latest market trends impacting contact center strategy v1

L E A D E R S H I P P R O B L E M SO L V I N G V A L U E C R E A T I O N

Copyright 2006. Alvarez & Marsal. All Rights Reserved.

Latest Market Trends Impacting Contact Center Strategy

August 24, 2009


Today’s Economy Demands a Focus on Performance Improvement

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How Business Leaders Are Responding Strategically

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Survey Response of over 1400 Business Leaders – November 2008

Reduce Operating Expenses

Increase Productivity

Reduce Working Capital & Capex

Introduce New Product / Services

Restructure / Reorganize

Seek Merger Acquisition

Hire Key Talent

Leave Certain Markets

Increase Hedging

No Steps

0% 20% 40% 60% 80%*McKinsey Quarterly, 1,424 respondents in November 2008

Generate Cash

Strengthen the Core

Grow!

Copyright 2006. Alvarez & Marsal. All Rights Reserved. 44

Recognizing the Warning Signs of Organizational Decline

Organizational Lifecycle

GROWTHSTART UP MATURITY TRANSFORMATION FUTURE GROWTH

THE PERFORMANCE IMPROVEMENT

PROCESS

WarningSigns

RESTRUCTURING

RENEWAL

• Competitors acquiring market share

• Margin pressure• Missing forecasts

• Increasing sales and gross margins

• Increasing market share• Scalable costs

• Declining sales• Operating losses• Declining or negative cash

flow• Out of cash


How Companies are Responding Tactically

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Reactive Proactive

Major Impact

Headcount reductions

Indiscriminate cost reductions

Cut prices to preserve sales volume

Slow pay vendors

Cut employee benefits

Rebuild effort post-recession

Allocate resources effectively

Reduce costs while making long term improvements to the business

Preserve margins

Reengineer collections process

Gain market share (volume of sales, strategic acquisition)

Minor/No Impact

No Steps Improve selling productivity

Improve working capital management

Improve margins

Make strategic hires

Improve operating productivity

Company’s Response to Downturn

Imp

act

of

Eco

no

mic

Do

wn

turn

on

th

e C

om

pan

y


Performance Improvement Levers

Drivers ofEarningsand Cash

Sales and Marketing

Products and Pricing

Customer Growth

RevenueLogistics

Operations

Sourcing

Direct Costs

Working Capital

AR / AP Financing and

Property

Inventory

IT and MIS

Finance and

Admin

People and

Locations

Overhead

Revenue and Margin Enhancement Product and customer profitability Segmentation and focus Channel management and

effectiveness Pricing strategy and customer

terms Sales and marketing effectiveness Customer relationship and

targeting Portfolio and product management Order management and delivery Competitive intelligence Forecasting and demand

management Customer service strategy

Direct Cost Reduction Operations and process

optimization Logistics planning Production planning and process Labor cost management Sourcing and supplier

management Quality improvement Service and warranty optimization Materials cost reduction Product design optimization Supply and outbound logistics Terms and conditions

Overhead Optimization Staff and span of control right-

sizing Shared services and outsourcing Indirect spend management HR, payroll, benefits, and training Sales and marketing overhead IT applications and infrastructure Finance and administrative

efficiency Insurance & risk management Management reporting and KPI’s Real estate footprint and terms

optimization

Working Capital Management AR / AP management Cash forecasting and management Billing and credit management Credit terms and factoring Inventory management PP&E utilization Financial controls and monitoring Capital expenditure planning Order to cash cycle Procure to pay cycle Financing costs and income


How Recessionary Conditions Influence Contact Center Strategy

In response to the downturn, the following strategies are being employed by companies that own and operate contact center operations

Rationalizing Contact Centers

Recession is forcing companies to optimize overhead costs as a way to preserve cash resulting in an increase demand in outsourcing or rationalizing of existing centers

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Rethinking Technology Investments

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The recession has forced some practitioners to rethink there existing technology platforms including SsaS/Hosted Solutions, Unified Communications and Social Media

Improvement in Government Service Levels

3Government agencies are expected to provide the same level of service (if not better) than the private sector


Rationalizing Contact Centers

Recent Cut Backs/Consolidations

• Teleperformance & Teletech were forced to cut back or close operations in Belleville, VA & Akron, OH

• StarTek closed its Regina, Saskatchewan center March 2009

• SITEL is closing its Sudbury Ontario center affecting 350 jobs

• Advance Auto Parts announced plans to shut down its 90 person call center in Roanoke, VA

• Greyhound announced plans to close its Tucson, AZ operation affecting affecting 450 jobs

Recent Growth/Expansions

• RYLA announced plans to open a new regional headquarter customer contact center hub in Saraland, AL creating 600 customer service &supervisory jobs

• Cbeyond plans organic growth creating 600 jobs through 2011

• Geico & Afni announced in 2007 that they would add 200 jobs at their local call centers

• Sykes opened a new state-of-the-art call center in Bardstown, KY

• Verizon Wireless rationalizes 2 NYC centers and opens 2 in Atlanta, GA & Wilmington, NC

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Companies are cutting back, rationalizing or consolidating contact centers when G&A spend does not flex with revenue or there are a number of decentralized/redundant

support functions. Consolidation & outsourcing allows a company to “variablize” their cost base and focus on the core business.


Rethinking Technology Investments 1 2 3

Contact Center Practice Leaders that have been forced to do “more with less” can no longer push on process and change management levers to gain economies of scale and

efficiency gains. Practice Leaders are rethinking their existing investments and developing business cases to upgrade which are catching many executives off guard.

