Counting the cost of Public Sector Channel Shift

A lot of Public Sector organisations are now getting serious (or at least semi-serious) about Channel Shift. Most have by now realised that the potential savings are real and significant.
So coupled with a central Government agenda of cost-cutting, whatever the Administration in place, the digitisation of public services looks set to continue. In fact a recent survey by Goss Interactive highlighted that on average public sector organisations plan to save £1.75m each through Channel Shift in 2015.

But how much does it actually save your organisation to shift customers to online channels?

Back in 2009 Socitm (The Society of IT Managers) worked out the cost to serve for each of the channels being provided by a UK public Sector organisation (in this case a Council). The benchmarking work they carried out showed that the costs per visitor were:

• £7.40 for face-to-face
• £2.90 for the telephone
• £0.32 for web enquiries

However, the direct costs of channel shift can also be supplemented by additional benefits such as:

• Increase customer service and satisfaction
• Building engagement and loyalty
• Meeting customer expectations
• Freeing staff to be re-deployed on more "low tech / high touch" activities

It is still worth pointing out that providing digital content and self-service functionality only helps a percentage of the population you are trying to help. For example there are 10.8 million people in the U.K. who do not use the Internet and therefore any 'digital first' self-service options for businesses and citizens should not be 'digital only'. 

Customer Interaction Technologies

Back at the end of 2008 I blogged about the use of CIT (Customer Interaction Technologies) and how they could help fill the opportunity gap between low cost-to-serve channels such as websites and high ones such as face-to-face contact or telephone-based customer services.

See:
http://press20.blogspot.com/2008/12/cost-to-serve-modelling.html
http://press20.blogspot.com/2008/12/customer-interaction-technologies-lower.html
http://press20.blogspot.com/2008/12/face-to-face-is-highest-cost-to-serve.html

Although its been a while since I posted these thoughts I've recently uploaded the entire presentation that these slides were based on up to Slideshare and it is now embedded below.

Customer Interaction Technology

View more presentations from Hayden Sutherland.

Companies ignoring self-service

I'm sure there is a tenancy to try to work harder during difficult times. This manifests itself in various ways, such as:

1. Some people work longer hours
2. Some people put more effort into their work (or a seen to be doing so)
3. But some people innovate (new products, new markets, new technologies)

However, it seems that UK companies are still failing to incentivise lower cost-to-serve channels and falling back on their call centres, according to Global Contact Centre Benchmarking report by Dimension Data.

It is still amazing that with low customer interaction costs via channels such as online that companies are still trying to work longer and with more effort and failing to innovate (if you can actually call using the Internet as innovative these days).

However, this report also mentions that a third of respondents fail to actual monitor their cost to serve, thus not even measuring the cost of each customer interaction.

Face to Face is highest Cost-to-serve

Following my recent posts on implementing and managaing customers down to a lower cost-to-serve channel, I got several emails from people asking me about face-to-face communication and where it fitted into my Interaction diagram.



Unsuprisingly, face-to-face (F2F) contact appears at 'Position E' in the top right corner. This channel of customer interaction is the most costly, involving premises or travel and a lot preparation. It may also need the customer service individual / account manager / client contact / handler, etc. having all necessary information and support materials to-hand.

Costs can potentially increase further depending upon the demands of the interaction. For example: you may have a complex product that needs explaining / configuring or possibly a prestige client-base who is used to the "Low Tech / High Touch" approach. Try managing these people to a lower interaction channel and you could instantly see them quickly migrate to your competitors.

Customer Interaction Technologies lower cost to serve

In less-certain economic times, companies come under increasing pressure to reduce costs and as I mentioned last week, this can mean managing your customers down to lower cost-to-serve channels (e.g. moving them from positon 'B' to position 'A' in the diagram)

For those who've read my previous post, you will know I believe you need to provide the right amount of customer interaction that a customer needs (but perhaps just not the level they want). This is where the web becomes incredibly useful.

But building a website to interface with customers is no-longer just a case of building a static content-fulled site, its about creating another interaction channel. And sometimes, providing customers with a basic level of interaction (e.g. Position 'A') just goesn't cut it any more. Fear not, a technology solution can be used, it just has to be used more carefully and cleverly.

Providing a rich user experience for your website is something that I've worked with a lot of clients on. Developing an intuitive and often complex site (e.g. Position 'C') obviously adds to your cost-to-serve, but in the longer-term this is a relatively small incremental cost per customer. It should also prevent the customer automatically heading off to to your 'Contact Us' page to phone your call centre. Technologies such as: Silverlight, Flash, and AJAX can help your site provide better interactivity and customer empowerment, and personalisation & other decision-based logic can provide a more individual experience.

