Measure Your Call Center as a Profit Generator

Share this article:

Most catalogers would say that they expect their call centers to increase revenue and improve profit. But many of these catalogers measure their call centers based on cost efficiency, directing them to minimize a ratio such as call center cost per dollar of revenue. After all, the lower a call center's cost per dollar of revenue, the more "efficient" the center, right?

Not necessarily. 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.

Consider a call center that maintains a 5 percent cost/revenue ratio. To maintain this ratio, the center would need to increase revenue by $20 to justify a mere $1 increase in costs. Conversely, if the center cut costs by $1, it could lose up to $20 in revenue while maintaining its 5 percent ratio.

It is no wonder that call center managers, striving to decrease cost/revenue, are afraid to invest in revenue-producing initiatives.

Catalogers will get more production from their call centers when they really begin seeing them, and measuring them, as profit generators. Though many ways exist to measure call center profitability, profit per call is my favorite.

Profit per call is calculated as: "total profit affected by the call center" divided by "total number of calls made to the call center."

In calculating total profit affected by the call center, begin with net sales minus cost of goods sold on all items handled by the center and by overflow vendors. Subtract all controllable call center costs such as payroll, telecommunications and outsourcing costs. Add any fees paid to your call center if it serves as an overflow vendor. Subtract a "cost of error" for every avoidable processing mistake. Errors in processing may result in added postage, handling and inventory adjustments that are not normally attributed to the call center. Errors also reduce customer lifetime value.

In calculating total number of calls made to the call center, include sales calls, non-sales calls, abandoned calls and calls forwarded to overflow vendors. From the call center's perspective, total number of calls made to the center is an independent variable that indexes profit expectations. Put simply, the more calls a center receives, the more profit the center should produce.

Profit per call clearly stresses that your call center should:

• Answer calls promptly. Control your abandonment rate and answer calls within your target interval.

• Handle calls accurately. This minimizes returns and prevents other direct and indirect costs of error.

• Pull profit from every customer call. Take the opportunity to maximize revenue from each call by cross-selling and upselling. Place minimal emphasis on talk times. Cutting talk times saves pennies in costs and risks dollars of revenue.

• Invest in people or technology to increase profitability. Even small percentage improvements in revenue can justify large dollar investments in people and technology. Spending money to reduce sales agent turnover, for example, may be one of the most profitable investments your center can make.

• Employ an overflow vendor only if it increases profitability. Send calls where you generate the highest profit per call, not where you incur the lowest costs.

• Serve as an overflow vendor if it improves profit per call. Be careful not to risk revenue from your base business. But serving as an overflow vendor may improve profit per call by increasing revenue and by supporting extra staff. With extra staff, your call center may be able to reduce its abandonment rate, improve its speed of answer and provide better service to your base customers.

Profit per call is a measure your call center leaders can use to guide strategic decisions. It is also a measure your sales agents can use to guide their daily activities. Stressing profit per call is a critical first step toward transforming your call center into a profit generator. Measuring success by profit per call places focus on sales agents - a center's most important investment. n

Share this article:
You must be a registered member of Direct Marketing News to post a comment.

Sign up to our newsletters

Follow us on Twitter @dmnews

Latest Jobs:

More in News

De Quinto Tapped as Coke's Next CMO

De Quinto Tapped as Coke's Next CMO

The president of the company's Iberia Business Unit will take over from Joe Tripodi upon his retirement in February.

Customer Centricity Is Spurring Marketing-Tech Investments

Customer Centricity Is Spurring Marketing-Tech Investments

A majority of marketers rank customer satisfaction improvements as paramount in the technology investment decisions.

Big, Bold Moves in the C-Suite

Big, Bold Moves in the C-Suite ...

JCPenney appoints Home Depot's Marvin Ellison as CEO; Harte Hanks and JWT add hitting power to their C-level benches