Managing Your Cost Per Call


In many areas of the country, the labor costs for CSRs are increasing quickly, and these rates are not going to decrease. Additionally, the quality of the labor pool to draw from is not ideal due to low unemployment rates in many markets. And the direct-to-customer industry is in competition for CSRs with other sectors such as financial services.  

The direct industry has a difficult balancing act to perform. On the one hand, we want to provide a high level of customer service—and that's getting tougher each year. On the other hand, the cost of direct labor per hour has increased from less than $7 to more than $11 per hour during the last five years. In some markets rates are well over that, as high as $14 an hour. Benefit costs have also increased, and now average 15% to 20% of pay.

Learn How to cut your costs by 10-20%

Cost benchmarks
The use of universal agents, increasing Internet order volume, and the need for contact center to support e-mail and online activity all make it more difficult for companies to define their costs clearly. Typically, contact centers measure their cost-per-call, cost-per- contact, and cost-per-order.

We define fully loaded cost-per-call as including direct, indirect, and management labor; benefits, incentive pay, training, recruitment, third-party call center services, correspondence costs, telecommunications, and occupancy. To better understand the cost per call, we reviewed our proprietary benchmarking database, looking at 18 large companies with call volumes ranging from 900,000 to more than 9 million calls annually.  

Here are the findings:

  1. The direct labor cost ranges from $1.11 to $3.29 for a 3-to-4–minute direct consumer call.
  2. When we add in indirect labor, the cost-per-call increases to a range of $1.39 to $4.75 per call.
  3. When we add in occupancy, benefits, and telecommunications, the fully loaded costs range between $2.70 to $5.60 per call.

Fully loaded costs for smaller companies would be more in the range $6.00 to $8.00 or higher. (For purposes of this analysis we have left out of the cost-per-call the credit card processing costs.)  

Total fulfillment costs for efficient companies range from $8 to $13 per order, including the major cost elements for contact center and fulfillment (but not including shipping and handling). As the data above show, contact center costs can account for as much as 50% of the cost per order.

10 ways to reduce the cost per call

  1. Do you have cost and service level standards that you have set and are trying to perform to? Do you have an actual budget that defines cost per call/order/contact? Remember the industrial engineering cliché, “You can’t improve something you don’t measure.”
  2. Improve scheduling and adherence to the schedule. Improving the schedule will depend on having the right software tools, but much of your success will also depend on management to make sure that people adhere to the schedule.
  3. Make better use of part-time workers rather than full-time workers during order-buying peaks and valleys.
  4. Increase the in-seat occupancy rate. A high occupancy rate would be 85%–90% after breaks, lunches, and meetings are subtracted.
  5. Use call monitoring and improve training and computer literacy. Of course CSRs should be conversant with products and company policies; but they also have to field questions and comments about Websites, browsers, and shopping carts from Internet-savvy customers.
  6. Investigate outsourcing. Highly productive outsource providers may be able to guarantee a standard level of service and cost. Is this beneficial to your business? How does it lower your costs? What contractual service levels and costs will make this acceptable?
  7. Reduce service levels. The standard is to answer 80% of calls in 20 seconds. Some are experimenting with reducing that to 70% in 30 seconds. Would that be effective in spite of reduced levels of customer service?
  8. Reduce the call-to-order ratio. An average ratio would be between 1.2 and 1.4 calls per order for many direct businesses. As Internet orders increase dramatically in many companies, that ratio decreases to less than 1.0. What are the reasons for the calls? Website ease of use? Catalog copy questions? Where is my backorder? Take action on how to reduce these calls.
  9. Can you use IVR for order status checking to reduce customer service calls?
  10. Does your on hold message refer customers to your Website if all agents are busy?

The impact of the Internet, direct labor rates, and availability of labor all need to be addressed. The real issue, however, is how well is your contact center being managed? That’s the first line of support for your customer.

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