January 2003

BY NADJI TEHRANI

Having covered the contact center, call center and CRM industry since 1982 when this publication laid the foundation for what is now a multibillion-dollar industry, and as the owner of the registered trademark for Telemarketing, I have had the great pleasure of watching and helping the industry grow from the ground up!

I have seen the ups and downs, the grief and happiness; I have witnessed teleservices companies as the Darlings of Wall Street and, yes, hotter than most Internet stocks!

THE CONTACT CENTER AT A CROSSROADS
The year 2003 brings new challenges and opportunities for all of us. If we make the RIGHT DECISION, we will prosper and if we dont, forget it!

Wheres The Industry Now And What Lies Ahead?
In spite of the current, severe recession, which has forced numerous companies to bankruptcy, the contact center industry has done exceptionally well and as far as I know, not one major and well-managed teleservices company has filed for bankruptcy! In fact, the inbound sector of the teleservices industry, for example, continues to grow at 30 percent per year every year since 1992. Yeseven in this economy! You might ask why I use the teleservices industry as an example. There are three important reasons for that: 
1) Teleservices outsourcing companies work for Corporate America and as such they are a true indicator of what is happening in American business.
2) Their performance and growth is measurable and verifiable as it is based on their billable minutes, as provided to us for our annual Top 50 Teleservices Agencies Rankings.
3) The above information cannot be obtained from inside sales and customer service departments of corporations without great difficulty. Even if one were able to obtain such information from corporate inside sales and customer service, it would be nearly impossible to verify. As far as I am concerned, there are too many unsubstantiated statistics floating around that are generated by people who call themselves analysts. To the best of my knowledge, most of the analysts that I have come to know are the type of people who could not spell call center last year, but they are experts at it this year. Our industry doesnt need more numbers like that.

What Will Not Grow And Why Not?
Outbound will not grow for a variety of reasons. The most important of which is anti-contact center legislation dealing with privacy, do-not-call lists and predictive dialer restrictive rule making. In addition, extreme competition has forced drastic price-cutting, which means extremely poor quality service, which in turn creates more restrictive legislation. There is also an absence of innovative applications, which adds to a lack of vigorous growth. (For examples of innovative outbound applications, see the sidebar to this column, written by Dean Brown, vice president of Sales and Marketing of TeleDirect International.)

Who Will Gain Market Share?
The companies that are blessed with a strong marketing strategy and are able to effectively execute such strategy will gain market share provided:
They properly position themselves.
They are able to effectively differentiate themselves from competition. (Remember, quality alone is NOT a differentiator because everyone claims that!)
They really know how to use integrated marketing andabove all, THEY DONT STOP marketing and advertising in a recession. On the contrarythats the time to vastly increase your market share and remember,
PR alone without the above WILL NOT DO IT!

Who Will Lose Market Share?
Companies who cut marketing and promotion budgets, particularly in this economy, will be first to go out of business or not grow beyond a certain point. Such companies want to get FREE promotion without spending a dime. You have to wonder about them. Separation of Church and State notwithstanding, havent they heard: There is no such thing as a free lunch? Please read my last seven  editorials for more information. Be sure to read at least the one from April 2001 entitled, If Business Gets Any WorseWe Should Probably Start Advertising http://www.tmcnet.com/cis/ 0401/0401po.htm.

What Is The Impact Of Technology?
Great advances in technology in the last few years are beginning to have a profound effect on the industry. Systems have become open, allowing greater interconnectivity between channels and freer data exchange. This freer data exchange has led to the visions of CRM to become practicable, with customer information no longer being siloed, unreachable when the agent needs it most, when dealing with the customer. Data analytics packages are becoming more refined and affordable by a greater number of companies. I look to more companies providing CRM solutions for the mid-market in the coming year, perhaps spurred by the entrance of Microsoft in this market, perhaps spurred by the relatively untapped size of this market segment. Advances in speech technologies are providing many exciting new opportunities for better serving customers, allowing easier access to information. The convergence of the voice and data networks, VoIP and related technologies are providing adopters with greater flexibility for their systems and services capabilities, as well as providing impetus to the decentralization of the contact center and greater offshore opportunities. 

