An 8-step Customer Service Cost Center to Profit Center Roadmap
Highlights
- Monetizing customer service can improve customer loyalty and top line revenue growth. It also creates a sea change shift in the organization's value to the company.
- Customer service profit centers recognize the untapped value of the customer base, apply specialized services to capitalize on that laden opportunity, and reposition contact center value in revenue terms. They append their mission from just delivering good customer support to delivering increased customer value that grows the customer base and drives company growth.
- A proven framework will accelerate the transition and reduce the risk when making the shift from customer service cost to profit center. This post shares an 8-step framework that has been used and refined for over two decades.
When the support organization operates as a cost center it's expected to be more efficient than the year before. Every year. However, efficiency is finite and you only cut costs so far. A perpetual cycle of cost optimization often results in underfunding that creates a drag on customer support at a time when customers are more informed, empowered and demanding.
Rather than invest the least amount of money to deliver the bare minimum service, a better approach is to change the mantra from "do more with less" to create value that exceeds costs and delivers revenue and profitable growth to the company.
The transition from customer service cost center to profit center is now mainstream for two important reasons. First, when contact centers sell products or services to customers, they increase customer share, and that's proven to increase customer loyalty. When customers use more of a brands products or services, they increase repeat purchases and purchase higher margin products.
And second, when support operates at a profit, it can deliver big revenue growth for the company. A McKinsey research report found that contact centers can increase topline revenues by 10 to 20 percent, even in highly saturated markets, and at the same time, reduce selling expenses by 5 to 10 percent. That's a powerful two-fold impact to the bottom line.
But making that journey is best done with a customer service strategy and roadmap.
The conversion from customer support cost center to profit center is not a simple transition but is aided with a proven framework. Here is the Johnny Grow customer service cost to profit center framework developed years ago and refined with every client engagement.
8 Steps to Shift from a Cost Center to a Profit Center
Without a roadmap, a project of this magnitude becomes aimless and pursues a trial and error approach. The transition may eventually work, but the delay will be costly and customers will be negatively impacted.
The framework instead identifies 8 essential steps to define a clear vision and the optimal route to get to the destination.
Start with a Growth Culture
A high-performance growth culture carefully defines, measures and reinforces shared values that drive the staff behaviors which determine staff (discretionary) effort.
Corporate culture is the human performance engine that directly impacts the level of success, or failure, for every business strategy, revenue initiative, operational performance and change transformation.
There are a lot of things the call center can do to drive growth. But the one thing that will directly impact every other is corporate culture.
The fastest route to a customer service growth culture is to adopt a growth mindset.
That is a steadfast belief that our abilities can be developed to achieve our goals; no matter how lofty. A growth mindset reinforces the belief that we will get smarter by putting in time and effort, and we have a powerful influence over our destiny. Our potential is ours for the taking, if we work hard.
A growth mindset is opposite the fixed mindset which assumes our abilities and understanding are relatively fixed.
Many customer service representatives (CSR) have delivered support for as long as they remember. They've not been coached, motivated or trained to redefine their role. They have seldom been asked to help with a strategic effort.
But when entire contact centers are trained to embrace a growth mindset, agents report feeling like company owners and customer advocates. They describe feeling far more empowered and committed. They rally around a shared vision and show far less reservation in taking on new challenges. They demonstrate a 'can do; attitude that propels the organization forward.
CSRS are not typically trained to have a growth mindset. But they can be. And the investment will drive increased levels of human performance needed for a customer support cost to profit center transition. Culture is a precursor and top contributing factor to anything and everything that requires employee effort.
Adjust The Mission
The shift from cost to profit center requires a parallel shift in mission. The purpose of the organization expands from delivering great service measured by customer satisfaction (CSAT) to driving customer value as measured by customer lifetime value (CLV).
Notice the key word was 'expands', not replaces. Good service remains an imperative and is a prerequisite to advance to a profit model.
No contact or call center should consider adding new revenue streams before it can deliver quality service that yields satisfied customers.
But when ready, the new mission will define an elevated customer relationship built on new engagement and interactions. It will emphasize new measures of customer value delivered through new services.
Define New Revenue Streams
The organization will introduce new customer support revenue streams to become a profit-driven business unit. These sources of revenue may be enhanced support services or other value-added services. Or the call center may perform sales order processing for ancillary products, add-on sales or renewals.
Low consideration purchases or anything that can be paid for with a credit card can be sold by the call center. More sophisticated purchase opportunities can be forwarded to the salesforce.
