May 1997

Does Wall Street Have The Complete Picture About Inbound?

BY NADJI TEHRANI

In this month's issue we highlight the Top 50 Inbound Service Agencies. Without stealing that feature's thunder, I would like to focus on why inbound call centers seem to have become the latest gleam in Wall Street's fickle eye.

For starters, here are some statistics, as generated by our analysis of the Top 50 applications. In 1995, the Top 50 Inbound service agencies used 683 million transport minutes. In 1996, they used 1,301 million inbound transport minutes - that's a 90.5 percent growth. In 1997, they used 2,048 million minutes - a 57.4 percent growth over the previous year. Pretty staggering numbers. On the outbound side, the Top 50 agencies used 1,237 million transport minutes in 1995. In 1996, they used 1,802 million minutes - a 45.6 percent growth. In 1997, they used 2,691 million minutes - a 49.3 percent growth over 1996. Why, then, is inbound growing faster?

I had the opportunity to chat with Rich Sims, president and founder of The Product Line, about these trends. He believes such growth is attributable to the perception that inbound is more professional than outbound. This misimpression has been engendered by the activities of criminals, whose outbound calling scams are widely reported to be defrauding the innocent, particularly the elderly, thus tarnishing outbound's reputation in the public mind. Additionally, inbound is a more traditional means of doing business. Typically, a company sends out mailers with an 800 number prominently displayed. The company then receives calls and Marketing feels good because they have a tangible number of responses - hard data.

Alison Folino, a top analyst with Smith Barney, has attributed inbound's favor, in part, to the fact that most of their work is based on long-term contracts, thus imbuing an image of stability - so desirable in Wall Street's eyes. When a service agency acquires a contract for tech support or customer service, it performs those duties on a regular basis: it gets calls regularly and therefore gets paid regularly.

Furthermore, the higher the expertise required for the contract, like hardware/software support or help desk operations, the more the service agency can charge, which usually results in higher profitability - all things Wall Street likes.
As we all know, Wall Street rewards companies with recurring, predictable revenue bases, because they are more likely to succeed. The existence of long-term contracts certainly contributes to the perceived stability of inbound operations, but it is also the nature of the beast. Inbound's historical trends provide a good sense of what the incoming call volume will be. Being able to predict calling patterns on the basis of what has gone before is not only valuable, but provides a sense of security as well. Response rates in an outbound campaign, by contrast, may often be unpredictable.

Before I Upset Anyone
Please don't misunderstand the direction of my outlook; I am not "down on outbound" - quite the opposite, in fact. The statistics I cited earlier clearly demonstrate that outbound is growing at a steady, high rate. Indeed, I believe inbound and outbound teleservices are strong and will remain so for the foreseeable future.

Richard Northrop, a managing director with Smith Barney, mentioned that outbound has the "potential to be the more valuable of the two aspects of teleservices, in that it generates new revenue and business for the client." The outbound engine, however, must pursue high-quality programs to achieve its potential. Furthermore, with the massive number of new products, especially technology products, continually unleashed on the market and the need to test their viability via outbound telemarketing/information gathering will concomitantly increase.

As I mentioned earlier, the felonious activities of a few so-called telemarketers have tarnished the reputation of the industry as a whole. The Top 50 companies, and the vast majority of the others, I'm sure, conduct highly targeted outbound campaigns, the recipients of which have been screened against databases (including "Do Not Call" lists) to ensure their suitability and receptivity to the campaign. Think about it - why would any reputable company want to waste its resources contacting individuals who have no exhibitable desire for its services? With the advanced technology available today, it is possible for a company to target its market with pinpoint accuracy. That's professionalism.

A Proviso
Not to deflate the sails of the outbound telemarketers, but a properly run inbound call center, whether it's captive or outsourced, also has the potential to become a profit center. This potentiality is directly reflective of the quality of management and agents staffing the call center. While the obvious purpose of an inbound operation is to provide information to customers, it should also attempt to convert incoming inquiries into sales calls, as well as serving as an information and education center. A properly handled incoming call is an opportunity to introduce customers to the product or service offerings of a company through the processes of cross-selling and upselling.

