January 22, 2001

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Redefining Business

The High Price Of Self-Service

Letting customers get answers directly through the Web may not reduce call-center costs

By James K. Watson Jr. and Joe Fenner

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he Web was supposed to provide the best of both worlds: better service and lower cost. By creating self-service Web sites, companies would be able to give customers the information they demanded around the clock and in the most useful form, while at the same time lowering call-center volume.

It's not quite working out that way.

In fact, the customer self-service trend is producing a much different dynamic. Here at Doculabs, our clients that provide customer self-service are seeing an increase in call-center volume. In addition, the nature of the calls that started with a self-service transaction has gotten more complex than general inquiries.

This creates an unexpected Catch-22 that has been observed by our recent case study work with financial-services companies. As these businesses provide more self-service capabilities, the volume of calls increases. These companies respond by providing even more robust content to customers online in another effort to reduce call volumes, only to find that inbound phone inquiries again increase in volume and complexity. Here's why:

Most companies staff their call centers with the intention of having less-experienced customer-service representatives handle 80% of the call volume. These generalists can adequately handle most general-purpose inquiries, such as checking account-balance information or changing a customer's address. This approach of using a pool of generalists for basic requests gives companies a cost-effective means to satisfy the majority of inquiries.

The remaining 20% of inquiries that are too complex for general-purpose representatives are routed to more experienced specialists. For example, questions about detailed options in a financial-services plan, requests to transfer funds to outside parties, or advice on investment options most likely are too complex for generalists to handle. These calls are more expensive for the company to address because a specialist is required or because the nature of the inquiries is unique and it's not economical to train generalists to handle these inquiries. Thus, as the complexity of an inquiry increases, the cost to service the request also increases.

Many companies use their Web sites to try to reduce call volume for basic inquiries, with the goal of offloading a portion of the basic inquiries that take up most of the call-center operation's resources. Even with a pool of generalists, call centers are expensive to maintain, and any reduction in volume will result in savings.

In theory, adding self-service as a way to offload phone service is a sound approach. If a company fields 1 million calls per year and can move 20% of those inquiries to a customer self-service Web site, that's 200,000 calls that don't require human intervention. If each call costs $11 to process, and if each Web inquiry costs only $3 to service, the business will save $2.2 million in phone service costs, while adding only $600,000 in Web self-service costs. That's easy math--a net savings of $1.6 million.

In reality, however, half of the inquiries that start at a self-service Web site may result in a call to the customer-service center anyway. The rich content available in the self-service application prompts more questions, and the nature of the inquiry becomes more complex, so the cost to service it increases.

Using our example, if 100,000 Web visits turn into complex inquiries, the company will incur $1.1 million to process them (assuming $11 per call). However, these calls are inherently more expensive to service than our baseline of $11. If the cost of these calls reaches $16 to service, that's $1.6 million in cost. This quickly dissolves any savings derived from implementing online self-service.

Costs are certainly a crucial issue for financial-services companies as competition heats up and the demand for Internet-based services grows more slowly than some expected. For example, earlier this month, Ameritrade Inc. said it was laying off 9% of its workforce in an effort to cut costs when its market didn't grow as quickly as expected. But the importance of this issue isn't limited to financial services. The current economic environment is placing an increased focus on profit for all online businesses, so the nuts-and-bolts issues of cost control are rising to the forefront.

Balanced against the cost issue, however, is the fact that companies need to consider that they are doing the right thing by providing customer self-service, even if they still experience an increase in call-center activity. This demonstrates that customers are engaged, interested, and willing to contact the business to resolve their issues or increase their activity as a customer. For these companies, the key is to staff customer-contact centers with the right people, leverage technology to handle these inquiries in an automated fashion--and capitalize on upselling and cross-selling opportunities. That's true no matter what communication mechanism the customer chooses to use.

All this is occurring in a setting where customer standards are rising all the time; the time when buyers might cut poor-performing Eżbusinesses some slack out of a sense of novelty has passed. Customers expect to get extremely detailed service via any communication channel, and they don't expect major differences from one channel to another. They assume a company will know them and treat them the same way even if they use the phone one day and the Web the next. For companies that provide customer service, jumping on this trend has made great sense: Give customers access to the same information via multiple channels and give them the ability to help themselves where possible. That would both provide customers what they expected and help scale back the cost of call centers.

Of course, this is easier said than done. Most companies started with different infrastructures for handling inquires in call centers, Web sites, E-mail systems, retail outlets, and other in-person or walk-up facilities. Companies were organized based on what was convenient for them--channels, product lines, geographic regions--rather than around the customer. Until recently, any level of data sharing across these channels was considered an advancement.

This brings us back to the generalist customer-service representative in the call center. With the right technologies and processes, less-expensive generalists can be used to handle increasingly complex inquiries. The key is to institute the processes and pick the right technologies to let you provide the ideal servicing strategy while also managing your costs.

The technology to help companies start achieving this goal does exist. Tools such as knowledge bases that prompt service representatives, E-mail response utilities, and online moderated chat can help generalists play an increasingly large role in servicing complex requests across any medium. Vendors such as Avaya Inc. and Nortel Networks Corp. are making great strides in providing such capabilities within their customer-relationship management systems.

With the right processes and tools, the "efficient frontier," the level at which generalists can efficiently service inquiries, starts to expand. As complexity grows, so, too, does the need for generalists to service these inquiries, or costs begin to escalate. Increasing the complexity of questions that generalists can handle will result in better utilization overall and lower cost.

The next step for customer-interaction centers is to understand the interdependencies of the multiple channels of customer support. Simply recognizing that multiple channels can be leveraged and integrated seems elementary. But measuring the impact that changes in one channel can have on another is the key to the next-generation CRM success.

Being able to understand the dynamics of interchannel dependencies will be the key to moving from a reactionary position ("Call volume is going through the roof. Now what?") to predicting the impact of a change to one dimension on the delivery strategy of the others.

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James K. Watson Jr. is president and Joe Fenner is a senior technical writer at Doculabs, an independent research and advisory firm that helps companies choose technologies and strategies for E-business. You can reach them at info@doculabs.com or on the Web at www.doculabs.com.

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