Raising The Bar On CRM Standards: Driving Toward A Customer-Centric Call Center And CRM Financial Strategy

Customer Inter@ction Solutions, Nov 2007 by Petouhoff, Natalie L, Johnson, Brian R

You've been on hold for 20 minutes. It's not the first time you've called this company's contact center. You've keyed in your account number via a maze of IVR menus, none of which sounded like what you needed. You tried to use the speech recognition feature, but it did not recognize anything you said. Frustrated, you hit "0" for an agent. The recording alerts you to long wait times. You finally get an agent and they ask you for your account number. You wonder why, since you just punched it into the key pad. You've called six times before, but previous calls aren't logged into the system. You explain the situation AGAIN. There is a long pause. The agent says something you can't understand. When you question it, he gets rude. You ask to speak to a supervisor and he says none are available. At a cocktail party later that night, you tell 20 of your closest friends about your customer experience and they all agree never to buy from that company again.

How many companies are providing poor customer experiences? Recent research shows that while 80 percent of companies believe they deliver a superior customer experience, only eight percent of customers agree. The research also shows that 43 percent of customers leave due to the attitudes and behaviors of a company's employees. In service-related situations, the number jumps to 73 percent. Research from Purdue University shows that 85 percent of a customer's perception about a brand is based on their interaction with the call center and agent. If the experience is poor, 63 percent will stop shopping with the company. Now that the sec requires C-level executives to correlate an executive's performance to die achievement of the company's goals, a company can no longer implement projects without linking them to bottom-line results. At a time when research from analysts shows the customer experience is the only differentiator remaining since competing brands are so similar, how does customer experience affect the bottom line? Executives must look at customer relationship management (CRM) and call centers as cornerstones to providing great customer experiences be it through a new financial lens.

Calculating Revenue Loss Due To Poor Customer Experiences

Research shows that on average:

* 70 percent of customers will have a positive experience;

* 30 percent of customers will have a poor experience; and

* 2 percent of all customers complain.

To calculate the cost of a poor customer experience, let's use a hypothetical company with four million customers and an average annual revenue of $100 per customer, which would result in a potential annual revenue of $400 million. If 30 percent of customers have a bad experience, that amounts to 1.2 million dissatisfied customers. (4 million x .30 =1.2 million dissatisfied customers. see Figure 1.) If two percent of those complain, that leaves 98 percent who don't say anything, or 1.176 million customers (1.2 million x .98 = 1.176 million. see Figure 2.) The potential revenue lost from that 98 percent is ($64,680,000 $52,920,000) = $117.6 million (see Figure 3) (1.176 x $100 = $117.6 million).

The Cost Of Lost Customers Is Greater Than Just Losing Customers

Research has shown that the costs of handling unsatisfied customers include those of handling contacts twice plus those of lost business. This results in a cost per customer that is two or more times the cost of a satisfied customer. Depending on the industry, between 30 to 70 percent of dissatisfied customers leave, which means new customers must constandy be acquired. The additional money acquiring new customers only pays off if the customer remains loyal. Unfortunately, data from an analyst's report in 2006 stated that 75 percent of customers who defect to a competitor claim that they had been satisfied with the previous organization. Thus, more money is spent without ROI.

Additionally, effects from negative word-of-mouth propagate the cost of poor customer experiences far beyond one person. Dissatisfied customers tell between 10 to 20 people about their experience. YouTube and odier Internet viral methods spread bad word-ofmouth quickly. With all the ways companies are either knowingly or unknowingly increasing losses, it is obvious reducing the number of dissatisfied customers needs to be the number one revenue- and profit-generating objective.

The Gap Is The GAAP

Business has traditionally measured the bottom line in one of two ways:

* Quantity of gross profits and

* Quantity of net profit.

Generally Accepted Accounting Principles (GAAP) anchored to accounting principles developed centuries ago are out of date because they leave out "customer experience." The lack of customer experience in the GAAP model may be why companies are experiencing poor returns and earning ratios.

In addition to outdated accounting principles, the other bind confronting decisionmakers is that of contradictory business goals. On one hand, the edict is to create long-term value and growth. On die other, it's to deliver against short-term goals that reduce costs, but in many cases, like in the call center, destroy long-term value. However, in light of customer-experience data from analysts, die old paradigm of cutting call center costs is bad business.