Profit from Inbound Customer Service

Do you view inbound customer service calls as an unfortunate expense, and take steps to minimize them? If so, you may be surprised to hear that our testing shows these calls can actually generate a PROFIT

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Synopsis

We recently released the audio recording of our clinic on this topic. You can listen to a recording of this clinic here:

Making a Profit from Inbound Customer Service

It would almost be amusing if it weren’t so damaging. We have all seen web sites where they go to almost any length to discourage a user from picking up the phone to ask a question, or cancel a sale or subscription.

Users are directed to knowledge bases, FAQ pages, and user forums. The site owners appear to be desperate that a user doesn’t tie up one of their customer service agents.

Why? Because customer service calls are seen as an expense that should be minimized.

Our recent testing shows a very different picture.

By providing call-center operators with an incentive and the necessary instructions and support, we were able to save dozens of subscriptions and up-sell new services.

The bottom line? At the end of our test, the calls received resulted in the generation of additional income.

Yes, you can make money by actually ENCOURAGING web site users to pick up the phone and call you.

Findings

The challenge that presented itself before testing was this: Could we actually generate revenue with inbound customer service calls?

Our testing platform was a network of subscription-based sites offering a variety of services on a monthly paid-subscription basis. Prior to the test, the customer service reps for these sites were focused exclusively on “solving problems” and dealing with customer questions or complaints.

Test Summary:

  • We used a sample size of 662 incoming customer service calls over a one-week period.
  • Prior to the test we conducted a half-day customer service and sales training session with the customer service representatives focused on changing their role perceptions from one of exclusively problem solvers to that of customer advocates and salespeople.
  • We set up a contest for five customer service representatives and offered a $100 prize to whoever had the most saved cancellations and up-sells.
  • We awarded 1-4 points for each successful save or up-sell.
Inbound Customer Service Micro-Test – Success Rates
Rep. Calls Site 1 (Saves) Site 2 (Saves) Site 3
(Trial)
Site 3
(Up-Sell)
Total Success Rate
1 222 20 3 3 3 29 13%
2 214 18 10 2 1 31 14%
3 105 9 1 3 1 14 13%
4 49 8 3 1 0 12 24%
5 72 2 4 1 1 8 11%
Total 662 57 21 10 6 94 14%

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What You Need to UNDERSTAND: Five customer service reps were able to make 94 saves or up-sells out of 662 total calls, for a total success rate of 14%.

The terms of the contest were as follows:

  • Site 1 saves were worth 4 points each.
  • Site 2 saves were worth 2 points each.
  • Site 3 “trial” up-sells were worth 1 point each.
  • Site 3 “full” up-sells were worth 3 points each.
Inbound Customer Service Micro-Test – Points Earned
Rep. Calls Points
Site 1 (Saves) Site 2 (Saves) Site 3
(Trial)
Site 3
(Up-Sell)
Total
1 222 80 6 3 9 98
2 214 72 20 2 3 97
3 105 36 2 3 3 44
4 49 32 6 1 0 39
5 72 8 8 1 3 20

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What You Need to UNDERSTAND: Rep 1, with 98 total points, received the $100 bonus. In this case, she also fielded the most calls, which gave her the edge over other reps with a higher success rate.

The customer service representatives had the following to say about our initial micro-test:

Rep 2: “I enjoy the customers that start out upset end up happy because they get something for free.”

Rep 3: “I think this is a good motivational tool because there’s a more positive feeling in our customer support unit.”

Rep 4: “I think this gives customers a chance to learn more about our products.

Based on the results of our test, we were able to project the following in terms of revenue and profit. We used the historical performance of each site to estimate total revenue. Following are the specific figures used for our projections:

  • A Site 1 save (preventing a cancellation) is worth $34.95 in average revenue.
  • A Site 2 save (preventing a cancellation) is worth $4.98 in average recurring revenue.
  • A Site 3 trial membership is free but we assume that 10% of the free trial members will convert to a recurring membership with an average lifetime value of $35.
  • A Site 3 up-sell is worth $35 in recurring revenue.

Based on these assumptions, the projected revenue from the test outcome is:

Projected Revenue from Micro-Test
Total Estimated Revenue $2341
Total Calls 662
Revenue Per Call $3.54
Revenue Projected Over One Year $121,732

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What You Need to UNDERSTAND: Each customer service call, which was formerly just an expense for the company, averaged $3.54 in new revenue, as well as increased customer goodwill.

The following table shows the amount of revenue generated per hour (and projected over one year) based on the micro test we conducted.

Because these customer service agents were all previously employed full-time, and used to handle customer support issues, the effective hourly rate (for this calculation) is $0/per hour.

Projected Profit Impact Per Hour Per Agent
Average Calls Per Hour Per Agent 1.5
Revenue Per Call $3.54
Per Hour Revenue and Profit
Revenue Per Hour Per Agent $5.31
Effective Hourly Rate $0
Profit Per Hour $5.31
Per Year Revenue and Profit
Revenue Per Year Per Agent $11,044
Additional Expenditure Per Year $0
Profit Per Year Per Agent $11,044

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What You Need to UNDERSTAND: Because the existing customer support agents were being underutilized, we were able to add $11,044 in profit per agent.