Recognize that the most successful revenue streams are defined by first understanding your customers' pain points and how they define value.
That can be done by accumulating data points during the normal course of agent engagement, or with purpose-built tools such as Voice of the Customer. Other techniques include white space analysis or mining data.
For example, harvesting customer support data can quantify customer problems to be satisfied with new fee-based services. Or the data can surface products that are sold with or in place of other products to configure up-sell, cross-sale or bundled sales promotions.
Using data to identify new revenue streams and selling opportunities is attractive because it's fast and unintrusive. However, it should be complimented with more qualitative analysis such as Voice of the Customer data and buyer insights.
The time invested to surface the most attractive revenue streams will provide customer validated assurance that new services are worth paying for and will thereby accelerate the call center's revenue growth.
Apply Customer Segmentation
Customers are not homogenous so attempting to satisfy all customers with the same services or offers will disappoint most.
Account segmentation is needed to group customers based on shared attributes, characteristics or other similarities. This most often means grouping customers based on firmographics, demographics, technographics, behaviors, purchase transaction history or profit potential.
Segmentation not only permits more relevant and personalized offers that achieve much higher sales conversions but also enables specific methods to grow each customer segment.
The contact center will apply different value-based segmentation strategies to retain the small group of the highest value customers, grow the economic value of the largest segment of mid-value customers and make the smallest group of unprofitable customers profitable.
For example, about 70% of your sales margins will come from about 20% of the customer base. These customers are more receptive to premium services that generate the highest margins. Pushing these high margin services to other segments will not achieve the same results.
Service strategies will achieve even higher conversions if they drill down to persona-based offers backed with compelling value propositions. For example, while working with a client we discovered that a cohort defined by age (contacts 50 years of age and higher) and title (director and above) was 2.5X more likely to procure a particular type of contact center enhanced service. That finding alone increased call center revenue 29% and margin 34% over the trailing 12 months.
Customer segmentation can also be used to define levels of service or benefits based on the customers economic value or potential. The below table shows an example of how contact centers may use segmentation to align services by segment.
Agent Sales Training
CSRs are motivated to help people. They are not always motivated by sales. But these two skills can and must be combined for a synergistic effect.
It's a bad idea to try to make agents salespeople. Instead, use the agents existing listening, communication and engagement skills to create what seems like a sales-free experience by positioning the selling component as part of the service delivery.
The sequence mattes. Agents must first create an empathetic connection. That comes natural for good agents. They have long been trained that no one cares what you know until they know that you care.
Empathy lets the customer know they are being heard, diffuses tension, enables a more productive dialogue and transitions the conversation from rants or complaints to finding a solution. Only then, can the agent consider new products or services that will benefit the customer.
And when sales recommendations are responsive to the customer's problem, and the agent explains the benefits in the customer's context, the sale is not a sale to the customer. It's a solution to why they called.
Proactive recommendations for products or services that solve problems or create customer value are generally welcomed when delivered at the right time and in the right context.
To make customer support profitable, agents will need to be trained how to identify selling opportunities and how to deliver soft sell recommendations that generate revenue and make the customer experience complete.
Include Change Management
Even when you know what to do customer service transformation is a tough journey.
The shift from customer support cost to profit center introduces new processes, automation, information, roles, responsibilities and performance measures. That's a lot of change, and the challenge with change is that it causes anxiety for many agents.
Change is endorsed by the few imposing the new mandate. However, it is not always so well accepted or is even contested by the majority receiving the change.
To bridge that difference, you should apply a change management program to systemically shift agents and the call center from a current state to a defined future state while mitigating productivity loss during the transition, creating an environment for sustained change and realizing the benefits of change more quickly.
Some of the change events and artifacts to make this happen include a change readiness assessment, Communication Plan, agent and technology impact analysis, learning & training tools, and value realization measurements.
A change management program will reduce staff anxiety, encourage buy-in and build enthusiasm for a new and better future. When done correctly, the program will ensure resistance to change will not delay or derail the journey to a customer service profit center.
Get to Omni-Channel Engagement
Research performed for the Customer Service Excellence Report found that customer experience scores when up, cost to serve went down and revenues grew with effective omnichannel customer engagement.
The research found that increasing the number of customer channels increases both the number of revenue related transactions and the average value for each type of transaction. That scores big when pursing a path to become customer support profit center.
Omnichannel engagement meets customers where they reside. It converges physical and digital channels, integrates different types of channels such as voice, chat, social and email, and aligns engagement with the buyer journey.
It allows customers to begin in one channel and transition seamlessly to another while allowing CSRs to maintain conversation fidelity.
