Perfecting Service Management

Issue #52

Tuesday, August 31, 2004

Amateur or Professional – You Get What You Pay For
by Craig Bailey

We have all heard the proverb "you get what you pay for." While we may have taken this to heart in our personal lives, we need to make sure that we don't forget the essence of this and how it impacts our customer relationships. Here is the scenario…

A managed services provider (MSP) has a customer who, due to cost constraints, bought the lowest cost solution to meet immediate business needs, with little room for growth. After 3 years, the solution provided by the MSP has become outdated (technology out of rev, etc.), making it increasingly difficult for the MSP to support. The result is that the customer experiences persistent, business-impacting problems. While various attempts have been made to suggest upgrades and add-ons, the customer keeps bringing the conversation back to the "immediate problems" being experienced. In essence, the customer is managing the MSP instead of the MSP managing the customer's experience.

How the account team (service representatives and account manager) responds to this situation can be delicate, but is absolutely critical. Too often the service team dutifully performs daily fire-fighting to resolve the persistent issues and constantly takes heat from the customer related to the recurring problems. All the while, the team is commenting (internally) on how outdated and ineffective the customer's solution is. The posture of the MSP team is "well, this is the customer's solution that we must support per contract, so let's just keep at it." This is insanity, continuing to do the same thing yet expecting a different result.

A professional responds to this situation by taking very proactive steps, including:

  1. Acknowledging the reality of the situation. The solution that we are providing the customer, while good at the time of implementation, is now outdated causing unacceptable business impact to my customer. And, the relationship is becoming increasingly unprofitable as we expend more and more resources reacting to the problems that result.
  2. Engaging the entire account team to define a recommended solution to the root-cause (an upgrade/redesign).
  3. Meeting with the customer to discuss the current reality and…UPSELLING.

If the customer decides not to heed the advice of the MSP, then an alternative outcome, although much less desirable, may be to part ways with the customer. That is, if/when a relationship no longer provides mutual benefit, then it is no longer healthy and should be terminated. Continuing down the same path without making foundational changes will only cause both businesses increasing financial impact, and stress to the personnel involved.

So, key principles to remember include:

  • Set clear expectations up-front about what your product/service can do, what it can't do, and when it will be necessary to discuss upgrades/add-ons for supportability and the customer's anticipated growth.
  • Don't let the daily noise cloud judgment or take focus away from the root-cause problem.
  • The customer should and does get what they pay for – and they know it!
  • Definition of insanity – continuing to do the same thing, expecting a different result.

View previous articles in this series.

Exploring Outsourcing: The Outsourcing Agreement
by Kurt Jensen

Creating an outsourcing agreement with a vendor can be challenging. While the intent is to create an ongoing relationship, agreements often have the flavor of being transactional in nature. Working through an agreement can become especially daunting if your company doesn't have enough contact center expertise to be familiar with common terms or requirements. Below is a high level list of features and considerations for a contact center outsourcing agreement.

  1. Primary Cost Drivers – the essence of any outsourcing agreement involves a discussion of primary cost drivers such as volume, average handling time and service level (formulas vary). Expect an 'agent minute' or an 'agent hourly' or an 'incident' rate to equate into the total cost equation.
  2. Forecast – the forecast is an extremely important requirement for both parties. Accurately projecting call volume based upon historic figures provides the outsourcer a baseline expectation from which to model staffing coverage. From a client perspective, forecasting provides an estimate of upcoming expenses. Expect to lock into an upcoming month forecast 35-50 days in advance.
  3. Performance – performance incentives or penalties are often tied to meeting service level, abandonment rates or average handling time over a certain period of time (often a month). Performance expectations are often enhanced by a termination for non-performance paragraph. Expect talented outsourcers not to hesitate to agree to performance incentive or penalties.
  4. Term – the term of the agreement is often accompanied by an auto renewal feature. While this places some burden on the client, it is often countered by a termination for convenience paragraph. Expect an auto renewal and termination for convenience to be in the 60-90 day range.

As the agreement process moves forward, it is important to capture cost details associated with the program. For example, if a new product is introduced and average handling times will spike for 30 days as a result, how will that impact costs over the program's lifetime? While it may seem simple, one effective method of capturing such details is creating a road map of year one with the vendor, taking one month at a time and anticipating cost impacting events such as:

  1. Attrition training – based upon employee attrition rates, what is the monthly cost of training attrition (if applicable)?
  2. Programming (e.g. web, chat, IVR, etc…) – if chat is set for launch at month six, what are the programming costs before and after?
  3. Increased/decreased handling time - will new products or policies drive handling times up or down?
  4. Volume – are any significant events anticipated to impact volume (product shut downs, intros, etc..)?

The added bonus of walking through the first year is the development of a high level road map which can be used to set goals. An example goal might be: "Keep average handling time steady through new product release." Having the road map will promote addressing the goal in advance and provide a direct cost benefit at the same time.

Contact us if you would like to share outsourcing or RFP experience. If you are thinking about outsourcing, we can help you manage the process, while you focus on your business!

View previous articles in this series.


+ Amateur or Professional
+ Exploring Outsourcing
+ Recommended Reading
+ Speaking Engagements


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Recommended Reading
As a complement to our current series on Exploring Outsourcing, we recommend the CRM Magazine article Considering Offshore Sourcing? Take Time to Do It Right by David Raia. The article presents 5 principles to remember when considering outsourcing, to allow you and your company to get the most benefit (and least risk) from an outsourcing arrangement.

Speaking Engagements
CCI President Craig Bailey will be a speaker at PDMA's (Product Development and Management Association) 7th Annual "Voice of the Customer" conference on December 7-10, 2004, in San Francisco CA. Presentation materials will be available for download from CCI's website closer to the conference date.

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In short, we align the resources of your organization to exceed your customers' expectations in the most effective and efficient manner possible.

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