In the last issue, the concept of “Effectiveness Indicators” was discussed and we reviewed a major key indicator in Call Quality and Quality Index. In this issue we tackle another key indicator that represents the effectiveness of the centre – as part of the overall contact centre strategy – in generating revenue (assuming revenue generation is a key mandate for the centre).
Profit Centre vs. Cost Centre
As discussed in earlier issues, traditionally call centres were managed in order to minimize the costs. The reason for that seemed simple and obvious; taking the calls and providing service on the phone appeared to be of no additional value to the organizations. The call centre activities were concentrated around providing the after sale services and at best would be considered as revenue protection (a necessary evil!!). It was many years later that organizations started realizing the value of their contact centres in not only protecting revenue but also in generating revenue from both new and existing customers. This new realization brought a new operational concept to the contact centre environment: “invest more in the centre in order to generate more revenue”!
In today’s environment, contact centres operate in two distinct modes: Profit Centre vs. Cost Centres. In a profit centre environment, the centre is operated similar to an independent or self-sustaining business unit. The budgetary and operational decisions are taken with focus on generating revenue for the organization. Although revenue generation may not be the sole purpose of the centre, its management is responsible to operate – and perhaps expand – using internal funds. In a cost centre environment, the budgetary focus continues to be on minimizing the costs. The majority of the operational decisions will be scrutinized in order to find the lowest cost approach with less regard for their value to the centre or the organization. In fact in most cases it would be very difficult to quantify the value of these decisions in a tangible manner.
Which one of these two approaches is right for your centre? Well, the answer depends on the role of the centre within the organization (for example “Technical Help Desk” vs. “Sales & Services”) and the overall mandate for the centre. There are advantages and disadvantages to both approaches. In a revenue centre, the management has broader control over its internal decisions, but with the control comes broader responsibilities and accountability in making the right decisions. On the other hand, in a cost centre environment, there is constant pressure in maximizing the efficiency of the operation (which is not entirely a bad thing) while the management may feel they have none to very little control over decisions that would impact their centre. The dividing line between the two approaches is not always clear but it is extremely important for the contact centre management to decide on an approach since it will determine and establish the contact centre priorities.
In those centres with opportunity to sell products and services, an aspect of effectiveness can be measured in terms of revenue per call ($/Call). As it sounds, this metric provides the average Dollar amount of revenue being generated by each call (can be calculated at the agent, team or centre level). When compared to the overall revenue targets by the centre (or the team or agent) it can also provide meaningful information such as: “are the numbers moving in the right direction?” and “what is the gap between actual and target”. Analyzing the revenue per call against cost per call can also provide information about the relationship between revenue and selling costs. Please note that cost per call presents only the contact centre costs and does not include other costs such as cost of goods sold, marketing and/or fulfillment.
It is normal for many centres to introduce revenue per call as part of the agents’ overall performance, however, there is a risk of over emphasizing the importance of this metric. Agents, as well as contact centre management, may sacrifice other key (and sometimes basic) aspects of the operation (such as Resolution or Quality) in order to improve their overall performance results. Have you ever called to ask for assistance with regard to a product and/or service and they tried to sell you other products and services to remedy the shortcoming of the first product and/or service? Or perhaps all you wanted to do was a change of address and they tried to upgrade your entire services?
One of the recurring challenges in establishing revenue per call environment can be determining who can claim what revenue. In some centres, all revenue or sales are attributed to the Sales department regardless of where they occur. If the sale is made in the call centre then the revenue should be ‘credited’ in some manner to the call centre. In a mixed sales and service environment it would be more crucial to train agents to recognize situations when there is an opportunity to sell and situations when there is no opportunity! At the same time, it would be great if we could measure the effectiveness of the agents (teams and/or centre) in closing the deal when that opportunity presents itself.
As mentioned above, Revenue per Call provides the Dollar amount generated by each call. There is, however, the risk of comparing results from different individuals or different teams as they may not have the same opportunity in terms of total Dollars. In addition, the metric does not clearly indicate the effectiveness of individuals and/or the selling process. In order to quantify this aspect of the operations, number of centre use “Close per Call” ratio as a key performance indicator. This ratio, while removing the impact of Dollar value of the sales, indicates the success rate of the centre (agents and/or teams) in being able to complete a sale cycle. In calculating and analyzing this metric, one must recognize that not all calls have an opening for a sale. If possible, it would be more accurate to consider only the calls that present that opportunity. (Depending on the communication and IT setup, it may be easier for some centres to capture and track their sales calls while other centres may have to rely on sampling and/or quality listening to collect such information).
The Bottom Line
Revenue per call, and to certain extent, close per call, highlights a different and perhaps more tangible aspect of any contact centre. This is a direct outcome of the operation which is easily understood and this may be the reason for the occasional obsession with improving it. However, like every other indicator, revenue per call or close per call must be considered as part of the bigger picture. No one should focus entirely on one or two metrics without respect to other indicators. A contact centre with all internal processes is like an automobile with all its mechanical parts. A good manager, like a good driver, must hear and see (and feel) the entire system while trying to achieve the most out of a given situation.
This article was originally published in The Taylor Reach Group newsletter.