With a corded phone clutched in one hand and a spatula in the other, the man gazes anxiously at a piece of meat sizzling on his stove. He’s on the line with his credit card company, but instead of speaking with a live human, he’s stuck in a series of automated prompts. Even as his dinner bursts into flames, he’s unwilling to let go of his phone for fear he’ll miss a chance to speak with the next available agent. He tries to put out his flaming dinner with a broom, only to have the broom catch fire.
This telling exchange between caller and company—part of Citibank’s “Simplicity” card ad campaign—isn’t just a clever send-up of a common customer service problem. It also reflects growing frustration with automated self-service applications that don’t work. Citibank’s response is the “dial 0” campaign, which stresses that it’s easy to call its 800 number and find a real human being. But while Citibank proclaims it will no longer trap callers in an automated loop, most companies are still struggling to improve clunky call center technology that can make it hard to get quick and efficient service.
Organizations that are listening to customer frustration are responding in several key ways: by updating call center technology, by making it easier to reach a human agent if necessary and—in some cases—by moving from far-flung call center agents to at-home customer service representatives. This strategic about-face marks the emergence of a new breed of call center—one that employs technology to connect with its customers, not put them on hold. It also represents a pull back from a trend that started five years ago, when industry leaders such as Dell and General Electric sent their call centers offshore and automated as many calls as possible to cut costs. Companies achieved substantial savings with these tactics, but first-generation touch-tone systems were cumbersome for customers to use and offshore agents were sometimes hard for callers to understand. The result? Customer backlash.
Recent surveys show Americans are vastly dissatisfied with the service they get when they call their bank or computer help desk. Now, forward-thinking companies are realizing that, while they still want to save money, they need to focus more on satisfying customers or risk losing them in droves. To improve communication while reducing cost, they are integrating the existing call center model with newer technologies. These range from voice over IP (VoIP), which makes it easier to oversee a remote workforce but poses some technical challenges for early adopters, to software that sends easy-to-answer calls to an interactive voice response (IVR) system while connecting the most valued customers with complex requests to highly trained agents.
Customers are a company’s most vital asset. For that reason, CIOs need to know about technology that can help their companies improve customer applications and satisfaction. While contact centers are often managed by operations staff, CIOs generally maintain the networks and the systems that run them. They can also be in charge of purchasing and implementing new technologies such as voice recognition, work management systems that track agent schedules, and CRM applications that provide easy access to customer information. Clearly, the CIO can play a key role in fine-tuning call center service.
“All the technologies we need for the next generation of call centers are with us today,” says Steve Boyer, CIO of call center outsourcer StarTek. “It’s a matter of figuring out how to integrate them, adapt them and use them to attract and keep customers.”
The Call Center Grows Up
Shortly after Alexander Graham Bell invented the telephone in 1876, he offered to sell his device to telegraph giant Western Union. Western Union declined and wrote in an internal memo that, “This telephone has too many shortcomings to be seriously considered as a means of communication.”
Western Union was wrong, of course, and companies soon saw the new contraption as an excellent way to communicate with customers. As early as the 1920s, phones started appearing on the desks of those whose primary duty was to deal with customers, setting the stage for the advertising clich¿”Our operators are standing by.” Phone agents didn’t really take off, however, until 1967, when AT&T developed the toll-free 800 service that reversed charges from customers to the companies they were calling. Soon after, the Federal Communications Commission ruled that equipment made by businesses other than the Bell System could be connected to the public telephone system. The decision opened the door for competing companies to develop technologies such as the modern PBX, IVR systems and automatic call distribution systems, which made it easier for businesses to handle large call volumes at a more reasonable cost.
As telecommunications technologies advanced, U.S. call centers boomed. Datamonitor estimated that in 1998 there were 69,500 call centers nationwide. By the late 1990s, however, major corporations sought to cut customer service costs and began to investigate how to save money by moving call centers offshore.
In one of the earliest high-profile announcements, Dell said in July 2000 that it would open a call center in Bangalore, India, and signed on with outsourcer Tata Infotech. Other companies in the United States and abroad followed suit, and the Indian call center industry took off, followed by similar developments in the Philippines, Latin America and beyond.
Customers have been less enthusiastic about offshoring. Many complained that it was hard to communicate with foreign operators due to their accents, and that scripted answers left them frustrated.
A political backlash against offshoring ensued, one reason Dell announced in 2003 that it would bring technical support calls for business customers back to the United States. Dell did follow through on the move. But in March it announced plans to double its Indian workforce to 20,000 over the next three years, a figure that likely includes some call center workers.
Technology hasn’t been a cure-all for customer satisfaction, either. The widespread use of technologies such as voice recognition software and IVRs also left some callers alienated and unhappy. A 2005 study by Opinion Research found just 35 percent of those surveyed said call centers fully met their expectations.
