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Four Arguments Against Outsourcing – And Why They Are Wrong

Outsourcing providers are one of the hottest commodities in telemarketing. The total value of sales generated by outsourcing providers has grown to more than $250 billion each year.

However, many remain uneasy about outsourcing. They are hesitant to turn over a telemarketing program – whether it is customer service, claims processing, lead generation or a retention service – to an outside resource.

They are right to be nervous.

In many cases, the only person-to-person contact a customer may have with your business is with someone in a contact center, and that first impression is laden with huge responsibilities.

Consider the following four common concerns about outsourcing. Though they are valid, they can be dismissed with a little information.

Outsourcing costs too much. Isn’t it cheaper to do it inhouse? The owner of a business can balk at paying a customer service representative a substantial hourly fee, especially if the owner never met the CSR. Add to that the setup fee and many employers start to look internally for resources they already pay for.

But it can cost much more to turn your staff into CSRs. While you might save money in the short run, those savings dry up in a New York minute when all the factors are added in. Each representative’s workstation will require a phone, desk, chair and the proper software and network access to properly connect with customers. You also will need to shell out for conference rooms and break rooms, not to mention salaries and the health benefits you would not ordinarily pay for when you outsource.

Since you will use your own facility for telemarketing, there is the added cost for the office space and additional costs per square foot for leaseholder improvements. Where are the savings?

In addition to saving money for the employees’ pay and environment, outsourcing allows you to obtain the latest in cutting-edge technology (such as equipment to make your contact center Web-enabled, meaning employees can interact with customers through the Internet) without having to invest in an ever-changing technical world. You also never have to worry about signing on too many or too few employees when you outsource; you can adjust the levels as the job progresses, meaning you have greater control over the costs.

With direct mail and today’s technologies, such as automated answering services, you do not need to outsource. It is true that many businesses are opting for direct mail over telemarketing, believing that direct mail is less obtrusive and a good deal cheaper. But when direct mail is done without prior supplemental market research, it can be a disaster.

For example: A company offering a nonbranded, flat-rate long-distance service started a direct mail campaign. Without brand awareness and with all the competitive clutter surrounding long-distance marketing, this company had an abysmal response rate – less than one-half of 1 percent.

Seeking help, a new program was put in place that started with representatives calling prospective customers before the mailing and asking five profiling questions to customize the direct mail message. The result? An estimated 70 percent of those called participated in the survey, and the total cost per sale was cut in half, even with the added telemarketing expense.

As for automated answering services, not only do they tend to annoy customers more than help them (especially when they are looking for someone to talk to about a specific problem), but also nothing can replace live, one-on-one conversation. Just by speaking to a prospect, a live CSR can configure the message, offer or incentive to fit that prospect’s needs.

You do not want to lose control of the program. In many cases, managers choose to have little interaction with an outsourced telemarketing program. As long as the goals are being met, it is usually hands-off. And for many managers, that’s fine. But for those who are used to keeping close tabs on their programs, this could be seen as unacceptable. These managers do not have the time or resources to set up or closely monitor an outsourced program – which is why they are outsourcing to begin with. But they still require accountability, and rightfully so.

The solution is to have a third-party expert evaluate the telemarketing program. A good evaluator will schedule and attend weekly status calls, analyze reports thoroughly, monitor calls at least once a week and carefully track “costs per” metrics.

Even in programs where the goals are being met, evaluation programs that can drive representatives to make only one more call per hour can pay off. For instance, take a contact center where the average conversion rate is 10 percent. Keeping in mind the costs of a telemarketing program, a representative making six contacts an hour translates to about $50 a sale. But if an evaluation program can drive that representative to make seven contacts an hour, the cost per sale drops to $43 – a drop of 14 percent. All for just one extra call an hour.

You cannot measure the success of your marketing initiatives if a third party carries them out. Say that you can accept giving up control of an outsourced program, and you find a third-party firm to monitor the contact center’s success. How do you know when the program is any good to begin with, never mind worth outsourcing?

It is sometimes difficult to tell, especially since the company that designed the promotion is further removed from the process than the company that is now charged with carrying it out. But outsourced contact centers can provide you with several tools to analyze the effectiveness of your program.

One such tool is a Barrier/Lever analysis, which allows you to identify the objections that are the most frequent and most difficult to overcome. It is used to better understand what “barriers -negative” and “levers – positive” variables are found affecting the purchase decision-making process. Another is a yield/loss analysis, which outlines the entire marketing process from list selection to enrollment and identifies where the greatest percentages of prospects fall out. In the end, a yield/loss analysis helps you pinpoint key weaknesses and strengths in the contact strategy.

Finally, contact centers can provide a testing phase, wherein different messages and offers are disseminated and the results are compared. By limiting the number of elements that differ from call to call, you can find out what specifically impacts results – which offer, even which phrasing of an offer, is the most effective.

Concerns about outsourcing a telemarketing program are not without merit. But with the proper planning, specification of goals and a willingness to delegate responsibility, outsourcing can be a less expensive, profitable venture.

• Chris Stanvick is a consultant at Kowal Associates Inc., Boston, a telemanagement consulting firm. His e-mail address is [email protected].

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