Talking It Up

As its name implies, TechnoScout.com sells high-tech equipment and gadgets. The company likes to project a suitable image to its equally high-tech-oriented audience and so e-commerce managers are open to new technology. For instance, customers accessing the site get a pretty slick special-deal offer that appears out of nowhere and floats across the screen. Thus when live online chat became an option for customer service, TechnoScout was quick to try it. It was just the kind of thing that TechnoScout’s customers would understand quickly and appreciate.

And they did. Customers who engage in live online chat with TechnoScout’s customer service reps are twice as likely to make a purchase as all web site customers and spend 30% more per purchase than all other customers. “Live chat has been great,” says Joel Skretvedt, director of Internet operations for TechnoScout, the consumer brand of TechnoBrands Inc., Colonial Heights, Va. “We get $40 more when a consumer is involved with live chat.”

TechnoScout’s average sale closed through live chat is $175, compared to $135 for all other sales. Moreover, it converts 113% more site visits into sales when consumers use live chat.

Live chat is gradually becoming more popular throughout the retail industry as merchants learn to leverage an evolving technology, including what’s known as software-driven virtual chat, and as consumers grow more comfortable with it. Although less than 5% of retail web sites currently use live chat, other figures point to growing use. Gartner Inc., the Stamford, Conn.-based research and analysis firm, reports that 40% of web sites representing all industries use live chat. And a recent Nielsen/NetRatings study reports that more than 41 million households use instant messaging, the basis for live chat. That’s 40% of all web users.

Instant gratification

“You can’t emphasize too much the American need for instant gratification,” says Sharon Ward, vice president of enterprise applications and head of the CRM group at Framingham, Mass.-based Hurwitz Group consulting firm.

“Live chat is getting more popular and it will likely become standard on web sites. Live chat customer service can help retailers give that personal touch that consumers want without the expense of the real personal touch.”

The benefits of live chat are hard to ignore. If used properly, it can lead to higher conversion rates and higher sales, while also improving—and cutting the cost of—customer service. And the cost of implementing live chat is low, retailers say. Further, the nature of Internet technology itself is causing consumers to demand such service. “E-commerce allows customers to buy at all hours, so they expect to be able to talk to a live person at all hours,” says Marcia Hicks, senior consultant with Kowal Associates Inc., Boston, which specializes in customer service consulting.

Getting results in terms of improved conversion rates and bigger sales, however, takes a highly trained staff as well as intelligent use of technology. At TechnoScout, Skretvedt attributes improved sales performance to a staff of 16 full-time live-chat operators, who are trained in sales techniques as well as customer service, and the ability provided by LivePerson Inc., the New York-based vendor behind TechnoScout’s live chat system, to make product offers based on customers’ click histories.

As is often the case with companies that are quick to embrace a new technology, TechnoScout’s experience with live chat was not always successful. It first implemented a system more than a year ago from New Channel, but Skretvedt says he found it limited the number of chats reps could engage in with customers. While New Channel would typically engage only about 20% of site visitors, or those who appeared most likely to make a purchase, “we wanted to engage everybody,” Skretvedt says. So last spring he switched to LivePerson, which is designed for a broader range of chat engagements. LivePerson ended up buying New Channel in July, receiving a customer list including a cross-section of Global 2000 financial service, telecommunications and software companies based in the U.S. and Canada.

The change to LivePerson technology was worth it, Skretvedt says. Within 45 days of the switch, he notes, TechnoScout nearly doubled the number of gross sales resulting from live chat sessions.

The live chat up-sell

TechnoScout uses clickstream data to support sales efforts by live chat reps as well as to present new advertising promotions to customers.

TechnoScout’s live chat staff gets instant updates on a visitor’s click history and demographics, enabling reps to make the most appropriate offers while engaging in chat with the customer. “A live chat rep can see where on the web you came from, how long you had been there, if we chatted with you before, and then recommend products you’re most likely to be interested in,” Skretvedt says.

TechnoScout processes over 1,000 live chat sessions per day, Skretvedt says. Sundance Catalog, which sells housewares and jewelry and thus has a less tech-oriented offering, handled about 240 live chats a day during the last week in June, up 65% from a year earlier. Sundance has learned that live chat can support a multi-channel selling strategy: Its heaviest chat volumes occur right after a new catalog mailing.

In addition to higher conversions and a higher spend, benefits of live chat may include the lower cost of chat compared with customer service phone calls, though savings can vary widely based on the type of service customers are requesting. “We have customers whose costs have gone from $6 per customer service incident to about $1.10,” says Mike Lande, CEO of InstantService Inc., Seattle, which provides the live chat technology for Sundance.

But that’s far from a universal experience, experts say. For example, companies that run live chat technology on their own systems are more likely to run higher operating costs per session than companies that outsource their operations, says Esteban Kolsky, an e-services analyst at Gartner.

In a study of 1,200 companies across different industries that use live chat, Gartner found that live chat sessions averaged $7.50, compared to $4.20 for telephone calls.

“For online chat to produce the numbers that vendors are promising, you need to reach certain levels of economies of scale,” Kolsky says. “But it’s hard to reach that.” Although live chat systems may be designed to let a single rep handle six or more sessions simultaneously, he says, “in real life they can usually handle two or three chats at one time.” Consultants META Group Inc. of Stamford, Conn., urges retailers to compare the time it takes a rep to handle a number of chats simultaneously with the number of calls an experienced call center rep can handle.

