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July 1999

Optimize Your Investment In Financial Services Outsourcing


Call center outsourcing is changing the way financial services companies communicate with their customers, and ultimately, the way they optimize customer loyalty. Properly managed outsourced call center relationships are enabling companies to shift from vertically isolated program "islands" to integrated dialog channels that produce valuable and profitable customer communication data. Selecting, organizing and managing these call center relationships is a demanding but rewarding process.

The right call centers can offer customer relationship management services that meet the specialized needs of banks and financial services companies. Financial services require industry-specific customer relationship management expertise, in part because banking does not revolve around product delivery as much as other businesses. And since the contact and relationship with financial customers is different, a well-chosen outsourced call center will provide the ability to address every channel that may touch financial customers, from customer service to credit and collections.

While the financial services sector faces some unique considerations in outsourcing its customer communications needs, many of the success factors leading to the decision to outsource call center needs are shared by most vertical markets. "A critical measure of success in outsourcing is the ability of the client and provider to discuss and create a shared vision," according to Frank J. Casale, executive director of the Outsourcing Institute. "From that foundation, the success of outsourcing lies in the hands of the people managing the relationship. Cooperation, flexibility and the pursuit of excellence will give the financial services companies involved in outsourcing the opportunity to achieve their goals and move forward with success."

Know What You Want To Achieve
Outsourcing must be done carefully, systematically and with explicit goals. Companies that rush into outsourcing without fully understanding what they hope to achieve often face budget overages, difficulties with their chosen outsourcer and less-than-optimal results from a marketing perspective. Sensible reasons to consider outsourcing include both strategic and tactical concerns on both a departmental and organizational level.

For example, outsourcing might be justifiable for a financial services department with high costs that cannot be reduced through internal cost-cutting measures or a lack of competency in specific areas. Organizational needs that generate consideration of outsourcing include the ability to profitably compete in the marketplace or relief from financial pressures achieved through immediate cost savings. The primary business needs for financial services call center outsourcing include lead management, customer satisfaction, channel management, churn management and cross-selling.

Outsourcing these critical business service components offers financial management the ability to stay on top of the customer communications process by reviewing and analyzing the essential data extracted to make sound management decisions. This is a key strategic advantage, significant management time saver and a cost saver. Some outsourced call centers can offer financial services companies experience and expertise in their vertical market (including customer relationship management and customer database optimization), which, when applied to specific programs, can lift acquisition and retention rates substantially. Furthermore, up/cross-selling experience/expertise is important, particularly in financial services with the emphasis on retention.

Welcoming Statistics
In one example, Sky Alland, a customer loyalty management company, was hired to conduct welcome calls for a major national issuer of credit cards. New credit card holders received an initial call from Sky Alland designed to establish a relationship and stimulate account activity. In an effort to quantify the impact of the calls, Sky Alland worked with its client to compare the activation rates and the account activity of contacted customers versus a control group of not-contacted customers.

The “welcome calls” chart demonstrates the power of customer-contact calls in Figure 1. This client was able to increase first-month credit card activations by 250 percent and first two-month account balances by 27 percent. Moreover, the credit card customers who received the welcome calls wrote more checks off their credit card accounts and withdrew cash more frequently at ATMs — both attributable to the effort to increase awareness and establish customer relationships right from the start. Based on the incremental profit from contacted customers, and the cost of the calling effort, the credit card client realized a 500 percent return on investment in the first 90 days of call outsourcing.

Figure 1

The red equals contacted customers while the blue equals customers not contacted for the following time period: transactions over a 30 day period; and account balance over a 60 day period. Transactions had an increase of 250% while account balances increased 27%.

Top 10 Reasons Financial Services Companies Outsource1

  1. Reduce and control start-up and operating costs,
  2. Improve company focus on core competencies,
  3. Gain access to world-class capabilities,
  4. Free up internal resources for other purposes,
  5. Resources are not available internally,
  6. Ability to ramp up and down quickly — important if your marketing campaigns are not evenly spread throughout the year,
  7. Function difficult to manage/out of control,
  8. Make capital funds available,
  9. Share risks,
  10. Cash infusion.