Despite customer grumbling, companies are not giving up on automation. In fact, the call center of the future will likely be highly automated and globally dispersed. The offshore call center industry is growing and companies continue adopting voice recognition, IVRs and other technologies to help them answer basic questions for less money. It’s easy to see why: Transactions that cost $2 to $10 when handled by a human agent cost only 2 cents to 20 cents when automated, according to McKinsey & Co. Today, 79 percent of North American enterprises and at least 50 percent of European companies have IVRs, according to Forrester Research.
Forrester’s report also notes that replacing traditional touch-tone IVRs with some speech recognition technologies provides greater flexibility for companies trying to encourage customer self-service. To avoid caller frustration, however, companies must also make human help available as needed. And despite complaints, the automated agent, or IVR, is catching on as callers get acclimated to such services, analysts say. In fact, according to McKinsey, more than 60 percent of customers favor an automated option for simple interactions.
To ensure good customer service, however, companies must focus not just on how fast the call is answered, but on what happens after it is answered. “If you’re outsourcing and putting in new technologies just to lower costs, you can run into problems,” says Elizabeth Herrell, VP in the telecom and networks research group at Forrester. “It’s not the automation or the outsourcing that’s the problem—it’s the lack of time spent on the details.”
She stresses there is no one-size-fits-all solution to meeting customer demands while saving money in call center operations. The call center of the future, she notes, won’t follow a uniform model—some agents will answer calls in large contact facilities, while at-home agents will be hired as needed during busy periods to provide flexibility. Companies need to try different technologies and tactics while improving agent and supervisor training and tracking customer satisfaction with real-time surveys. “Customers will be unhappy when they can’t get information or when a system doesn’t understand them,” Herrell says.
Your Call Is Important to Us
There’s no denying that automating some calls can save a lot of money for a company and enhance service by helping callers get information such as flight times quickly. However, the investment in newer technologies such as speech recognition solutions can range from a few hundred thousand dollars to more than a million dollars, Herrell notes. The ROI from such investments can come quickly if businesses can answer more calls and avoid putting callers on long hold loops. That’s why companies such as Red Lion Hotels and Countrywide Financial are investing in voice recognition software and other tools that can automate some of their calls.
Red Lion, with annual revenue of $165 million in 2005, is installing such software as a way to save money and provide some self-service for customers seeking simple information like a reservation confirmation. It also hopes to handle unexpected surges in call volumes with automation.
The hospitality and leisure chain doesn’t outsource its contact centers. It employs its own agents at a primary call center for hotels in Spokane, Wash., and it has two others for its ticketing operations. But call volumes can be unpredictable, says David Barbieri, Red Lion’s CIO. During peak times, customers looking to make a hotel reservation or to buy tickets through the concert and event service would sometimes go into an “on hold” loop if an agent wasn’t available. Red Lion was concerned that customers left on hold were likely to hang up and try a competitor.
With Voxify’s voice recognition software, Barbieri expects to handle sudden volume peaks without losing calls. “It’s important the technology works and works quickly so that customers can have a stress-free interaction,” he says.
Barbieri also expects to save $300,000 a year by installing the software, which will go live in stages this year. He is in the process of developing application program interfaces that will link Voxify’s hosted voice recognition service to his two core systems that handle reservation and ticketing transactions. Barbieri estimates that about 75 percent of the company’s ticketing calls can be handled with voice recognition in the future. However, callers can request an agent anytime by pressing “0.”
Experts agree that voice recognition has advanced to the point where it can be an important part of the call center. “But the key is not to penalize the caller when they want to talk to a human,” says David Brandon, senior technical call center consultant for Forsythe Solutions Group.
Two years ago voice recognition software replaced touch-tone IVR applications that frustrated callers at Countrywide Financial, a $15.7 billion specialist in home loans and diversified financial services. The result, says Lior Ofir, Countrywide’s first vice president for emerging technology, is improved performance with more customers completing transactions. The software from Nuance has helped the company achieve a return of more than 300 percent on its $4.5 million investment over the past two years, says Ofir. Still, Ofir knows it’s important to give customers the option of speaking with a live person, especially if they’re doing a complex transaction.
“We don’t believe in hiding the agents,” says Ofir, whose group implements new technologies for the company’s U.S. call centers. “The goal is to give our customers a clear choice.” The new system, he says, recognizes about 300 variations of a request to speak with an agent, ranging from “I want to speak to a human” to “agent.” Callers can also press “0” to connect to a customer service representative or the operator. In addition, Ofir says, the system uses voice analysis to detect when callers are having trouble and will then automatically switch them to an agent.
You Can Go Home Again
While U.S. companies such as Red Lion and Countrywide seek to boost service and cut costs through careful use of automation, others are banking on the human touch. In addition to newer technologies, they are experimenting with the ultimate virtual call center—agents working from their homes in North America.