What About The Offshore Market?
These days, its impossible to discuss outsourcing without at least considering the wide variety of offshore options that seem to crop up almost monthly. Companies may choose to outsource offshore for a variety of reasons: they may perceive that the U.S. call center labor pool is tapped out and go looking for greener pastures; they may be looking for cheaper labor; they may be attracted to the generous tax and facilities assistance offered by foreign countries.

For all these reasons, the topic of outsourcing offshore is hot right now. But how do you make the decision to go offshore and, once you do, how do you determine not only which country, but which continent, is right for you? Years ago, outsourcing outside U.S. borders meant crossing the border to Canada; Canada has become a popular option, particularly the Maritime Provinces where ready labor pools are available in light of decreases in the former number one industry there: fishing. Additionally, outsourcers are becoming available in the Caribbean at a furious rate: Jamaica is a popular destination right now.

But its impossible to discuss outsourcing offshore without bringing up the most talked-about destination, Asia, particularly India and the Philippines. Many Fortune 500 companies have set up contact centers, help desks, back-office functions and software development centers in Asia with a great deal of success. There are pros and cons about setting up shop in both India and the Philippines, and describing the pros and cons is beyond the scope of this outlook, though both destinations have been covered extensively in this magazine in the last few years.

According to research soon to be published by TMC Research in The Worldwide Teleservices Outsourcing Market: Analysis & Forecast, 2002-2003 (to purchase a copy of the report, call Bruce Hirsch at 203-852-6800, ext. 130 or see www.tmcnet.com/research), there are a variety of challenges facing U.S. teleservices agencies. Respondents from teleservices agencies cited the following challenges, in order of importance: 
Pricing 21%
International competition 17%
Legislation 16%
Competition with in-house centers 14%
Turnover 10%
Equipment costs 9%
Hiring 7%
Expansion 3%
Consumer rejection/Caller ID 3%.

As one can see from the figures above, turnover and hiring are a problem for teleservices agencies. When asked what obstacles to hiring they faced, they responded as follows:
Area is saturated with other teleservices agencies 33%
Wage demands too high 29%
Located in a high employment area 17%
Located in an unskilled labor market 12%
Position is undesirable to the local labor market 5%
Regional accents too strong 3%.

On the consumer side of the report, respondents who are potential purchasers of teleservices outsourcing services pointed out the areas in Chart 1 as areas they would consider for outsourcing offshore. 

Chart 1
Areas of customer interest for offshore outsourcing.

Of the potential consumers for teleservices who responded to the survey, those with concerns about offshore outsourcing outnumbered those who did not have concerns about offshore outsourcing 62 percent to 38 percent. The concerns they have about offshore outsourcing ranked as follows:
Difficulty with ongoing management of program/quality concerns 19%
Agents accents 18%
Cost of travel for setup/training/management 15%
Inexperience of offshore call center outsourcers 14%
Turmoil in global areas 13%
Loss of control of campaigns 12%
Lack of familiarity with offshore outsourcing 9%.

To counter the pressures of international competition, U.S. teleservices agencies will have to begin to develop areas of expertise at which they excel, which differentiate them from others. As is shown in this research, a surprising 38% of potential teleservices outsourcing customers have no concerns about offshore outsourcing, so U.S. companies must continue to work their hardest to improve their quality and their offerings, and make themselves indispensable partners to their clients if they expect to continue to prosper in the coming years.

Heres How You Can Get The Teleservices Outsourcing Report
You can purchase The Worldwide Teleservices Outsourcing Market: Analysis & Forecast, 2002-2003 report at www.tmcnet.com/research or by contacting Bruce Hirsch at 203-852-6800 or 800-243-6002, ext. 130 or e-mail Bruce at bhirsch@tmcnet.com.

What Is The Impact Of New Legislation?
New legislation must not limit legitimate business practices and adversely affect commerce, but marketers must also always keep in mind the needs and preferences of their customers and never abuse them. As always, I maintain that telemarketing should be a part of an integrated marketing campaign and in the best use of telemarketing, inbound must feed outbound. We will be sure to cover legislative developments and their impact on the industry in the coming year.
As always, I welcome your comments.

