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Pay for Performance: Conduct a Cost Analysis with Your Clients
CH Consulting LLC
In today’s call center industry we are finding our clients trying harder and harder to address their businesses profitability and cost structures by decreasing their cost of doing business with their call center partner. Due to the current economic climate, off-shoring across many major industries and increased competition, most the time our clients legitimately need to cut costs for their own economic health. These call center clients are looking more and more for a “partner” that works on a 'paid for performance' basis. This basically equates into the call center company having to work to fund their client’s initiative. Or it may be worse, leaving the call center at risk of receiving no payment for services at all.
How do we address our own increasing cost of doing business against the clients that are trying to decrease our fees? I have the following recommendations to assist you in focusing on profitable business with clients that will and can pay for your services:
- Understand the retail price of your client’s products/services and their margins on said products/services. A client that comes to me for lead generation, sales support or any other type of outbound work, must be able to show me what their margins are on their products or services in a manner that can at least assure me that REALISTIC performance goals will result in REALISTIC ROI (return on investment) for the client. For example, a client that has a $10 product that they are making $3 per piece on is not quite as lucrative as the client with a $5000 average sale and 50% margins. The better the profitability (and marketability based on price, demand and competition) for my client, the better the odds of being able to assist them within a reasonable budget. All too often I see entrepreneurs/business owners approach a call center company after they have exhausted all internal attempts to generate leads or sell. Unfortunately, this is also when there is no money left in the budget to try anything else. It puts the project and vendor at risk of walking into a doomed situation with no hope of having the funds and/or time needed to really help a client create a successful call center project for the long-term.
- Know your clients ROI expectations and needs based on profitability and budgeting for against your charges to them. Make sure that realistic performance expectations are set for both parties. Clients that need a 30% conversation on a prospecting list for new sales acquisition to even begin to break even are not the type of projects that have the odds of creating long-term profitable business for you. These are clients that are unrealistic about their own competition, marketplace or business status and will inevitably blame you for why their project and overall sales revenue goals did not happen. It is critical that as the experts, we give our clients REALISTIC expectations on performance based on their product, market space, price point, data list...etc. We have the history of knowing from past lead generation, sales acquisitions, up-sell/cross-sell, win-back and customer service campaigns to know what is realistic. To allow a client to set the expectations, short of history and reporting that can be shared on past performance of an identical calling scope, is to walk straight into the fire. Those in this industry for the last 20 years are experts on how to use the phones to effectively communicate with prospects and customers. We need to position ourselves as such. Had we better represented best practices to the telecommunications industry and others back in the 1990’s on effective list management and the over-use of the phone to prospect, we may be dealing with less regulations and a better reputation today.
- Know your own costs. And I do not just mean your generic “hourly rate” costs on gross expenses to billable hours; I mean a true analysis of your cost of doing business for each part of your process starting with sales and ending with reporting.
- How long does it take IT to set up a new script?
- How many hours of Account/Project Management go into launching a new project? How many into daily management?
- How long do new data and reporting requirements take?
- What is the hourly cost per department internally?
Knowing these internal numbers should give management and sales an opportunity to establish clear boundaries on the minimums a client has to pay for anything to be set-up let alone rolled out. There have been too many times in the past two years where call centers feeling pressure to generate hours have accepted less the profitable terms. This not only has an obvious impact on the profitability and future of that particular call center, but it truly has as negative of an impact on the industry as a whole. Rather then sell on expertise and results, we find we are expected to “low-ball” on services against struggling US-based operations and off-shore options with a fourth of the cost structure of state side operations. A business model that forces you to perform under unhealthy profit margins must be addressed. If the client wants you to perform on your own dime, I’d encourage you to ask him which of his own clients he works for free for.
- Structure paid test scenarios that allow you and your client to test your forecasts and review real ROI. I highly recommend that when a client asks you to do any pay-for-performance work, you immediately defer them to a structured, flat rate or hourly fee test. The test should be established for a minimum number for hours that will allow both you and the client to actual see how a project may REALISTICALLY perform for a long-term roll-out. All of the following will have an impact on the success of a test and any roll-out opportunities: market climate, competition, price, list source, scripting, training, reporting, ROI…etc. Before accepting terms that may leave you in the hole at the end of the engagement, make sure that you know the test will perform against the client’s and your own profitability goals. If the numbers do not line up, you must pass on this project.
The phones remain one of the most effective ways to communicate with prospects and clients. The call center industry remains the experts on how to most effectively utilize this tool in communications and sales efforts. It is critical that we recognize that there are going to be project models and businesses that can not afford the premiere services of US-based operations. We can accept this however, and not force our industry into dire financial doom or out of business by ALL holding the line together on what quality service means and costs for effective project set-up, deployment and management. The best way to establish long-term, mutually profitable accounts is to tackle all of the hard questions and discussion points listed above up front with your client.
Christa Heibel is the CEO of CH Consulting LLC. Still in her early thirties, Christa has led CH Consulting to revenue growth of over 200% annually since it’s conception in 2002. Christa is regarded as an expert in the field of integrated marketing campaigns as well as effectively using technology for supporting sales and marketing efforts.
An accomplished speaker, writer and sales trainer, Christa is looking forward to leading her many corporate clients and partners to similar growth over the next few years. She continues her commitment to staying active in the political arena, and plans to expand CH Consulting to actively managing telemarketing and other outreach campaigns for public officials.
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