Closing The Value Gap Through Outcomes Based Sourcing

Mar 05, 2014

This piece of thought leadership was written by Craig Gibson and first appeared on Professional Outsourcing. 

We are witnessing a turning of the tide in customer management outsourcing across all sectors, in both offshore and home markets as the focus shifts from ‘cost’ to ‘value’. 

Throughout the 1980’s and 90’s rudimentary cost reduction was the primary aim of pretty much any outsourced customer management relationship.  Performance was driven by tough productivity targets that focused on the efficiency of the process rather than the quality of service.  And suppliers routinely – and not surprisingly – compromised quality in order to avoid the financial penalties they would incur if those productivity targets weren’t met.

There can be no doubt that customers suffered. But clients suffered too, learning the hard way that customer discontent leads inevitably to customer disaffection and subsequent loss of revenue.

Today, we live in a more enlightened world. Dimension Data, in its Global Contact Centre Benchmarking Report 2013, cited that 88.6% of organisations now see the drive for customer satisfaction as intrinsic to their strategy and 71.6% view the customer experience as a commercial differentiator. 

Vitally, they want their outsourcing partners to add value rather than just reduce cost.  And progressive, enlightened providers are changing their business models to accommodate that desire. They are aligning their performance, not against draconian productivity targets and SLA’s, but against business outcomes that matter; increased customer satisfaction, loyalty, advocacy and spend.

For several years now South Africa has told the world that it can deliver both quality and economy. And for years it has suffered the counter argument that other markets – such as the Philippines – remain cheaper.  And perhaps they are, on the crude calculation of a fully loaded agent seat, but cheapest in this measure doesn’t equate to being the best and I will take time to demonstrate that, when measured in more meaningful ways, they are actually not the cheapest either. 

At Webhelp SA we’re are working in a very innovative way with our clients. This new way of working is based on a single assumption; that every customer experience we deliver should be exceptional.  Under the terms of our contracts, we simply don’t get paid if they’re not.  We have volunteered a contract to our clients in which they pay only for those interactions that meet the performance standards they deem to be ‘exceptional’, measured in terms of NPS scores, first time resolution and various other qualifying targets. 

We deem these to be ‘compliant’ interactions – they ‘comply’ with the performance standards of our client and meet our own expectations for excellence.  These are the transactions that are truly worth paying for, because they have the power to make an appreciable difference to our client’s overall business performance.

In pilots, we have compared our compliant interaction achievement with those typical of one of our client’s previous operations in the Philippines and India, and, on those terms, we most certainly outperform these delivery locations on price.

We expect this to be the contracting model we apply to all our client engagements.  We want to be paid on delivering good outcomes not transactions. From a financial point of view, you might say, we’re taking a risk – if our interactions don’t comply we don’t earn. We’re happy, however, to take that risk because we have absolute conviction that, under our direction and the level of consulting we provide the client with before any engagement, we can build the appropriate solution for our team to deliver exceptional customer experiences.

So, our proposition to the market is clear and is being proven; you may be able to buy cheaper elsewhere, but you will have to compromise quality – and business value – to do it.

And that’s a compromise less and less organisations are willing to make. As early as 2006 research from the customer management consultancy, CM Insight reported that 75% of companies that had placed customer management operations offshore had recorded a distinct deterioration in the quality of the customer experience.

We’ve observed a trend in the last 12 to 18 months of organisations repatriating work from other offshore locations – including India and the Philippines – because of concerns about poor customer experience.  We believe South Africa is in a strong position to benefit from that trend.

There are other reasons, too, why South Africa’s star is on the ascendant.  One reason, I believe, is because in today’s multi-channel world, offshoring must deliver more. 

In recent years many organisations have protected themselves against the offshore quality risk by only offshoring very simple interactions, those that are easy to replicate and perceived to be of low emotional value to the customer. 

That wasn’t an unreasonable strategy when money had to be saved and offshoring looked like the only way to do it.  But it doesn’t hold water today. 

Those simple, replicable, non-emotional interactions no longer need to be handled by a contact centre either in South Africa, the UK, or anywhere else.  For the most part, they’ve been automated, or they soon will be.  Let’s face it; the evolution of online self-service is able to deliver greater cost savings and scalability than offshoring anywhere could ever promise.

