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Call centers represent a pivotal point in
customer service operations. Until recently, organizations have neglected
most areas of customer service processes by considering them dyed in the
wool cost centers. Because of this neglect, call center operations
represent a huge opportunity to improve a company's overall financial
performance. Organizations can turn these operations into little goldmines.
By reducing costs and increasing revenues through satisfied customers,
organizations can transform customer services into profitable processes.
A well-designed business intelligence
component of your contact center information system enables you to monitor,
measure, and, therefore manage the revenue and cost aspects of your
operations. A contact center business intelligence component enables your
managers, in real time, to determine the right actions to take to maintain
profitability in your operations:
- Eliminate repeat
calls on the same issues.
- Resolve issues
during the first call to eliminate customer frustration and
consequently costly returns.
- Staff and train the
right types of agents per the requirements of a specific contact
center project.
- Design and redesign
processes to eliminate costs and increase profit.
- Increase the lower
incremental costs at the front-end where agents deal with frustrated
customers in order to reduce the higher incremental costs at the
back-end, the logistics of handling a returned product.
- Develop customer
loyalty through well-trained contact center agents that increase the
types of revenues that offer high profit margins because they have
very low cost of sales.
- Create high customer
satisfaction resulting in repeat purchases, referrals, and
word-of-mouth goodwill.
- Use business
intelligence tools to measure how the changes in certain operations
impact cost and revenue behaviors.
- Measure and monitor
pertinent aspects of financial and non-financial activity in real time
through a business intelligence framework.
- Measure how
management adjustments can influence results in terms of operational
ROI and profit.
Critical factors in maintaining
profitability depend on having access to the key performance indicators. A
well-designed framework for business intelligence plays a key role in call
center financial prosperity. How practical you are at integrating cost
accounting principles into the service operations enables you to keep
people involved in the budgeting, planning, and actual performance
monitoring. When the measuring and monitoring capabilities are practical
and easily accessible, they make sense to all employees. Performance
improvements require involvement from all levels of the organization.
A well-designed business intelligence
framework can make profitability happen. Capture performance data at the
level where people are making their individual contributions. Roll these
detailed metrics up to calculating trends and patterns that are useful for
forecasting and planning. Cycle these measurements back into planning and
strategy designs.
One way to do this is to consider the
Cost-Volume-Profit (CVP) analysis of contact center activities. A business
intelligence component tied to operations data can monitor the balancing
act between loss, break-even, and profit as call volumes change over weeks
and months and depending on the cost structures of fixed and variable
commitments.
We can use the CVP report below as one of
many examples of how business intelligence -- as an integral part of the
contact center operations -- can track information useful for making
business decisions. This CVP report enables managers to consider
sensitivity analysis, how profit and other performance measurements will
change as original forecasts, or underlying assumptions such as fixed or
variable costs and service prices, change over time.
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Cost-Volume-Profit
Analysis
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Monthly Fixed Costs
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Forecasted Total Inquiries Per Month
Can Be Derived
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Variable Cost Per
Customer Response
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Monthly Total
Variable Cost Per Forecast Can Be Derived
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Revenues Required
At $200 Monthly Fee Per Service Contract To Earn Operating Income
Of:
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$0
(Break
Even)
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$12,000
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$16,000
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$20,000
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Resulting Operating
Income (CM*)
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$20,000
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$10
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21,053
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33,684
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37,895
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42,105
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$190
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$12
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21,277
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34,043
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38,298
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42,553
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$188
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$15
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21,622
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34,595
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38,919
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43,243
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$185
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$25,000
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$10
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26,316
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26,316
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26,316
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47,368
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$190
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$12
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26,596
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39,362
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43,617
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47,872
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$188
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$15
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27,027
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40,000
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44,324
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48,649
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$185
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$30,000
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$10
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31,579
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44,211
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48,421
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52,632
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$190
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$12
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31,915
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44,681
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48,936
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53,191
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$188
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$15
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32,432
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45,405
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49,730
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54,054
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$185
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* Contribution margin (CM) = unit sales price - variable
costs.
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This analytical report indicates to
managers how many support contracts must be current and at what price in
order to break even. The analysis indicates the various revenue levels,
number of current contracts, as well as the combinations of fixed and
variable costs structures that are required in order to at least break even
or achieve an operating income of various levels. Reports like these are
important for managers to understand how to set, maintain, and achieve
profitability goals. Having this type of visibility into the financial
structures is important, especially since in some information systems it is
possible to use the contact center as the hub, or organizing center, for
many other operations such as returns management, product disposition, and
asset recovery.
Using this type of business intelligence
has value in considering alternative fixed cost versus variable cost
structures. The sensitivity analysis highlights the risks and returns as
fixed costs are substituted for variable costs in the contact center's cost
structure. This risk/return trade-off can be measured in terms of operating
leverage that describes the effects that fixed costs have on changes in
operating income and contribution margin (CM = unit sales price - variable
costs). High levels of fixed costs tend to lead to more sensitivity in the
relationship between sales and operating income. This review provides
critical information for several types of decisions, including how and how
much of these services might be outsourced to a managed service provider
thereby eliminating the some of the risks, cash flow, and capital
investment impacts of fixed and variable costs.
The use of Web-based information
technology, such as business intelligence grafted into the processes of
customer services and support management, enables organizations to excel in
how they maintain their own operations. These are the keys to developing
sustainable competitive advantages, to distinguishing your operations from
any other company in your industry. The organizations that move first and
move with smart innovations, seize the opportunity
to benefit from major wealth creation. They are building sustainable
competitive advantages that outstrip others in their industry.
Mark Biskeborn
is director of marketing for Alorica Inc. Alorica is a
customer service management firm managing the entire customer lifecycle,
from front-office customer interaction to back-office fulfillment. Alorica delivers fully integrated services such as
customer interaction management, service logistics, depot and onsite repair
services, as well as total eBusiness solutions.
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