July 26, 2010, 3:09 PM

The right connection

When it comes to customer contact operations for U.S. online retailers, how important is culture?

When it comes to customer contact operations for U.S. online retailers, how important is culture? Is having staff that knows the idiosyncrasies of the U.S.-version of the English language and can veer away from a script worth the extra money it costs to hire U.S. staff vs. outsourcing to an underdeveloped country?

One e-retailer I interviewed earlier this month has tried both and says in-house is the way to go. Hayneedle.com recently spent a substantial amount of cash to not only bring its entire contact center staff in-house, but also to build a brand new facility for the 140 employees.  Hayneedle had been outsourcing about 25% of its contact operations to Guatemala, but recently put all customer service staff on the payroll. Hayneedle’s route wasn’t cheap. Its lease costs between $336,000 and $560,000 per year, and the one-time improvements cost at least $1 million. Add to that the cost of each work station and, of course, the paychecks.

Hayneedle, however, says the investment is paying off—as of late June, revenue from its contact center operations is up 30% over the same period last year. It says having staff in-house enables it to better engage with customers and build brand loyalty and, of course sales.

Still, the cost savings with outsourcing can be tempting. One analyst I talked with told me e-retailers on average can save 30% from outsourcing. Another figure from market research firm Datamonitor puts the benefits, taxes, technology and other costs for the average contact center worker in India at about $13.50 per hour compared to $27.80 per hour for U.S.-based agents.

I, probably like many e-retailers, am on the fence. Those cost savings are steep. And I wonder if with the right training and proper monitoring, outsourcing could be a viable option. But then again, I wonder if all the training and the cost to relocate a few U.S. employees overseas to manage the operation makes outsourcing nearly a wash with having U.S. staff?

Another point for in-house: Nearly everyone I know has some frustrating tale involving outsourced call centers---including myself. Recently, when I had an issue with a trip I had booked through a travel web site, I encountered staff who were unable to understand or handle  problem. That’s because it wasn’t straightforward. The hotel I had reserved was closed due to storms and I wanted to change my flight to a different location. However, in doing so, I was hit with flight change fees I thought should be refunded given the circumstances.

Ultimately—several e-mails and phone calls later—my issue was escalated to the U.S. team where it was finally resolved but I was left a bitter, frustrated customer. What’s more I highly doubt the company saved any money as an internal team wound up stepping in anyway. A friend works at an online travel company and constantly complains that a great deal of company time is spent hand holding its offshore team. If an issue arises that is not in the training manual or a customer asks a question that is not part of a script, the question is bounced back to U.S. staff. And, he says, that happens a lot.

What I have concluded from my research and interviews is that the customer service issue isn’t black and white. For example, Pat Perdue, director of contact center operations for marketing communications agency Draftfcb explains that there are some hybrid options. Larger retailers that have tens of millions of calls coming in each month may want to outsource the more basic tasks such as updating an address on an account to an inexpensive overseas center. Then, he says, retailers can pay more for more in-house staff to handle pressing inquiries or complicated issues such as customer service problems or sales. I concur. If my customer service call had been directly routed to an in-house staffer who could understand and address my issue immediately, I would have been a much happier customer.  There’s also outsourcing to a U.S.-based call center or testing out agents working from home. Both these options could eliminate the language and culture barriers and save on overhead.

The right approach also can vary with each company. Hayneedle, for example has a unique business model: it operates 220 niche e-commerce sites. That’s a lot for retailers speaking English as a second language to get their arms around. I’m wondering how many Guatemalans are familiar with Wine Racks enough to answer specific questions for a customer calling from EWineRacks.com? Same for ChocolateFountains.com and JustCocoClocks.com. Perhaps outsourcing overseas would work for a smaller e-retailer with fewer SKUs.

I’m curious to know if any of you have outsourced customer service abroad, and the lessons you have learned in the process. After all, you are the retailers experiencing it firsthand.




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