November 2008

Outbound, outsourcing, and the new world order
Outbound, outsourcing, and the new world order. By Colin Talor

With the introduction of the American Do Not Call (DNC) list, most people (including those within the call and contact centre industry), assumed the death knell had been sounded for outbound calling. The DNC identified huge volumes of people whom you could no longer telephone and although there are certain exemptions and exceptions to it, the legislation forces organizations to change the way in which they transact business.

Telemarketing or outbound calling was once the primary activity of call centres. Companies employed outbound telemarketing tactics because they worked. Thirty years ago, people were often genuinely happy to receive a telemarketing call from hundreds or thousands of miles away. Gradually, more companies began using outbound telemarketing themselves or contracted with a third-party outsource agency to place calls on their behalf. The introduction of predictive dialling greatly improved the number of calls that an agent in a call centre could make and the number of calls soared. Pretty soon, consumers were receiving two, three, even five calls a day and their frustration with telemarketers calling to “sell them something” soared too.

Regulation begins
Enter the U.S. DNC list whereby frustration with outbound telemarketing crystallized into 150 million Americans registering themselves. Recently, on the first day of operation of Canada’s DNC list, the number of people calling to register themselves overwhelmed the third-party operator. Ultimately, we will likely see more than half of all Canadian phone numbers registered under the DNC.

According to ContactBabel, a firm that provides research, analysis and business recommendations to CRM and contact centre solution providers, legislation has exerted quite an impact on outbound telemarketing activities.

“Fourteen percent of respondents [to a ContactBabel survey] said that their outbound calling had been greatly reduced due to legislation, although 56% of respondents indicated their outbound telemarketing had [been] reduced 'in some way,' (which is up from 41% last year).” Over the past decade, what was once a 50/50 split between inbound and outbound calling, has been reduced to the point that today, only an estimated 18 percent of call centres would define themselves as exclusively or primarily outbound.

New ways of skinning the cat
So with fewer people to call, what are organizations doing? Perhaps surprisingly, they are still calling. Sales calls to new customers are still the # 1 activity. Even though the universe of “callable” numbers has been greatly reduced, cross selling and customer service activities represent significant segments of outbound telemarketing.

Increasingly, companies and organizations are examining the possibility of outsourcing and off-shoring their outbound calling requirements. Much of this activity is provided through third-party outsource agencies. There are a number of reasons for employing an outsourced solution:

• Outsource firms tend to cost less than completing the work internally (much less if an offshore provider is employed);
• Outsource firms can often access skills, staff and technology that the client company may not possess internally; and
• Ensuring compliance with legislation (DNC).

Outbound calling by third-party firms will generally be completed on a cost-per-hour basis, on a dollars-per-sale basis (often called ‘pay for performance’ or P4P), or on a base plus bonus structure. These rate structures reflect risk and which of the parties (outsourcer or client) is accepting that risk. Understandably, cold call selling is often outsourced on a P4P model whereby the company doesn’t pay anything unless the outsource firm actually makes a sale. Of course, this is not completely true since a company that sponsors high volume P4P campaigns runs the risk of eroding brand value due to the volumes and/or quality of the calls. Hourly rated programs tend to be service and customer satisfaction types of calls and up selling, cross selling, and renewal activities are often structured on a base plus bonus arrangement.

P4P and offshoring
There is a high correlation between P4P programs and offshoring. A casual study I conducted found that more than 75 percent of P4P program opportunities reviewed were targeted to offshore firms calling into North America. The reason for this is cost. While it is virtually impossible to make a cost comparison on P4P activities as the unit price varies by product and/or service, it is possible to look at hourly costs to establish a baseline. A recent survey completed by The Taylor Reach Group, Inc. found that hourly rates varied across Canada from a low of $20 per hour to a high of $32 per hour for outsource firms located in Canada. Generally, Toronto (and other major urban centres) had the highest rates and more distant and/or rural locations provided lower rates. This compares with hourly rates ranging from $12 to $14 offshore.

There are certain challenges and risks to bear in mind before you rush to offshore your outbound telemarketing activities. From an effectiveness perspective, these include issues pertaining to: language, geography, inflexible scripting, understanding the product or service if it is not prevalent in the culture of the off shore location, and context if the offshore agents are not familiar with North American culture. There are also risks from a financial point of view. The stated rates do not include the cost to source, vet, negotiate nor contract with an offshore service provider, nor do they include the 20 to 30 percent premium to manage an offshore partner. Lastly, offshore outsourcers generally have a lower sales conversion rate due to the previously described challenges. Once these considerations are taken into account, costs offshore become similar to those onshore.
If you are presently completing outbound telemarketing, outsourcing to a third-party firm should certainly be considered, but you need to ensure that the rate structure is appropriate to the type of calls you wish to have placed (sales, service, satisfaction services etc.), that the technology employed is appropriate (predictive, progressive or preview dialling) and that your risks related to legislation are mitigated through a compliance program. The first organization to be fined for violating the US DNC was AT&T, through one of its outsource partners. This is not what you want to experience.

Outbound telemarketing is not going away any time soon. Companies and organizations that either employ or wish to employ outbound calls in their marketing mix will need to be vigilant and know how to mitigate the risks. Third-party outsource firms have developed compliance programs to ensure their actions meet the rules. Because outsource firms have a vested interest in maintaining their livelihood and are at much greater risk than their clients, these companies will continue to invest in compliance.

Colin Taylor is the chairman & CEO of The Taylor Reach Group, Inc., a call and contact centre consultancy with offices in Toronto, Atlanta and Sydney. TRG assists organizations in improving the operational effectiveness and efficiency of their contact centres. For more information, visit http://www.thetaylorreachgroup.com.