Companies including Office Depot, Vermont Teddy Bear and JetBlue already use hundreds of home-based customer service agents across the United States and Canada. Home agents don’t always replace offshore call centers at these companies. Instead—as in the case of Vermont Teddy Bear—they serve as extra manpower that swoops in during holidays or seasonal business peaks. They give a company flexibility to handle unusually busy days or even hours. In fact, the number of home-based agents is expected to triple to 300,000 by 2010, says Stephen Loynd, a senior analyst at IDC.
Loynd says one reason the trend—which he has dubbed “home-shoring”—is taking off is because it’s cheaper than outsourcing to a domestic call center. Newer technologies also mean the call center is becoming increasingly virtual. IDC estimates that it costs $31 per employee per hour (including overhead and training) to operate a traditional call center in the United States, but only $21 per hour for a home-based agent. That’s still higher than rates for offshore agents, which start at $10 per hour in the developing countries of Southeast Asia and Eastern Europe, according to Forrester Research.
On the plus side, at-home agents are generally older and better educated, Loynd says. “If you have enthusiastic, hardworking agents with a flexible work schedule, they’ll be better on the phone,” he says. They’re also more likely to stick around. While some traditional call centers report attrition rates of 80 percent to 100 percent annually, outsourcer Willow CSN (which uses only home-based agents) claims an annual attrition rate of just 15 percent.
Vermont Teddy Bear agrees that home-based agents can boost customer satisfaction, although it won’t divulge actual figures. The company, which reported annual revenue of $66 million in 2005, doesn’t automate its calls or use offshore agents. Instead, it operates a small call center in Shelburne, Vt. In addition, it has used home agents from outsourcer Alpine Access since 2000. Most of the time, says contact center manager Chris Powell, the center’s 170 seats are not filled. But the maker of handcrafted bears experiences major peaks in business during holidays such as Valentine’s Day and Mother’s Day and can go from 50 agents to 700 on its busiest days. At these times, home agents help the company respond to orders and shorten customer waits.
Powell says the ability to staff up for short periods of time was more important than cost in the company’s decision to add home agents to its call center strategy. But judging by the average per-order conversion rate (the number of orders per call), home agents excel, Powell says. Last Valentine’s Day, he notes, the home-based agents came in ahead of those in the call center in their conversion rates. Alpine’s agents, he says, have a 1 percent to 2 percent higher conversion rate, meaning that if the average order is $100, the at-home agents are bringing in an extra $200 for every 100 calls. “It would appear that you get a higher quality agent for a reasonable price,” Powell says.
The Virtual Call Center
To make sure customers can get 24/7 service, companies rely on agents worldwide. But routing calls and managing a global workforce presents it own set of challenges including making sure that round-the-clock scheduling runs smoothly.
One way to manage agents and route calls from a central location is to use VoIP technology to replace traditional phone systems. VoIP was originally touted for its ability to help companies cut long-distance costs. Now, for call center operators, it promises a greater ability to oversee a disparate workforce.
VoIP works by converting a voice signal from the telephone into a digital signal that travels over the Internet. Companies save money with reduced long-distance charges and elimination of individual phone lines since all voice and data travels over the Internet. The technology, however, is in its early stages of adoption and users have to overcome security vulnerabilities and quality of service hurdles. For example, calls that travel over data lines can be subject to Internet worms and viruses.
Still, outsourcers such as ClientLogic, Mphasis, TeleTech Holdings and others are installing IP phone lines in their contact centers. They say the advantages of being able to administer the system centrally outweigh the challenges. “With an IP phone, agents can be anywhere—at home or at a physical site—and we can route calls to them from a central location,” says David Eckert, CIO at ClientLogic.
“If you’re doing it just for the cost, you’re fooling yourself,” says Mojgan Lefebvre, international CIO at TeleTech. “The driving force should be to have 24-hour support service, multimedia contact centers with Web, e-mail or voice. That’s easier with VoIP.”
Analysts also point out that VoIP eliminates the need for call center managers to integrate voice and data networks, as they do in traditional call centers. Companies don’t have to run separate infrastructures for automatic call distribution and IVR applications. VoIP also supports agents regardless of location because it’s not necessary to have the traditional telecommunications equipment at each call center.
For Roto-Rooter, VoIP helped create a system in which there are few service interruptions or delays in answering calls, says CIO Steve Poppe. In the past, the emergency plumbing company had “mini call centers” in each metro area it served, which meant agents could get backed up and callers might stay on hold. Now, three call centers in Baltimore, Chicago and Fort Lauderdale, Fla., take a million calls a year.
With VoIP, the regional centers are better equipped to handle peaks in call traffic. If there is a problem in one center, for example, the system automatically routes callers to the next available agent, wherever that agent may be.
Since installing voice over IP at the centralized call centers about two years ago, Poppe says fewer calls are dropped. “We’re doing a better job of capturing every call,” he says.
Poppe foresees a time when the highly trained Roto-Rooter agents will work from home as well as the company’s call centers. “The location of the agent is not important,” he says. “What’s crucial is taking care of the customer. If you don’t, they’ll just move to the next company in the phone book.”