Outsource For The Right Reasons
Financial services managers tasked with assessing outsourcing’s potential benefits often make the decision for cost reduction, cash infusion, increased satisfaction, and other effectiveness and efficiency improvements. Most important, if the outsourced function is not a core competency, then the energy applied to it can be redirected to more results-oriented financial services tasks. Potential disadvantages include outsourcing for the wrong reasons, losing control of the resource, losing personnel who have been trained in the organization’s particular business practices and have become a part of the organizational family, and the risk that the outsourcing vendor may not be able to achieve the desired benefits or may fail in providing critical services.

Financial services companies best suited to outsource are those with a relatively high volume of customers (250,000+) and branches (200+). Financial service companies that staff a large number of employees to make phone contact on a manual basis are also good candidates for call center outsourcing; that’s because they can realize tremendous time and cost efficiencies with the benefit of automated call center technologies (e.g., predictive dialers, automatic call distributors, telebusiness software) and most outsourced call center providers have already made the investment in these technologies. Automated dialer and call center technologies are evolving rapidly and it is expensive for the financial services company to frequently upgrade these technologies, whereas the outsourcer can better leverage the investment.

Along the same lines, outsourcers can offer state-of-the-art database management systems, including relational databases and relevant reporting systems, which are expensive to purchase, maintain and upgrade. This is particularly relevant today given the trend in financial services channel management — an area traditionally associated with large, expensive database constructs.

Call center candidates who can most benefit from outsourcing include banks, brokers, credit card issuers and automatic direct payment providers. Typical outsource programs for financial services include the following categories.

  • Lead Management, Order Entry And Fulfillment. The call center identifies and distributes leads generated through inbound 800 number contacts to the appropriate distribution outlets, fulfills information requests and conducts outbound follow-up to hot financial prospects in order to improve sales effectiveness. Product/service orders can also be accommodated, including credit card processing, online inventory management and fulfillment — either full department handling or in an overflow capacity. This program works especially well for both short-term and long-term advertising campaigns.
  • Customer Satisfaction Measurement/ Management. This popular program facilitates communication with customers to evaluate the performance of the financial services organization and its channel members in key areas affecting customer satisfaction. By providing feedback in real-time, advanced call centers enable clients to react quickly to customer concerns and correct operational shortcomings.
  • Cross/Up/Next Sell. This service offers a chance for clients to maximize and optimize the call center scenario by seizing opportunities to cross-sell related financial services to target customers. A technically advanced call center with a strategically networked database can mean the difference between modest profits to an astounding leap in call center productivity.
  • Relationship-Building/“Churn” Management Contacts. The emphasis of the retention marketing call is not to interview customers, but to provide and collect information key to building the customer relationship. Examples include welcome calls to new customers and renewal contacts to high-value customers facing re-enrollment decisions.

Starting A Call Center Relationship
Finding a call center that specializes in your business needs is an obvious but often overlooked factor. The company philosophies and chemistry must create synergy and it must share your vision and goal. It is critical to measure the depth of a call center by assessing its interpretation of customer loyalty management. It is also not out of the question to assess the employee profile of the customer relationship associates, including average years of experience and education backgrounds.

Once the decision is made to outsource, it is essential to identify the right person(s) who will be given responsibility for oversight and management of the outsourcing arrangement and vendor relations after the contract is signed. Their inclusion is critical for several reasons. First, there is no better way to understand the issues involved in outsourcing than to be involved in all aspects leading up to the deal. Second, relationships with call centers start at the moment discussions begin. Being on the ground floor and having continuity in the relationship with people in the vendor organization contributes to success.

1“Survey of Current and Potential Outsourcing End-Users.” The Outsourcing Institute Membership, 1998.

Karen Beck has developed customer retention strategies for many Fortune 500 companies during her nine-year tenure with Sky Alland Marketing. She joined Sky Alland in 1989, during the early years of the company’s development. She is responsible for building many processes and systems currently employed by the firm’s clientele. Karen has held several marketing and client services positions at Sky Alland, and she currently heads up sales efforts in the mid-Atlantic region.

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