Sat, 28 Jun 2003

Sanjay Bharwani, Manager, Accenture, Jakarta

In a world where investment funds will remain scarce, a more profitable approach to attracting and serving customers requires comprehensive strategies that both reduce the cost of service delivery and improve the value of customer interactions.

Executives are caught between heightened pressure from financial markets to increase revenue and reduce costs on the one hand, and increase customer demand for new and enhanced services on the other. This situation reveals the inherent contradictions in the blueprints for customer interaction used by many companies today.

When customer interactions are critical to business performance, companies must transform their approaches, not fine- tune them or improve them incrementally. Accenture calls this "investing to the tipping point" that is when the accumulative impact of change moves a company to a new level of performance.

Parceling out investments through a series of tactical programs limits the possibility of delivering sustained, market- relevant results.

What will it take to fundamentally change the economics of sales and service?

* Create a merit-based customer service system

Escape the tyranny of the "customer is king" model. Define a customer interaction strategy based on who customers really are and what they really want, and then allocate sales and service resources according to these insights. Building integrated capabilities for analyzing customer data, modeling and segmenting the customer base and creating links between customer channels -- these actions will have clear a impact on business results.

* Know what it really costs

Develop a detailed and accurate picture of what it really costs to execute current sales and service models by customer segment. Although direct contact costs for labor, facilities and telecommunications are usually readily available, most organizations will have to dig deeper to define and measure indirect costs: operational support, technology, vendor management, integration with other business units and other considerations.

* Balance costs and revenue

Determine service levels across the channel portfolio according to the customer's needs and profitability defined by the new strategy. This will involve handling most service transactions through self-service or guided-service channels, while reserving costlier support options for the more valuable customers and transaction types. Emphasizing self-service means emphasizing good service: personalized, efficient and consistent.

* Boost workforce performance

Given that labor costs make up more than 60 percent of a contact center's operating budget, the right organizational structure and performance tools are especially important for optimizing headcounts and for increasing agent proficiency and motivation.

* Explore alternative sourcing models

Outsourcing provides a flexible alternative to traditional Customer Relationship Management (CRM) investment models by lowering the fixed-to-variable cost ratio in customer sales and care. Outsourcing and co-sourcing models allow companies to launch new customer strategies with less capital spending up front and less financial outlay over the life of the investment, with the cost of strategic change amortized over a declining cost to serve.

A combination of new customer treatment strategies, more flexible investment options and creative operating models now make it possible to transform the old system of tyranny to a merit-based model, where customer treatment is in accordance with customer profitability. A CRM strategy that seeks both to reduce the cost of service delivery and to improve the value of customer interactions will produce better results than if it just focused on one or two factors. A strategy that addresses all interactions and channels is more likely to influence customer attitudes and behaviors than a piecemeal approach.