Sincerely,
Nadji Tehrani
TMC Chairman, CEO and 
Executive Group Publisher
ntehrani@tmcnet.com

[ Return To January 2003 Table Of Contents ]

The great news about the United States is that there are 280 million red-blooded, live consumers for every product or service we sell. The bad news is there are only 280 million consumers. You can bet that each one of these consumers has met up with a telemarketer at least a couple of times this week.

The telemarketing discipline is now the topic of late night host monologues and, worse still, the easy target of any legislator looking for press on the basis of consumer protection. New restrictions are causing many of us to wonder, what is the future of telemarketing and does this mean the end of outbound call centers? But wait, does this restrictive environment mean we are no longer allowed to intelligently initiate welcome calls and follow-up calls with customer assurance and targeted offers to customers?

Strangely, this discussion is reminiscent of European marketing discussions in the mid eighties where cold-call telemarketing was already outlawed or considered discourteous. However, a friendly call to follow up with a customer or to thank a customer for their order is considered most appropriate. Nobody seems to be too concerned that these calls also include special offers that result in huge revenues and by nature also improve the longevity and lifetime value of the customer. From that modest beginning, intelligent outbound call initiation has become a huge business in Europe and the rest of the world. 

Today in our market, the perceived wisdom is that outbound calling is a dead-end business. What is a dead-end is blind (non-targeted) outbound cold-call telemarketing, not interaction with prospects and customers who want to buy and use what you sell. The distinction is that now more planning is required to do a better job and avoid running afoul of any legislative guidance. 

The marketing industry has widely adopted a notion that a customer relationship goes through many stages. The cell phone customer is a good example of buyer fickleness on the downside and revenue value on the upside if this phased relationship is nurtured by the vendor. It is downright common sense and practical to call a customer and thank them for their businessit becomes hugely profitable if it affects an increase in the average revenue per unit (say a successful upsell) or retains the customer for a month or year beyond the average lifecycle length; the cost of individual and general acquisition drops; and the customer base remains larger and internal growth rates look great to your investors and Wall Street. At the first level of customer retention, GartnerGroup plausibly proposes that a one percent increase in general customer base retention translates into an eight percent increase in margin. Who wouldnt like thatand all by making an outbound call to an existing customer on the pending anniversary of their contract! Isnt this outbound telemarketing by another name?

The whole discussion about rediscovering outbound calling cant take place in a vacuum. It is about intelligent calling. This means a whole series of things must take place before anyone is called. What you sell, how you sell it best, who buys it most and what are the various purchase and response characteristics of different markets and offers? There is a necessity to tag, clock, recycle and measure all these contact events so things that work are recognized and exploited and things that dont are identified early and stopped before they burn goodwill.

The next problem is that all of these incremental disciplines must be applied to every list, task and customer in a manner that does not add a burden to the customer representative (agent) from a style, task, training or cultural perspective. 
Marketers are great at offering ideas that, at best, have yet to be proven, or worst, defy culture. For example, take the popular idea that every contact represents a sales opportunity. If taken at face value, trouble calls should result in a sales opportunity. Have you ever tried to propose to a customer that buying more is the solution to their problem? Not without a massive loss of credibility. However, in essence the marketer was right, here is a sales opportunity if you identify the trigger event and launch a later and appropriate upsell call positioned as a customer assurance follow-up call, offering a premium or other incentive for their trouble. The expected success of an upsell event is two to three percent in the context of the trouble call but 50 to 70 percent in the context of a customer assurance call! Outbound telemarketing by any other name!

The challenges in executing these new disciplines are typically beyond the training and technology in most call centers. This is all about making these disciplines transparent and getting human discretion and chance out of the transaction. Adding the optional load of deferrable (outbound) tasks in a demand (inbound) environment adds to the complexity of execution. But for those savvy marketers who are looking for a competitive edge, this is a most worthy endeavor as it has been proven to increase revenue, retention and profit. Long live outbound calling!

Dean Brown is vice president of Sales and Marketing at TeleDirect International, Inc. (www.tdirect.com), a leading provider of automated marketing campaign solutions that allow companies to enhance customer satisfaction and capture revenue at every point of customer contact. He may be contacted at 480-585-6464, ext. 3373 or [email protected].

[ Return To January 2003 Table Of Contents ]