three ways to improve call center service levels:

• Reduce average call length;
• Decrease the number of incoming calls; and
• Add more customer service representatives.

Among the traditional ways of doing so are integrating customer databases and scripts with the call. Eliminating redundant data entry is another. Adding interactive voice response (IVR), fax-back, e-mail or web-based information retrieval are other ways to attack the workload problem.

But there are many ways organizations inadvertently drive up call volumes, even when call-handling technology improves. Consider billing practices. Of all reasons why customers dial up call centers, billing issues represent half the volume.

Customers call to order new services, because they have a service problem, when they have a problem with bill or because they don't understand the bill, argues Mark McCormack, executive vice president of Intertech Management Group Inc., St. Louis. Interactive voice response (IVR) units, which can automate the answering of some questions, will help. So will web-based interfaces, allowing customers to check bills online without generating traffic for the call center.

A large number of calls to airlines are questions about frequent-flyer program accounts, for example. Call center traffic can be managed if flyers are allowed to use IVR to check account status. That leaves call center personnel free to handle revenue-generating calls.

IVR also can help when airline crew scheduling or dispatch functions for taxicab drivers or truck drivers are automated, instead of requiring call center staff interaction. Package tracking using the web, rather than live interaction with a call center, is another example.

Delivery of information about train, bus or subway schedules are other ways IVR or web technologies can help companies manage call center traffic. Catalog shopping, inventory status checks, dealer and distributor locations and contacts can be automated, as well.

MindSpring Enterprises Inc., an Atlanta-based Internet service provider (ISP), uses self-service web access to lighten the burden on its call centers, for example. Users can use the web to change billing plans, check account status, add new e-mail names or create new accounts. As a result, MindSpring recently was able to move three of its 50 call center agents to other duties.

Bill accuracy and formatting also are issues, McCormack says. But so is the accuracy of the bill-stuffing process. If a customer gets somebody else's bill, that's a problem," he says. "In the customer's mind, this raises another question," McCormack says. "Who got my bill?"

Statements should be designed to help customers better understand the services they are buying, and to keep them informed of upcoming changes in service, argues Tom Roberts, spokesman for El Dorado Hills, Calif.-based International Billing Services. "Charts and graphs can be used to illustrate how customers' spending or usage patterns compare to prior periods, or to explain more complex issues, such as whether the customer is buying the right package of services for his or her usage pattern." All of that is important because inserts, messages and envelopes help to alert customers to changes before they happen and reduce call center traffic.

Channel partners sometimes also contribute to unnecessary call center volume, argues Ernst & Young's Boyle. Occasionally, agents or resellers kick questions they might handle themselves up to the underlying carrier. "You also have to be careful about marketing campaigns," Boyle says. "You have to let the call center know so they can staff up to handle the additional call volume."

Broken processes also kick up call volumes. When appointments are scheduled, but not kept, calls are generated. When the field support staff are proficient, fewer customer calls are placed. When jobs are done right the first time, fewer calls are made. Giving customers the ability to "self-schedule" appointments is another tool for reducing some call center traffic.

"Top banks find they can handle 70 percent of calls using interactive voice response," Boyle argues. "On the other hand, in some other industries, such as insurance, IVR only does the job about 20 percent to 25 percent of the time." Telecom probably can operate someplace between those two, Boyle says. "Carriers just need to analyze and track why it is that their customers are calling," he says.

And though there seems no doubt web-based interactions are starting to supplement call center sessions, the two are complementary, Jasinski argues. "You can't know all the answers to all potential questions in advance, and script all the answers for the website," he argues.

The logic for moving to web-based interactions is fairly compelling. "The cost of a call center interaction is about $6 to $7," Boyle argues. "The cost of an IVR session is about $1 to $1.50. On the web, you're probably looking at about a nickel."

Call centers help carriers sell more services and products, reduce churn and provide higher-quality service. But finding ways to reduce the volume and duration of calls remain key challenges. Technology helps. But business practices ranging from billing and marketing tactics to technical support can create additional--and unwanted--call center volume.

It helps to automate. But automating faulty procedures may not help much. Service providers will fare better when they scrutinize the underlying business practices that inadvertently drive calling volume higher.

The above article "'Don't Call Me' Call Centers" which appears in the February 1999 issue of X-Change Magazine.