Each agent has additional responsibilities, but still we observed that as a whole the call center was not operating at full capacity. In addition, a large percentage of the aggregate agent capacity was being used to answer email support tickets and processing customer charge-backs.

If we assume that each rep could on average field 15 calls per hour, we see that the profit significantly increases.

Projected Profit Impact Per Hour Per Agent
Average Calls Per Hour Per Agent 15
Revenue Per Call $3.54
Per Hour Revenue and Profit
Revenue Per Hour Per Agent $53.10
Effective Hourly Rate $0
Profit Per Hour $53.10
Per Year Revenue and Profit
Revenue Per Year Per Agent $110,448
Additional Expenditure Per Year $0
Profit Per Year Per Agent $110,448

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What You Need to UNDERSTAND: By increasing the number of calls and operating the call center at full capacity at all times, this business could generate as much as $110,448 of yearly profit per customer service agent.

For more on how to calculate these numbers for your own business, see our spreadsheet tool, below.

When implementing a customer service operation that takes an active approach to saving and up-selling, keep in mind the following key guidelines:

  1. The primary factors that will determine the profitability of your operation are labor cost, profit on saves and up-sells, average calls per hour, and so on.

    To help you calculate the potential profitability of your customer service efforts, we have created a spreadsheet that lets you plug in the numbers and measure your success:

    MEC_Cust-Svc_Analysis_Tool.xls

  2. Incentivize your agents. We have already mentioned contests, but you may also want to consider using actual commissions. This may allow you to pay your agents a lower hourly wage while actually encouraging them to make more money. A well-crafted commission structure is a win-win situation for employers and employees.
  3. Make incentives fair to everyone. If some reps are unable to field as many calls, base any contests on percentage of saves and up-sells instead of sheer volume. In addition, pay contest incentives frequently (perhaps even daily), so everyone feels like they have a good chance of winning.
  4. If your team is big enough that they require a customer service manager, the manager should be given incentives as well, based on the performance of the entire team.
  5. Small, non-intrusive bells can be used to build the energy in the room as saves and up-sells occur.
  6. Give your customers a reason not to cancel. Incentives here will be unique to each business, but may include discounts, additional products or services, and other value-added elements.
  7. Use compelling up-sells. Don’t expect your agents to be able to sell many additional products if the offers themselves aren’t attractive and well-targeted to your existing customer base.
  8. Any “scripts” used for customer service saves and up-sells should continue to be refined and optimized over time. (Ideally, your agents will learn these well and not sound like they are reading.)
  9. Customer information should automatically be transferred from one product to another to allow for easy and quick up-sells.
  10. Make the (toll-free) customer service phone number very prominent on your website and email messages. This will encourage customers to call you and not to make credit card charge-backs.
  11. Furthermore, your call center could handle additional capacity, and workflow could possibly be streamlined by removing or decreasing the email support system, which can be simultaneously tedious and less capable of making saves and up-sells.

Conclusions:

This test was conducted with one company which had a particular group of products.

Can every company achieve the same or better? Maybe. Maybe not. It will depend on the nature of your products or services, and whether you have the option to save sales, up-sell, and cross-sell.

Certainly, you should look hard at your own inbound calls and look for opportunities both to save and make sales.

And keep in mind that not all the benefits from this test are expressed numerically. There were other benefits that are not so easy to quantify, but are also very tangible:

  • We turned unhappy customers into happy customers. Many called in with a problem, and then after the call felt they had been well served and taken care of. The benefits are hard to measure, but they are important. It is often the case that when you turn an unhappy customer into a happy customer, that person will remain loyal to you for a long time. And they’ll tell their friends too.
  • We transformed an essentially negative workplace into a place of opportunity. Agents at the call center were accustomed to listening to unhappy callers who wanted to cancel their subscriptions. How much fun can that be? One agent offered the following: “I like keeping a count so I know how many people I upgraded.” By giving the agents the opportunity to save and make sales, we created a more positive and enjoyable work environment… with all the attending benefits.

Finally, there was one last thing we learned during the course of this test:

KEY POINT: Keep your mind open for testing opportunities.

Often we look at and analyze elements of a business which are already making money, and then conduct tests as part of our plan to improve their performance.

It takes a leap of imagination to look at a business area that is actually costing money, and then ask the question, “Could this be something that actually makes us a profit?”

As is so often the case with the tests we conduct, the key element of learning is this: “Wherever your most entrenched assumptions lie, that is the area to consider testing first.”

RELATED MEC REPORTS:

Literature Review

As part of our research, we have prepared a review of the best Internet resources on this topic.

Rating System

These sites were rated for usefulness and clarity, but alas, the rating is purely subjective.

* = Decent | ** = Good | *** = Excellent | **** = Indispensable

About This Brief

   Credits:

  1. Editor — Flint McGlaughlin
  2. Writers — Brian Alt
    Nick Usborne
  3. Contributors — Jalali Hartman
    Aaron Rosenthal
  4. HTML Designer — Cliff Rainer

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