In the past, contact centers have been viewed as “’a necessary evil‘ to doing business – a cost that needed to be managed and minimized.” In fact, ICMI and Zendesk Research found that 62 percent of organizations perceive their contact centers to be cost centers.
This perception is starting to shift, however, as changing market conditions force businesses to adopt a customer experience (CX) mindset. NICE predicts that, “by 2025, the contact center will have evolved into an experience center and … [will] no longer be seen as a business cost but will finally have completed its transition into being a profit and opportunity center.”
From Cost Center to Profit Generator
As Platform 28 writes, “Turning a contact center from a cost center to a profit center has one fairly obvious and significant benefit: the generation of revenue.” This revenue can be created by contact centers either directly or indirectly. Direct methods include explicitly closing new sales such as through upsells and cross-sells. Indirect methods include the ability of agents to reduce churn and create the type of positive experiences that lead to word-of-mouth marketing and referrals to potential new customers.
While the impact of indirect revenue generation should not be underestimated, it is the direct methods that offer the greatest potential boost to a business’s bottom line. As Ameyo puts it, “Revenue-generation can only be maximized by enhancing the agent’s ability to convert cross-sell and upsell opportunities.”
Cross-selling is the process of selling (or at least recommending) products or services that complement an item that a customer has already purchased. A classic example is McDonald’s asking, “Would you like fries with that?” after a customer orders a hamburger. Another example is often seen with ecommerce, when a company displays items related to the one the customer is currently browsing. If you’ve ever shopped on Amazon, you’ve no doubt seen this strategy at work in the “Customers who bought this item also bought” section.
“Creating a cross-selling strategy isn’t rocket science, but it does take some planning,” writes Keap. In particular, sellers should consider segmentation, relevancy, and timeliness.
Segmentation refers to dividing customers into groups according to relevant demographic (e.g., location, gender, age) and psychographic (e.g., habits, values, aspirations) traits. This process helps companies to better understand who their customers are and what they want, which enables them to suggest complementary products that are more likely to resonate with those customers.
As the name implies, relevancy refers to how closely the additional products or services a company is recommending relate to the original purchase. For example, for a laptop purchase, a printer and wireless mouse would be highly relevant, whereas an area rug would be of low relevance.
Cross-selling works best when pairing a high-cost item with a low-cost accessory or service or when offering two low-cost items. But regardless of the price, authentic relevance is critical. “Offering intelligent suggestions based on your conversation or observation is the key to successful cross-selling,” explains Keap. “If you’re simply trying to unload overstock inventory, your customers will catch you in the act sooner than you expect.”
Finally, it’s important to be thoughtful about the timing of your cross-sell offer. For physical products, it often makes sense to offer the complementary item at the time of the original purchase, especially in the case of a low-cost accessory paired with a high-cost item. But for digital products and services, including SaaS, it generally works better to wait until after the customer has started to express satisfaction with the original purchase before pitching additional items.
A close cousin of cross-selling is upselling, which is the process of selling (or at least recommending) an upgrade to a “more premium version” of the original purchase such as a more expensive product or higher level of service. To return to the McDonald’s example above, upselling would be asking, “Would you like to supersize that?” after a customer orders a regular combo meal. Another example would be a SaaS company recommending that a B2B customer upgrade to a higher service plan.
As is the case with cross-selling, it’s important that companies consider segmentation, relevancy, and timing in order to increase the likelihood that upsell offers appeal to customers. For instance, if a B2B customer just achieved a success milestone as a result of using a SaaS product and has already maxed out its number of licenses, suggesting an upgrade to a higher service plan would feel authentic and thus is likely to be successful.
On the other hand, if the SaaS provider recommended an upgrade when the customer has only just begun using the product and has only activated half of its allotted user licenses, this type of offering would come across as inauthentic. Not only would such a pitch be unlikely to bring in any additional revenue, it could even damage the company’s standing with an existing customer.
You Have to Spend Money to Make Money
When executed thoughtfully, upsells and cross-sells present a potential win for both the company and customer. As Keap sums it up, “You’re able to predict their needs without them having to ask while generating more revenue from the purchase.” That said, business leaders need to recognize that a significant investment will likely be required to transition their contact centers from solely providing break-fix customer support to engaging in the type of profit-generating activities discussed above.
Given the previous conception of the contact center as a cost center, most business leaders are naturally accustomed to keeping its associated costs as low as possible. “Because call center costs tend to be small in proportion to revenue, minimizing a ratio such as cost/revenue systematically stresses cost cutting over revenue generation,” explains DMNews. “To maintain [a 5 percent] ratio, the center would need to increase revenue by $20 to justify a mere $1 increase in costs.”
When viewed through this lens, it’s no wonder that contact center managers, striving to decrease their cost/revenue ratio, are afraid to spend money on initiatives that would likely to lead to higher revenues. But such investment is precisely what’s required.
Data from Loudhouse Research indicates that 86 percent of contact center leaders don’t think their agents currently have the necessary skills to successfully engage in cross-selling and upselling. Accordingly, the most impactful investment a business can make in terms of converting its contact center into a profit generator is in its agent hiring and training practices.
“Not all customer service agents are born salespeople,” explains Platform 28. “The skill sets of customer service and sales have some overlap: both are people-intensive, involve listening and speaking, and require the ability to work toward providing solutions. However, because of the traditional emphasis on speed in resolving customer service requests, agents may need significant retraining to learn how to take the time to go deeper, and to hear beyond the spoken words to ferret out potential upsell and cross-sell opportunities.”
As contact centers shift their hiring and training practices to place a greater emphasis on sales skills, they must also adjust the metrics used to measure agent performance. “Focusing strictly on straight productivity metrics and managing a contact center primarily as a cost center simply is no longer feasible,” writes Business2Community.
DMNews agrees, advising contact centers to “place minimal emphasis on talk times. Cutting talk times saves pennies in costs and risks dollars of revenue.” In fact, WNS reports that “a 10-15 percent increase in AHT (Average Handle Time) can lead to the drastic increase in net conversion or incremental sales per day, which then adds up to phenomenal increase in net incremental revenue and profit margin from the contact center.” Accordingly, WNS recommends that contact centers track metrics such as “‘conversion’ or the ‘number of bookings’ or ‘Dollar value’ that measure sales effectiveness” in addition to existing KPIs like NPS, CES, and CSAT.
Converting a contact center from a cost center to a revenue center is no easy task, likely requiring a significant investment in hiring and training as well as changes to metrics processes. But the potential upside far outweighs the risks. For example, McKinsey found that “a customer contact center can generate up to 25 percent of total new revenues for credit card companies and up to 60 percent for telecom operators.” As Tom Cruise exclaims in the movie Jerry Maguire, “Show me the money!”