PetSmart acquired Pet360 for $130 million in cash and up to $30 million more in future performance-based payments.
There are three crucial tasks for e-retailers seeking success with contact center outsourcing: monitor, measure and motivate.
The period leading up to Valentine’s Day is among the busiest times of the year for Vermont Teddy Bear, a multi-channel retailer of stuffed animals and other gift items. So disaster loomed early last February when landline phone service went out in all of Vermont, where the company and its in-house contact center are located.
Fortunately for the retailer it also had contracts with three outsourcers to handle customer calls and e-mails during busy seasons, one of them being Alpine Access.
“With a phone call to Alpine Access they were able to put on agents in probably less than 45 minutes, and we were back in business,” says Chris Powell, contact center manager at Vermont Teddy Bear. “That’s very important for a retailer like us, because our business is so seasonal that we can’t take a chance on losing anything.”
Managing the spikes
While it’s not often that an entire state loses its phone service, the incident illustrates a key advantage of outsourcing contact center work: the ability to quickly add customer service agents when demand spikes. That can be important in an industry as seasonal as retailing.
Contact center specialists also can invest in the latest technology, offer expertise on how to train and monitor agents and provide customer service when a retailer’s offices are closed-or when the lights or phones go out. They also can relieve retailers of the burden of continually hiring and training agents, a big consideration given that turnover in U.S. contact centers averages around 33% a year, according to ContactBabel, a UK-based research firm that focuses on contact centers.
But most retailers and other organizations keep their contact center work in-house for a simple reason: they don’t trust others to provide their customers with quality service.
That fear is not necessarily justified, say online retailers that have outsourced all or part of their customer service work and some consultants. But a successful outsourcing relationship requires careful investigation before closing a deal, and careful monitoring and close collaboration thereafter.
That starts with a detailed service-level agreement that sets specific performance goals and makes clear how they will be measured. It also includes providing the outsourcer and its agents with as much product information as a retailer would provide in-house personnel, and, perhaps trickiest of all, making the outsourced agents feel like part of the retailer’s team.
The aim is to gain the benefits of outsourcing, but still have customers feel like they’re being served by employees of the retailer who are knowledgeable and enthusiastic. “It has to be transparent to the customer, because we really are the same company,” says Dino Martin, senior vice president of operations at multi-channel toy retailer FAO Schwarz, which uses outsourcer Global Response to provide customer service.
Outsourcing on the rise
While most companies of all types handle customer service in-house, outsourcing is growing steadily, if not explosively, according to a report last year by Milwaukee-based asset management firm Robert W. Baird & Co.
That report estimated 20% of the $300 billion spent worldwide on contact centers in 2006 went to outsourcers, and projected that will grow to 26% of a $400 billion market by 2011-or from a $60 billion-a-year market to $104 billion in five years. For retail and consumer services companies, spending on outsourced contact center services will grow by 14% a year from 2006 through 2011, Baird predicted.
Contact center outsourcing is growing for the same reason outsourcing as a whole is becoming more common, says Les Cheek, a managing director at Baird. “Outsourcing allows a company to focus on its core competencies while other things that may be critical to the success of the business are done by people who do them all the time, the contact center companies,” he says.
While the Baird report does not break out online retailers, some contact center outsourcers are gaining a lot of business from web merchants. For instance, Toronto-based outsourcer 24-7 INtouch is growing at 50% or more a year, and more than 75% of its small and mid-sized clients are online retailers, says CEO Greg Fettes.
The starting point for any outsourcing deal is a service-level agreement that includes key performance metrics, such as how quickly calls will be answered, how long calls will take and an acceptable abandonment rate.
FAO Schwarz wants 90% of calls answered within 20 seconds. That’s better service than most companies offer: A 2007 ContactBabel cross-industry survey of 204 U.S. contact centers found the average time to answer is 42 seconds, although a quarter of companies said they typically answer in less than 10 seconds.
As for abandonment rate, FAO Schwarz says no more than 2% to 3% of callers should hang up before an agent answers, Martin says.
But Roots Canada, which sells high-end leather goods and Olympic team-branded apparel, sets an abandonment rate goal of less than 1% for its outsourced provider, PFSweb. “We get a lower volume of calls, and we want to super-serve those calls,” says James Connell, director of e-commerce, digital marketing and new media at the Toronto-based multi-channel retailer.
While performance goals are standard practice, some goals can be counterproductive, says Chris Carrington, president and CEO of outsourcer Alpine Access. “We have some retailers who say you have 240 seconds to handle this call, and if you go four minutes and 30 seconds we’re going to impose a penalty,” he says. “But if you average 4 minutes and 15 seconds but get 25% more revenue per hour aren’t you glad I spent 15 seconds more?”
To avoid that trap, Vermont Teddy Bear measures revenue per minute on the phone, which gives credit to agents who spend extra time-as long as they regularly close the sale.
The call length is important because in many cases a retailer is charged by the minute. Vermont Teddy Bear, pays outsourcers from 50 cents to $1.20 per minute an agent spends on a call, Powell says. At peak times, when he knows he can keep agents busy, Powell contracts for dedicated agents and pays them by the hour; rates range from $24 to $40 per hour, he says.
See for yourself