Now, that might not sound like good news for South Africa, but it absolutely is. That’s because today, organisations are searching the world for offshore destinations that can handle the complex, individual and emotionally charged one-on-one communications that only an articulate, intelligent, culturally aware and resourceful live agent can deliver.

The quality and economy promise of South Africa has never been so appealing or so urgently needed.

Given that the customer experiences that companies are likely to consider offshoring are considerably more demanding than they were 10 years ago, failure carries a much higher price tag.

Customers, who have already learned to be cynical of companies that claim to ‘value their custom’ but are prepared to deliver sub-standard services from the far corners of the earth in order to save cost, will take their business elsewhere.

Companies in today’s redefined and more constrained economies simply can’t afford to lose customers in this way.  But they still need to look at realistic economic options.  So, I feel sure that the questions that companies will ask of offshoring are changing in South Africa’s favour.  They’re beginning to ask, not just ‘what can I save?’ but ‘what can I gain?’ and ‘how can I protect my customer base and my revenue stream?’

South Africa, with its high quality agents, its cultural alignment and its willingness to go the extra mile, has all of the good answers to those questions. 

Our approach of charging only for ‘compliant’ calls is a step in the right direction – an effort to apply a monetary value to a business outcome rather than an operational transaction.

We will pass on the economies to our clients that this market offers. Certainly, but more importantly, we will raise the game in terms of the value outsourcing can deliver.

We are positioning ourselves to deliver exceptional service across the multiple channels – digital, social and voice – that today’s customers use to interact with organisations.  Already we operate across multiple channels for more than half of our customer base.

We will turn outsourcing on its head by linking our remuneration, and the remuneration of our people, to the delivery of service excellence and transformational change in our clients’ performance, related to customer satisfaction, loyalty, advocacy and revenue. This way we are able to ensure our client’s business outcomes are delivered.

The ability to deliver this transformational change in multi-channel and omni-channel environments depends on an understanding of customer behaviour and how it is influenced.  Technology makes it easy for us to capture the voice of the customer across all channels, but data in itself has little value without the ability to interrogate it effectively and put it to good use.  We have invested in teams of customer insight specialists who turn data in to intelligence and then use it to reduce cost and drive revenue for our clients.  This drives a continuous cycle of business improvement. 

It is my conviction that in the future – in the UK, South Africa or anywhere else – an outsourcer’s currency of true value will be customer insight and business improvement – not the rudimentary mathematics of agent hours.

Our outsourcing proposition is based on our determination not just to replicate, but to transform our client’s operation through insight. Our clients will expect further cost reduction over time and we will contract to achieve it.  We will do so by making the best possible use of alternative channels and by using analytics to identify opportunities for beneficial change, driving out pointless contacts and elevating those that add value.

Clients will expect the customer experience to get better and better.  We aim to be a quasi-consulting business, developing and implementing solutions that deliver a quality experience and not a commoditised call centre business.   By the same token, we will use analytics to understand what their customers want to achieve and how they wish to interact. Then we will facilitate that, making it easier for them to get the services they need and to complete their purchases without hindrance.

Making it easier for customers to make contact, resolve issues and complete purchases can have only two outcomes: It will cost less to serve them and they will be more likely to spend.  And, for that reason, we make Customer Effort the key performance measure for our operations, way ahead of the productivity measures of old.

Elevating an ‘easy’ experience into an ‘exceptional’ one is the source of customer advocacy – the Holy Grail pursued by any sensible organisation.  It requires empathetic agents empowered to deliver informed, relevant responses.

Psychological research repeatedly shows that direct behavioural experiences – contact centre conversations not least – have the greatest impact on customers’ attitudes towards brands.  For that reason, we supplement Customer Effort with Customer Satisfaction and Net Promoter Scores as key measures in our client relationships.

To make the measure precise, we have developed TouchPoint NPS.  That means we contact customers immediately after every interaction – via any channel – and ask about its impact on their likelihood to recommend our client to family or friends. 

As contact centre interactions become more complex, as we shift from pure voice to digital channels, as we concern ourselves not only with ‘managing’ customer journeys but designing them and measuring their business impacts, we will need different and more advanced skills.