February 28, 2006, 12:00 AM

The Customer Connection

Call centers still dominate customer service, but e-mail is coming on strong.

Though it can be costly and labor-intensive to operate, the online customer service department is one of the most important components of any web retailing organization. Online customer service is, in fact, the virtual help desk or complaint department customers turn to with questions and problems.

Along with a full-featured web site and abundant merchandise priced to move, customers think highly of, and respond better to, web merchants who offer them timely and efficient customer service.

When it comes to running an online customer service department, many retailers prefer an internal operation integrated with back-end systems and customer databases and that relies on trained specialists to communicate with customers. That’s one of the results of the latest Internet Retailer Survey on E-Retailing-this one on online customer service. Most web retailers also train their customer service employees on specific tasks such as how to conduct a live chat or handle e-mail correspondence. For instance of the more than 300 retail chains, catalogers, virtual merchants, consumer brand manufacturers and consumer service companies taking part in the survey, virtually all use e-mail to correspond with shoppers on customer service issues. Almost two-thirds, 62%, also have service reps that specialize in e-mail.

No outsourcing plans

The survey was e-mailed in early February to all subscribers of IRNewsLink, the magazine’s newsletter, and more than 300 responses were collected and analyzed using Internet survey technology by WebSurveyor, which has partnered with Internet Retailer in a series of monthly surveys of the e-retailing industry. The results show that web retailers clearly like running their own operation, as opposed to outsourcing to a third-party, and integrating their contact center with their customer databases and order management systems.

A total of 86.9% of retailers in the survey operate their own customer contact centers versus 13.1% that outsource. Of those who operate their own customer service centers, 91.8% said they have no plans to outsource customer service, compared with 2.2% with plans to use an outside third-party within six months and 6% with intentions to outsource within two years.

Having customer service centers that give reps updated access to information is a top priority for most retailers. The survey, which asked web merchants nearly 20 detailed questions about their operation, reveals that 66% have their customer service system integrated with their order management system, while 68.6% also integrate the call center with the appropriate databases.

Companies with experience in dealing directly with customers-catalogers, virtual merchants and retail chains-have the most tightly integrated systems, the survey notes, with 69% of catalogers and virtual merchants and 68.6% of retail chains having service centers integrated with back-end order management. By contrast, only 58.3% of consumer brand manufacturers, many of which are new to the direct-to-consumer game, have their systems thus integrated.

The e-mail connection

Catalogers and virtual merchants were also among the survey respondents with the highest number of service centers integrated with their customer databases. 75.9% of catalogers in the survey linked customer service operations and databases, followed by virtual merchants at 72.1%, retail chains at 64%, and consumer brand manufacturers again lagging the rest at 63.9%.

A typical online customer service department is staffed with 10 to 40 employees, though some web retailers run much larger organizations. Among the web merchant organizations taking part in the Internet Retailer survey, 66.1% say they employ fewer than 10 reps in their customer service centers, compared with 17% with more than 50 reps.

But regardless of their size, retailers are also using e-mail as a main communications forum to handle customer questions, requests and complaints. For instance, 60% of survey respondents say that more than 10% of customer service interactions occur via e-mail, with 49.2% indicating that they handle up to 50 e-mail interactions per day.

43.3% of survey participants say they respond to a customer’s e-mail with an answer other than an automatic acknowledgement in less than two hours. But response times vary widely. Almost 20% of web retailers surveyed acknowledge that they take 12 to 24 hours to respond to an e-mail query and 4.6% take between 1 and 2 days. 3.1% don’t know how long it takes.

By category, a significant minority of merchants across the board answer customer e-mails in two hours or less, with that response being reported by 32% of store-based merchants, 31% of catalogers, 47.6% virtual merchants, and 42.9% of consumer brand manufacturers.

The low-cost alternative

Compared to an average phone-based customer service interaction, e-mail customer service queries are cheaper to process. The Internet Retailer survey found that 73.7% of respondents report that e-mail interactions cost up to $2 each. 48.2% spend less than $1 to process a single e-mail customer service query, followed by 25.5% who say their costs are $1.01 to $2 per contact, 14.7% at $2.01 to $3, 6.4% at $3.01 to $4 and 5.2% at more than $4 per query. A total of 70.9% of store-based merchants in the survey pegged their processing costs at less than $2 per customer e-mail interaction, compared with 74% of catalogers, 78% of virtual merchants and 67.7% of consumer brand manufacturers.

By contrast, phone interactions are significantly more expensive, with 86% of all respondents reporting that phone calls cost up to $6 each. By category, 64.1% of store-based merchants indicate that their average cost of answering and following up on a customer service phone call cost them up to $6 per interaction versus 92% for catalogers, 88.8% for virtual merchants and 74.2% for consumer brand manufacturers.

Web retailers that look to give their shoppers timely online customer service rely heavily on providing reps with updated information and on training employees to handle specific interactions such as in-bound calls, e-mails and live chat, according to the Internet Retailer survey. For instance, most web merchants answering the questionnaire indicate that they employ reps specifically to handle e-mail correspondence. 70% of catalogers taking part in the survey have dedicated e-mail customer service specialists, as do 66% of store-based merchants and 61% of virtual merchants.

Specialization

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