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Some costs are invisible until a customer is lost
It can be vital to have a viable
customer-relationship management system

Monday, March 19, 2001

Duplicate effort wastes a lot of time in business. For example, customers who want answers to questions may have to pick their way from shipping to a manufacturing plant to sales and even to management.

However, companies can present a unified front and link all their customer-contact systems into one. That's what customer-relationship management systems do, says Jon Hantho, president of customer communications for Symcor Services Inc., a Toronto-based firm that specializes in developing billing and statement solutions.

"We assist our companies to communicate more effectively through the effective use of bills on-line and off-line," he explains. "The bill or statement is a major trigger for a customer encounter. Most of the call volume coming into call centres begins when a customer gets a bill and inquires about the service or an error."

An average call about a bill, which may last no more than 12 minutes, costs $50, Hantho says. "This is what our customers are telling us. The good news is that not all customers call about their bills. The bad news is that a single call can wipe out your profits from a month of business for that customer. The solution, in our mind, is to present bills on-line and link the bills to self-help. Allow the firm to drill down for more information. We have seen telecom firms extend their customer care out of the call centre and onto the Web to enable them to help themselves. For frequently asked questions, the cost is nominal. Some of the services telecoms offer their own customers include a 'who called me' service that allows the customer to key in a number and find out the name associated with it."

More complex and potentially costly telecom-customer queries, such as those that may question whether calls are within a subscriber's call plan, can be handled on-line, Hantho says.

"You may have signed up for e-mail access on your digital wireless phone," he says. "The telco knows how I use the phone. When my bill pops on the Net when the customer initiates a query, the company should be able to review the account and make recommendations on how the customer can make better use of the technology or change the plan."

The technology to do immediate call-traffic analysis is available, but no telco in Canada or the United States currently does it, Hantho says, adding, "Our firm can do this, and it would be possible to implement it for no more than a few hundred thousand dollars for a customer that already has a Web-accessible customer database."

Would this really be cost efficient? Yes, Hantho says. "You measure against call-centre activity and see how much it declines after call-analysis software is installed. You also have to check Web-site hits to ensure that the traffic that has left the call centres has moved to your Web site."

He continues: "To demonstrate that interactive account-query systems are working, we like to see a reduction in customer turnover. A major issue for companies today is what we call 'churn' -- customers defecting to competitors."

"We know that in wireless, the churn rate can be 2 to 3 per cent annually. If you can measure a better relationship between improved customer service and a reduction in the defection rate, then you have hit the sweet spot in terms of payback of what enhanced customer handling costs."

The concept behind costing forgone relationships relies on a what-might-have-been concept of opportunity profit. "If a firm has not kept a customer for as long as needed to get a return on investment, including the cost of acquiring the customer, the investment in that customer is lost," Hantho says.

Enchanced bill-analysis service reduces not only the direct costs of finding out information about accounts, it also reduces the opportunity cost of losing a customer to a competitor, Hantho says.

In the larger world of cost-tracking and administration, software that improves customer retention and reduces the cost of "care and feeding" a customer also trims visible and invisible costs. There is nothing invisible in the math that says that a customer acquired today has to produce a return.

"But that return may require a relationship of months. In the business of cellphones . . . maintaining the relationship is the condition of profitability. And helping the customer to make the most of the service is the means by which telcos can raise their own profits."

Today, firms that provide services to their customers have to understand profitability not just by line or business, product or service, but also by the customer. So the new math that will make companies successful will allow them to retain profitable customers and create strategies to turn even unprofitable accounts into ones that generate acceptable returns.

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