This must, however, be done with the highest degree of diligence and strictures of quality, in which case all customer service agents become consultants to customers. The object of your company is to sell products; if you fail in that, you fail in the marketplace.

Every Company Is A Call Center
And now we come around to the title of the piece. If you use the phone daily to conduct your business, you possess a call center. The issue is how your customer contacts are organized and managed. To present a unified, consistent message to its consumers, it may be advisable for a company to create a dedicated call center for all customer service related matters.

To embark on such an undertaking, companies must contend with the trends of ever-more-sophisticated technology, as well as the demands such a dedicated center would place on employee hiring, training, compensation and scheduling practices, to name a few, within the overall company framework.

Most companies do not have the requisite knowledge to organize and manage a modern, profitable call center. Every company, therefore, should weigh the option of outsourcing those activities that are not within their core competencies. If teleservices agencies are expert at customer service, help desk and all other call center activities, then why not let them handle those functions? As Elizabeth Stites, director of marketing at MATRIXX Marketing Inc., suggests, treat the service agency as a strategic partner. Allow them to manage the customer relationship, from start to finish. It's like delegating responsibility for an important task to a trusted employee. You retain the ultimate responsibility, but they do the work, allowing you the freedom to focus on those tasks you do best.

To help those of you who are considering outsourcing, we at Telemarketing(r) & Call Center SolutionsTM magazine have prepared the Teleservices Outsourcing Directory to fill your need for objective and reliable information on what teleservices outsourcing is, and what its benefits are, and to provide some key points to keep in mind when making that decision.

The Teleservices Outsourcing Directory will be sent to you with your June 1997 issue. We trust it will be invaluable to you in this era when there is an ever-increasing need for outsourcing.

As always, I welcome your comments and opinions. Please direct them to ntehrani@tmcnet.com.
Thank you.

Sincerely,
Nadji Tehrani
Publisher & Editor-in-Chief

Congratulations To The New Top 50 Inbound Service Agencies

Their Accomplishments Are Crucial To The Economic Contributions Of All Service Agencies:The Creation And/Or Protection Of Over A Half Million Jobs And The Generation Of Over $23 Billion Per Year In Sales!

We extend our heartiest congratulations to every member of the 1997 "Top 50 Outbound and Inbound Service Agencies." Every year, Telemarketing & Call Center Solutions™ magazine ranks the leading service agencies based on figures provided by the phone companies. In May, we will focus on the inbound service agencies. Together, the "Top 50" outbound and the "Top 50" inbound service agencies have contributed 231,836 TSR jobs to the communities they serve. This figure is even more impressive when you consider that it many related administrative, fulfillment, technical support, management and subcontracting jobs. If we were to take these into account, the total number of jobs would exceed 290,000.

What does the TSR total suggest about the contribution to the economy made by all service agencies?

First, let's assume that companies beyond the award-winning service agencies account for at least as many TSRs (a very conservative estimate). That means the TSR total is up to 463,672 (and the overall job total - including administrative, technical and managerial support - is up to 580,000). Next, let's assume each TSR sells $50,000 worth of goods and services each year (another conservative estimate). This means the total sales generated by service agencies is at least $23,183,600,000. A common estimate used in the business world is that, on average, $100,000 worth of goods and services are produced annually (in the manufacturing and service sector) per employee. Thus, the total sales generated by all service agencies ($23,183,600,000) is responsible for creating an additional 231,836 jobs in the United States. The total estimated number of permanent jobs created and/or protected by service agencies in the United States is 811,836. In addition, these gainfully employed citizens are paying millions of dollars in taxes, thus helping local, state and federal governments. We salute all service agencies for their significant contributions to the U.S. economy.