Catalogers face enormous challenges in finding enough qualified candidates to staff their call centers, retaining sales agents who at any time may leave and find another position earning comparable pay, and gaining full commitment from agents who see their employment as transitional or supplementary. With these overwhelming challenges, it is no wonder that many catalogers outsource call center functions.
But operating a call center effectively can give a cataloger a huge profit advantage. While competitors search the world for low-cost call center partners, a cataloger with a dedicated call center can focus on developing sales agents and improving customer service.
Understand the numbers. In a recent study of catalogers, I found that an average sales agent handles around $400 in sales per hour. So an agent working 1,000 hours per year handles around $400,000 in sales. Assuming a 50 percent profit margin, that amounts to $200,000 in gross profit.
I also found that sales agents earn, on average, just over $10 per hour in wages. Adding other direct sales agent costs such as taxes and benefits, let’s say a typical agent costs $15 per hour, or $15,000 for working 1,000 hours in a year. Subtracting $15,000 in sales agent costs from $200,000 in gross profit leaves an annual profit contribution of $185,000 – not bad for a part-time agent.
Every cataloger’s numbers will vary from these averages. But the economic message is clear: Catalogers should focus their call centers more on protecting and increasing revenue than on reducing sales agent costs.
Pay highly competitive wages. A call center is wise to spend the money to attract and retain quality sales agents. The value of productivity gains resulting from having “better” agents – and the savings on turnover costs resulting from retaining agents – justifies highly competitive wages. To illustrate, let’s consider the productivity gains – and reductions in turnover – required to justify a $2 per hour increase in sales agent wages.
A sales agent handling $400 in revenue per hour at 50 percent profit margins would need to produce an extra $4 per hour in sales to generate an extra $2 in profit to offset the extra $2 per hour in wages. That’s a mere 1 percent increase in productivity to offset a 20 percent rise in wages.
Retaining a sales agent saves on costs of recruiting, selecting and training a new hire. Also, retaining an agent prevents a cataloger from having to use a less-productive employee. I found that most catalogers can easily justify a $2 increase in wages with around a 25 percent reduction in turnover. (E-mail me if you want a detailed calculation of the break-even retention rate.)
Combinations of productivity and retention. In reality, increasing wages brings improvements in productivity and in retention. The chart that follows illustrates break-even combinations of productivity and retention, based on our assumptions above, that justify a $2 per hour increase in wages. Simply raising sales agent compensation will not guarantee better results. But even small improvements in productivity and/or retention can offset significant increases in agent costs. When investing in agents, strive for:
• A starting wage that makes the sales agent position desirable to target candidates.
• A selection process that identifies the best agents from the candidate pool.
• A deployment strategy that matches agent competencies with customer needs.
• A training program that lets new agents contribute quickly.
• A wage progression system that encourages agents to learn new skills and to produce revenue.
• A work environment that facilitates camaraderie.
• A communication process that gets agents interested in achieving results.
By investing wisely in agents, your call center soon may become your company’s most sustainable competitive advantage.