Market Observations:• SMB & Mid-market contact center practice leaders (seats 100-350) feel underserved and at a

disadvantage when pursuing new technology

• Contact Center Satisfaction Index (CCSI) states 65% of unhappy customers will defect to a competitor if they receive poor treatment or experience a negative moment of truth by a live agent

• Software-as-a-Service/Hosted Solutions are gaining traction in the contact center space

• Unified Communications & IP-based contact centers as a way to improve customer retention rather than customer acquisition

• Web 2.0 Technology is enabling practice leaders to right-channel more interactions to the web and less to live agents which is reducing G&A spend

• Social Media is making its way into the corporate fabric of today’s companies being leveraged as a way to complete sales, bolster customer service and capture voice of the customer


Approaches for Rethinking Technology Investments 1 2 3

Contact Center Practice Leaders Vendors/Solution Providers

• Develop a business case and hard benefit ROI model to justify new technology/upgrades

• Address high cost of service and technology integration for Premise & SaaS-based solutions

• Develop functional requirements matrix (what the system must do) to make sure you are buying the right solution to address your business needs

• Evolve professional services to not only provide consulting around technology implementation but business & operational issues that the technology implementation will affect

• As a channel, Social Media should be integrated into the multichannel contact center framework. Policies and empowerment are needed to interact with today’s social customer

• Solution Providers must reaffirm the SaaS fundamentals - SaaS is lighter, simpler, more agile and more modest than Premise based solutions

• Develop a Talent Retention Plan to keep top-performing live agents so they will not bolt when the market turns around.

• Solution Providers should rethink current market positioning of products & services or partner with other solution/channel providers to appeal to SMB/Mid-Market buyers.

Below are suggested approaches for buyers & vendors a like to consider when rethinking contact center technology investments


Improvement in Government Service Levels 1 2 3

Situation Analysis & Market Observations

There is a growing pressure to increase operational efficiencies while at the same time ensuring that citizens can access any necessary information at any time. According to the latest scores from the American Customer Satisfaction Index (ACSI), the federal government still lags behind the private sector when it comes to delivering exceptional customer service

Federal Government Commercial Counterparts

68.9 points out of 100 75 points out of 100

Complication

The Federal Government is a monolith and citizens are completely intimidated by the complexity of it. The challenge that most Federal Governments face is how to make the government smaller for its citizens and provide the same level of service (if not better) than their commercial counterparts

SolutionMany federal, state & municipal agencies are investing in Web 2.0 and other tools to improve transparency and level of care to its citizens constituents


E-Government 2.0

Early breakthroughs in in e-government – the use of technologies and tools to provide and improve public-sector services, transactions and interactions – have enabled government agencies to deliver better service and improve operational efficiencies and effectiveness

Over the past five years, these efforts seemed to have plateaued due to lack of governance models, legal, cultural and operational roadblocks

• Web-related efforts are often fragmented from one agency to another

• Sharing information across siloed departments runs counter to the 360-degree view of the customer theory of CRM

• Most federal agencies don’t refer to their “citizens” as “customers”

• Generally the government culture is slow to adopt technology

• Insufficient capabilities exists in the arena of marketing, usability, customer insights and Web analytics

Like their commercial counterparts, government call centers are as much strategic than they are a necessary evil. To be successful, government call centers must start with the end in mind – provide exceptional service to its citizens

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State of Georgia

At the request of Georgia Governor Sonny Perdue, Joe Doyle, has transformed everything from the DMV to voter registration and has made it all customer friendly

• Employees at the DMV were scared to take lunch in their uniforms because they were scared at what citizens may say, think or do to them!

• Lowered the wait time at the DMV from two hours to six minutes

• Joe Doyle has taken the State of Georgia’s call centers from 50th in the nation to 4th with service levels approaching the quality of service as Nordstrom’s

His approach to transforming the State of Georgia call centers are anchored in four basic principles – the importance of top-down leadership, principle centered, customer driven and results focused

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1 2 3


Other Government Examples

Centers for Disease Control & Prevention

Consolidated 40 different toll-free numbers covering topics across the agency to a single toll-free number to disseminate all CDC information.

Consolidated publication distribution services from 5 warehouses to single distribution center

Centers for Medicaid & Medicare Services

Medicare and Medicaid account for one of the largest expenditures in the Federal budget, and is the world’s largest healthcare insurer that oversees healthcare services for roughly 43 million Medicare beneficiaries. Customer inquiry call volumes are significant, averaging 30 million calls a year.

Since the launch of Medicare in 1966, beneficiaries had to navigate through several hundred 800 numbers because CMS’ call centers operated as a patchwork of 71 standalone centers.

The Virtual Contact Center Strategy and enabling technologies provide CMS with the tools to standardize operations and has resulted in: sustained cost savings in call center operations due to decreased call resolution time; consistent, accurate, and clear responses to Medicare beneficiaries and the public, thus improving customer service; increased efficiency and one-stop shopping

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1 2 3


Conclusion

In recessionary conditions, the mantra “Cash Is King” is more prevalent than ever before forcing executives to reconsider their contact center investments and strategies in hopes of reducing their direct costs and optimize their overhead

While these efforts are happening, we should never lose sight of the importance of the customer and the social responsibility of organizations to deliver on its customer value proposition

Judicious use of call center technology integrated with a customer-driven approach to training, live agent empowerment and change management should result in effective and efficient operations balanced with high customer satisfaction

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latest market trends impacting contact center strategy v1

Documents

150 years

increase operational

performance

government

rationalizing

rethinking

government

performance