But to maximize the financial impact when becoming a customer support profit center you also need to align the right channel based on activity.
Right-channel customer engagement defines the right communication channel to achieve the most effective and efficient outcomes.
Key technologies and channels that aid right channel engagement and profit goals include the following.
- Messaging apps
There is a customer driven shift from third-party apps to messaging apps such as SMS, WhatsApp and Facebook Messenger. According to research from Gartner, within the next two years, "80% of support organizations will have abandoned native mobile apps in favor of messaging for a better customer experience."
According to Gartner, within the next two years, "80% of support organizations will have abandoned native mobile apps in favor of messaging for a better customer experience."
Click to Tweet- Self-service apps
These apps automate low-variability, high frequency cases. Research by IBM shows up to 80 percent of routine customer questions or problems can be resolved with self-service tools. And contact centers that move high volume, low complexity cases to self-service channels drive down costs and improve profitability. - Co-browsing apps
These screen sharing apps permit agents to see and interact with a customer's screen in real time. They can diagnose problems, search for content or guide users through computer screen processes or Internet webforms. The technology also allows agents to share their screens for presentation or demonstration purposes. And when they show rather than tell they increase sales conversions. - AI-infused chatbots and virtual agents
Artificial Intelligence (AI) is the single most powerful technology to aid customer engagement and profitable services. These automated bots can apply endless amounts of customer data and natural language processing (NLP) in real time. They can deliver customer engagement that resolves problems and processes simple sales transactions. They can determine customer sentiment to know when to present an offer, upsell, cross-sell or next best action.
According to Gartner, "as more customers migrate from in-person to digital-first channels … organizations will be able to shift customer acquisition and retention from in-person to online self-service tools, digital content, and human- or bot-assisted interactions."
Call center technologies are essential to deliver rewarding customer experiences while at the same decrease the cost to serve and increase revenue impact.
Develop Decision Support Tools
Dashboards are the best analytics tools to display real-time information. They show what's working, what's not and highlight variances so managers can intervene to quickly course correct.
The change from cost to profit center also creates a change in customer service performance metrics.
Customer satisfaction measures such as CSAT and NPS remain important. Agent performance metrics such as Average Handling Time (AHT), Speed of Answer (SoA) and First Contact Resolution (FCR) also remain important. But now the existing metrics must be balanced with new revenue-based measures such as sales conversion rates, the number of sales transactions generated per agent, the average order value per agent or Revenue Per Representative per day (RPR).
And finally, to be a customer service profit center you must show a measurable profit. So, contact center analytics are needed to tie service activities to revenue and profits.
Every customer interaction that impacts a purchase, drives customer lifetime value or increases retention should be measured and reported. Getting this level of measurability will require a data driven model that assigns attribution, aligns activities with financial results and rolls up data as part of a closed loop reporting system.
The below table shows an example of how a data driven model may be structured to roll up data.
When customer support demonstrates a measurable and growing profit to the company the organization will eliminate the cost center stigma and be viewed as part of the revenue generation team. That will create cascading effects with things like the budget, technology investment and career path escalations.
Takeaway
As Mark Twain advised, the secret of getting ahead is getting started. The secret of getting started is breaking your complex, overwhelming tasks into small manageable tasks, then starting on the first one.
You may want to consider the steps in this customer service cost to profit center framework over three phases.
- Get Started. Define your baseline performance, identify the prerequisites to move forward and ensure the organization can deliver consistent services that yield satisfied customers. Attempting to add new revenue streams or otherwise transform the contact center before getting the basics right will create chaos and deliver disappointing results.
- Get Better. Pursue the 8 steps. Applying a proven and repeatable transformation framework will define, de-risk and maximize the likelihood of success. The steps need not be sequential, and some steps will be more influential than others depending upon your baseline or starting point. From our experience in working with clients, the transition from multi-channel to omni-channel to right channel engagement can be especially challenging. But it's essential to meet more customers where they reside, align the use cases that best fit each channel and achieve both increased revenues and lower transaction costs.
- Get Ahead. Ensure you have a closed loop reporting system that defines the correlation between customer support actions and financial results. When transaction data is linked to business outcomes, you can systemically manipulate actions to improve results. This measurability is required for continuous process improvements.
Also, shift your analytics from hindsight to foresight. Information becomes much more actionable when it advances from historical to predictive. In fact, without predictive analytics, the view for every person in your contact center is entirely backward looking.
Finally, consider integrating industry benchmarks with your performance reporting to adopt a path to outperform competitors.