But there is a middle ground and it sits somewhere between the slick responses of a video-based interaction and the human-to-human contact we all crave. However its an area that many websites have yet to fully understand and tackle (and it sits at Position 'D').

CIT or Customer Interaction Technologies as they are called, can all help bridge this interaction gap:

Click-to-call
Is a way of connecting your call-centre with your customers, who can leave their details and be called back as a time better suited to them or the company (e.g. during any particular quiet periods your customer services representatives have).

Self-learning avatars
Virtual assisitants, provided by people such as Creative Virtual, are still a technology that has yet to break into the mainsteam and its hard to work out why. Perhaps when one passes the Turing Test, we may see a change.

Interactive FAQ's
These online knowledge bases can provide dynamic Frequently Asked Questions, that understand context or provide more than just the standard content-managed answers. Link these into your personalisation functionality, track their usage and you get a rich set of data on what people are looking for (and what they don't know about).

Customer chat
In essence a business version of Instant Messaging, this technology has been used on websites for serval years now and provides a customer with text access to your call centre. Yes, I know this may seem like a slower (and therefore more costly way) way of interacting, but done cleverly it can reduce the cost-to-serve or even allow your operative to have more than one conversation at the same time.
E.g. pre-typed or 'hotkey' responses to produce instant answers to familiar questions, such as specific issue information or company contact details

Although these Customer Interaction Technologies haven't gained significant ground on many websites, its possible that as times get leaner andcompanies put more pressure on their websites to increase conversion and customer satisfaction, they they become a cost-effective toolset for the digital channel.

Managing customer expectations in a downturn

If you're in the business of serving customers, you can see the story unfolding before you.

• The economic crunch is here
• Company revenues decline
• You get told to reduce service levels
• You reduce staff and/or cut the hours of cover
• There's a dilution in the customer experience
• This causes an erosion in customer loyalty

So tricky days ahead then as we welcome the ever-decreasing cycle of recession-based customer services.

But this need-not be the outcome, as a recent McKinsey article highlights. This report covers the possibility of finding your customer 'Break Points' and carefully tracking this to avoid a complete drop in customer satisfaction.

One alternative to this is managing your customers down to lower cost-to-serve channels such as online, without a drop in quality of service. As I mentioned in a previous post, this can also be difficulty to pull-off correctly, but then this is a recesssion... and you don't just judge the person during the good times do you?

Low cost to serve doesn't mean low quality

I've previously put together my thoughts on cost to serve vs interaction models, but have been sent various examples recently where companies have obviously decided that low cost to serve means low quality of service. From examples of bad IVR, through to the refusal of some large companies to stick their customer services telephone number on their website.

This does not need to be the case. Just because you are using a lower cost-to-serve channel to service customers, doesn't mean that there has to be a dramatic reduction in the quality.

But delivering a good quality customer service experience does not necessarily mean providing a human voice all the time. Yes there there may still be the expectation among your customers that they will speak to an operative when they phone your billing number; but its how you deal with them when instead they get a voice-recognition system that matters. Also there is often more than one choice of communication channel for the required level of interaction you need at a lower cost-to-serve than a call centre.

Once company that has turned the entire customer service experience on its head is SwiftCover Insurance. The advertising material they've put out over the last few years has made a point of covering the fact that they don't have any Clucking Call Centres:

Clearly aimed at those no-nonsense people who don't like dealing with low quality call centres, they obviously have eliminated a higher cost-to-serve channel straight away. Its not suprising that they've managed to gain a share of a market given some of the incredibly bad practices apparently being used by some call centres such as using fake names and hanging up when things get difficult (This article in The Times is a real eye-openner if you have the time).

Actually, are you aware that there is a British Standard for Customer Service?

Cost to serve modelling

Many of our company's clients (plus anyone who has cornered me on the subject) knows that I can talk for ages on the subject of Cost-to-serve models. But for those who haven't (and apparently you should count yourselves lucky), here's my main theory:

The average cost to serve a customer (e.g. to make a sale or to answer a complaint) depends upon the channel they use to contact you and then how you deal with that contact. Basically, some channels (e.g. face-to-face) cost lots and others cost less. Companies wishing to minimise their costs, should therefore try to 'manage' customers to the lowest relevant cost channel required to provide the level of interaction needed to service the cuctomer.

For example, in the diagram below 'B' shows that a high level of customer interaction (e.g. face-to-face contact to sell a new car) has a higher cost to serve than the lower 'A' which needs lesser levels of interaction (e.g. a web page). Basically, the more complex or 'human' you need the service to be, the more it costs to achieve.



The difficulty comes when a company badly manages their customers down to lower cost to serve channels, especially when the customer will always try to use the one with the highest possible level of Interaction.