Customer Service Is Too Expensive: 3 Ways to Reduce Costs

September 12, 2022
Sep 13, 2022
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Customer Service Is Too Expensive: 3 Ways to Reduce Costs

Large companies typically spend in the neighborhood of $1 per minute of talk time for customer service agents to handle calls. For a hypothetical contact center handling ten million calls per year with an average talk time of five minutes, this equates to an annualized cost of $50 million. Yet, despite those costs, they’re often paying for a poor experience.

Organizations with well-designed processes and technology can offer live chat (via web or mobile apps) more efficiently than via call. But live chat still cost in the range of $.50 a minute, and many customers still want to reach out via the traditional voice channel, despite the push to funnel them elsewhere. Meanwhile, upward pressure on wages for entry-level positions are making it increasingly difficult to maintain quality customer service levels with current budgetary limits. Spending $1 per minute or even $.50 per minute is too much, especially for customer requests that can be delivered via self-service approaches.

In general, there are two paths to lower the cost of customer service – either by reducing labor costs or by improving efficiency. We’ll go through options to reduce labor costs but the real meat here is in improving efficiency, either by reducing the number of calls that reach agents or reducing how long agents spend on each call.

Reducing Cost Per Agent

Reducing unit labor costs is possible with off-shoring and this is a viable option when 24/7 coverage is important. However, there are other challenges with this approach, and the cost performance may not live up to expectations.

While offshore agents are cheaper on an hourly basis, calls often go longer for a variety of reasons including a lack of understanding between customer and agent, environmental factors, cultural differences, and a lack of relevant experience on the agent side, which puts a dent in your savings. We have seen US-based companies even implement regional call centers to overcome such differences in the US alone.

The cost savings are further eaten into when your agents are speaking to repeat callers and those that have had to transfer due to the drop in first contact resolution (FCR) rate. At the same time, the savings you have realized often come at the expense of the customer experience for all of the reasons listed above, which can have long-term effects on customer retention and brand reputation, and potentially revenue as a result.

Reducing the Number of Calls Handled By Live Agents

There is much greater cost reduction potential through the realization of efficiency gains supported by upgrading technology and systems. Many companies have seen success in reducing customer service call volumes resulting from digital transformation efforts that shift customers to self-service via internet portals and mobile applications.

For customer service organizations seeking even further efficiency gains, the commercial availability of new cloud, AI, and natural language processing (NLP) technologies during the last five years offer a relatively untapped opportunity to realize significant efficiency gains for customer service call centers.

Replacing existing intelligent voice response (IVR) systems with AI-driven intelligent virtual agents (IVAs) that converse with customers using NLP to understand and resolve issues and requests can drive substantial cost reduction. In some cases, it can reduce the cost per call from $1 per minute to a few cents.

The first and most impactful scenario to achieve efficiency gains for customer service calls is via the deployment of IVAs to fully automate significantly more calls than possible with existing IVR systems. In this scenario, the IVAs converse with callers in much the same way a customer service agent would and complete the interaction with no need for human intervention.

It is expected that over time up to 50% of incoming calls could be handled in this fashion. Even assuming a lower success rate of 30% would yield a reduction of three million calls handled by customer service agents of the 10 million mentioned in the hypothetical example above. Estimating the variable cost of operating such IVAs at $.05 per minute results in a $.95 reduction in the cost per minute - or over $14 million saved from the $50 million annually.

Reducing Handle Time For Calls

Additional efficiencies are possible by relying on the IVAs to complete tasks commonly handled by customer service agents.

Even though many IVR systems are technically capable of interacting with customers to understand who is calling and verify their identity, they are often too cumbersome or complex for callers to effectively get this information and relay it to the live agent. When they don’t succeed, customer service agents must perform this task, which generally requires one to two minutes - and that time is costly. IVAs have demonstrated much higher success rates than traditional IVRs with this task, meaning call centers could see a 50% reduction in the number of calls requiring an agent to perform this task.

Again using the hypothetical example from above and assuming the 30% reduction in calls requiring the involvement of a customer service agent, cutting one minute of the handle time of half of seven million calls would yield an additional $3.5 million in savings annually.

Deploying IVAs can deliver other operational improvements, which can also result in cost efficiency gains. For example, using IVAs to replace traditional IVRs increases the accuracy in determining the reason a customer is calling, thus reducing the number of transfers between live agents. IVAs can provide intelligent routing, getting callers to the right agent the first time, with the context that agent needs to resolve the call as efficiently as possible. Resolving issues during the first call and thereby eliminating repeat calls is another improvement to be expected. The overall long-term potential for cost efficiency gains of implementing conversational IVAs in your call center can be even greater than the 35% reduction outlined in the hypothetical scenario above.

To see how we use IVAs to create efficiencies that reduce costs and improve the customer experience, read about our Unified Conversational Customer Service Platform on our website.