Back-up call

The growth of the Internet has led many companies to believe call centres are a thing of the past. But there’s no substitute for human interaction, as many have found to their cost.

Open almost any newspaper or magazine and the chances are you will find an advertisement or article about an e-commerce launch. The growth of the Internet and level of investment in online ventures are remarkable, with few organisations doubting the importance of having a strategy for the new digital media.

Buoyed by the apparent success of sites such as, the real value of Egg and paper value of Freeserve, the potential for making money in the digital world seems enormous. Businesses increasingly believe customer relationships can be best built by leveraging Web-based channels. According to research by Andersen Consulting in 1998, use of the Net to learn about customers will grow by 430 per cent over the next five years.

What is remarkable about this rush online is that many companies have little or no experience of interacting directly with customers in other channels. Fewer than four out of ten companies in the UK have introduced a call centre, for example, yet Andersen Consulting expects their use to learn about customers to grow by 85 per cent in the same period.

Before call centres even entered the mainstream, there are already predictions of their demise.

Such predictions have been led by the economic consultancy Business Strategies, which in May forecast large-scale redundancies among call centre agents as many of the transactions they carry out by phone migrate to the Web. “No longer will it be necessary to speak to someone to book a holiday or buy clothes. Such services will be available at the push of a button,” managing economist Clare Reid says.

Evidence of this migration can already be found. The best-known example is Egg, which within five months of its launch moved to Net-only applications for its savings account. Although it always planned to offer dual access channels, with the Web being used to acquire customers and the call centre to service them, the company had to act early to protect service levels in the call centre and keep costs down.

It is cost reduction that most supports the Net-first argument. The most frequently quoted – or rather misquoted – figures compare transaction costs between retail outlets, call centres and online on a ratio of 1:0.5:0.1 per action, respectively. But American Banker estimates that a transaction at a teller costs $1.07 (64p), while online the cost is 21 cents (13p). While it does not provide a figure for the call centre, this is likely to fall halfway between the two.

This reduction in overheads is what fuelled the growth of call centres in the first place, especially in financial services, as it allowed companies to replace expensive retail outlets and staff with cheaper telephone-based services. Now that same logic is being applied to the replacement of call centres with Websites.

Craig Proctor, director of business support services at Experian, says: “Every client has got it in mind, particularly clients in financial services and insurance.

“At the moment, clients know it is something they should be looking at. However, they have no clear strategy about how to implement it.”

He believes advocates of Websites as a substitute for call centres are premature in their thinking. With about 17 per cent of the population able to access the Net – “and only three per cent who know how to use it” – there is a real danger of locking out a potentially large customer base.

But what really gets in the way is Website performance. “There is a distinct lack of clarity regarding bandwidth, which currently prevents you from doing what you would like to do. Interactivity on the Net is not as practical as you might expect when viewed from the technical side of things,” Proctor says.

Distribution curve

Digital television is more likely to deliver the speed of interaction necessary to fuel e-commerce than PC-based Net connections. But the distribution curve of this technology will be flatter than most predict until the decision is taken to switch off the analogue signal. In the meantime, the customer’s experience of Websites is likely to be one of relatively slow connection, performance and delivery.

Hillary Shepherd, marketing director at Omega Marketing Services, a full-service marketing support company with many clients in the travel trade, believes new channels will begin to infringe on existing ones. “There will obviously be an impact. The biggest area is likely to be straightforward data collection, such as the name and address for a brochure request,” she says.

At present, clicking through travel sites is one of the top three uses of the Net. But rather than being a substitute for brochures, this augments them. Many, if not most, consumers want the opportunity to look at destination details while sitting in their armchair, rather than in front of a PC. Capturing prospect data online makes sense, not least because it is cheaper than an automated phone call.

This repositions the call centre as the provider of more complex customer support. “There is a need for the agent to be more informed about the product or client in order to provide value-added services. There is a change in emphasis,” Shepherd says. “But there will still be a need to have telephone back-up. You won’t be able to get away with not speaking to customers.”

One of the main issues when using a Website is that it puts the onus on the browser to do all the work. Whether inputting information or defining search terms, you have to go along with the site rather than use your own instinctive approach. During a phone call, agents who have been empowered to deal with customers through call outlines, rather than scripts, can guide a caller and respond dynamically to what they say.

In this age of relationship-driven marketing, it is an important dimension. According to a recent study by Net Effect, 67 per cent of transactions on the Web are never completed, so relying on a site to bring in customers could be a high-risk strategy. For all the cost, the telephone delivers a near 100 per cent complete transaction rate.

But outsourced call centres are having to adapt. “We’re looking at an enhancement to allow us to do e-commerce, so we can handle the Net side of our client’s business,” says Stephen Wigg, managing director of Readycall.

He believes an opportunity exists for third-party call centres because many e-commerce ventures are start-ups – either new businesses or divisions of existing ones. Wigg says: “Most companies looking at this side of their business create a whole new department which hasn’t got the skills. It is easier for us to say we can handle it.”

Arguing that automated interactions on the Web are unlikely to remove the need for human contact by phone, he points to interactive voice response systems: “Clients are now going back and looking at using live operators to handle in-bound calls. The reason is they are the only people who can resolve complex queries.”

Relying on automated services may even result in higher costs. When Fidelity Investment launched an online banking service in the US it found that for every Net transaction, the site generated three calls to the call centre. Many companies in the UK could experience the same thing. Proctor adds: “When banks in the UK move to Net banking they rely on customers to type in their password. If they get it wrong three times, they have to dial in to have it re-keyed into the system. So the call centre is bombarded by people who’ve forgotten their code.”

Call bombardment

This is devastating for the bank concerned because it will have downsized its call centre in anticipation of reduced traffic. The remaining agents struggle to cope with the troubleshooting calls, meaning service levels for more complex and potentially high-value phone transactions are reduced.

This is not to argue that the Net will not become an important new channel to deliver services. The question is whether it is a genuine substitute for the phone channel, and how real the cost savings will be. The business case for online-only delivery needs more careful scrutiny. In the US last year, online banks signed up 6.2 million new customers, but 6.1 million signed off from their existing provider.

At this level of churn, few customers will have become profitable, even given the low transaction costs associated with the Net. With the launch of – the Cooperative Bank’s Net service – a 24-hour, seven-days a week call centre has been set up. If you still believe a Website can replace existing channels, try to find a Net service provider that does not also operate a call centre to offer customer support.

David Reed is author of “Call Centres – The Next Generation”, published by FT Retail & Consumer.

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