High tech, high costs

In addition, chats may increase the number of customer service inquiries. Similar to what banks experienced with ATMs, an automated service may be creating additional demand; not every transaction displaces one that would have taken place with a person. Kowal Associates says contacts increase 15-40% with easy-to-use web options.

Kolsky adds that costs can rise sharply in relation to the complexity of a call or chat session — as high as $18 per telephone call and $26 per live chat session for highly technical questions.

Sundance Catalog, however, says live chat provides better customer service because its live chat reps can operate three to five chats at a time, giving customers the impression they’re receiving fast, personal attention. “One thing Sundance tries to do is to not always focus on the cheapest thing; we do what’s best for the customer,” says Tim Taggert, customer call center manager for Sundance. “Live chat capabilities include both.”

To increase customer feedback, InstantService gives online retailers the capability to survey customers following a chat. Typical questions ask customers to compare the live help service to other services. The response has been mostly positive, says Taggert, who has received comments such as: “Love the live customer service!” and “A great service, especially since it’s not always convenient to call.”

Different skills

IRCE 2008 Conference Multi-Media CD-ROM

Adding live chat for customer service is not a technological challenge, Taggert says. On its web site, Sundance places four lines of HTML code that can be found in the Account Administration side of the InstantService product. A customer who clicks on this link from the Sundance web site enters a chat queue. From the Agent Console, a rep selects the customer from the queue to engage in chat.

InstantService’s product color-codes customers based on how long they’ve been waiting. “We have all the reporting functionality, such as the length of the chats, how long a customer has been waiting and transcripts that tell agents how well they’re doing in answering chats,” Lande says.

That feedback only underscores that live chat demands new skills of customer service reps. For example, live chat reps must have strong writing skills and be aware of certain web-related norms, such as that writing in all capital letters can be interpreted by the customer as a reprimand, says Hicks of Kowal Associates.

Among requirements at Sundance is the ability to type more than 35 words per minute. The company evaluates reps’ grammar in letters to customers or on phone calls to determine which employees are suited to online chat, says Russell Wigren, Sundance’s Internet customer service manager.

To help move chats along quickly, Sundance Catalog provides a bank of 15 chat responses and 20 longer pre-written responses to help reps answer common questions quickly—and with the appropriate tone—for its eight full-time live chat operators. The call center also has 15 call operators who are trained to handle chats if the volume overloads the chat operators, Wigren says. Typical answers include how a seller can get products in the catalog, which requires one of the longer chat answers, as well as such standard ones as, “Please hold on while I research that for you.” But most chats rely on the operators’ communications skills.

Multi-step strategy

TechnoScout says it has no trouble staffing its live chat department. Staff members generally come from among the company’s 100 telephone service center reps. They receive extra training in marketing and product technology and stand to make higher pay plus commissions.

Using live chat and related systems most efficiently requires a multi-step strategy that brings inquiring customers up a ladder of customer-service options. The ideal approach, particularly for cutting operating costs, says Gene Alvarez, analyst and vice president of electronic business strategies at META Group, is to have customers seek answers to their questions first on the retailer’s web site; then in an automated, software-driven “virtual” chat session; next in a live chat session; then in an automated telephone voice-response system; and finally in a telephone conversation with a live customer service rep.

Understanding the variables

Retailers are also still learning how to leverage their new technology to engage customers in increased purchasing activity. Skretvedt, for example, admits that TechnoScout still needs to learn how to maximize its use of the marketing opportunities presented by its live chat. “We haven’t utilized it the way we should,” he says. The company plans to hire a full-time marketing professional to determine such things as how far to drill down into a shopper’s click history to generate sales pitches that can be offered through live chat as well as other more traditional means. “There are so many variables: When’s the best time to make an offer? How much of a discount is too much?” he says.

Nonetheless, TechnoScout is already realizing a strong return on investment, Skretvedt says, noting that he can typically recoup the $2,000 monthly license fee in four days through extra sales.

The LivePerson system has video and voice-over-Internet capabilities, but Skretvedt says these have not proved to generate additional benefits in tests. For one thing, broadband is not widespread enough, even among TechnoScout’s customers. But even site visitors with broadband and computer microphones show little desire for adding voice or video to their live chat sessions.

Voice and video may be overkill, at least for now. But with live chat, the web has created a new reality in customer service, one that can’t be replicated in other channels. And, as TechnoScout’s experience shows, customers are embracing it. “People are just very comfortable using live chat,” Skretvedt says.

paul@verticalwebmedia.com

It’s not just plug-and-play

While the technology of a web-enabled call center can help make customer service reps more effective, there are a number of questions that need to be answered before implementing a web-enabled call center, says Kowal Associates, consultants in customer service:

— Are you prepared to have service available 24/7? Offering web-based service some of the time may not be enough.

— Do you want to build this capability in-house, or will an outsourcer be a better solution?

— What level of service offering are you prepared to support — e-mail, chat, voice, co-browsing? Each has increasing complexity.

— Do you have phone reps with web skills? Phone reps weren’t hired for their writing ability.

— How sophisticated is your customer base? What will they expect in web customer service?

— How much quality control do you need over web communications? Unlike phone conversations, e-mails provide an audit trail showing what the company said.

— Are your current supervisors and managers equipped to deal with multi-media?

— Is your telephone system ready to support data as well as voice? Do you need an upgrade or a forklift?

— Does your technology allow home-based web agents? It’s a great way to accommodate after-hours support needs.

— Are you ready to have customer service contacts increase by 15-40%? Many web interactions are incremental and don’t replace a phone call.