According to an article in the April issue of paybefore.com , the New Jersey legislature, in an effort to fill state budget shortfalls, passed a law that disrupts the prepaid card market in that state.  The new legislation dictates that once a prepaid card remains inactive for two years, any unspent money left on the card will be confiscated by the state- even if the card has not expired.

In addition to concerns over the time and cost necessary to modify internal systems and processes to be in compliance with the new law, Incomm, a major provider of prepaid cards, is very concerned that their New Jersey consumers will not have continued access to their gift card funds. “States should not have the right to remove funds from an unexpired gift card,” an Incomm spokesperson commented, referring to federal law prohibiting gift cards from expiring prior to five years after purchase.

As a result of this legislation, prepaid giants InComm, Blackhawk Network, and American Express are all pulling or have pulled their gift cards out of New Jersey.

Pulling out is easier said than done.  Changes like this cause significant disruption in operations ranging from sales to information technology to customer service.   When changes like this happen, the most nimble organizations win.  And you can’t get more nimble than the Cloud.

Get the Executive Brief: 5 Axioms for Optimizing Prepaid Customer Service

Cloud-based customer self-service solutions help executives easily manage change:

• Ramp up capacity immediately when unforeseen events trigger a flood of unexpected calls that would otherwise get stuck on hold or go unanswered
• Scale down capacity quickly and easily if you have to exit a market or shut down a business operation
•  Rapidly update call flows and information available to callers in response to any crisis
• Add features and communication channels faster than premise-based deployment by leveraging existing cloud deployments and integrations
• Reduce risk by responding quickly to changing business requirements

“How do you know which customer loyalty program is the most effective?” asked the Executive.

“That’s easy,” replied the Consultant. “It’s the one with the most generous rewards, the steepest discounts, and the stickiest stream of special offers.”

“I don’t think so,” the Executive responded thoughtfully. “When you have to pay your customers to keep doing business with you, that’s not loyalty.”

Customer loyalty comes from building strong relationships

Many so-called customer loyalty programs create an illusion of loyalty.  Customers may stick around as long as program rewards remain attractive, but customers are just as likely to defect as soon as a competitor offers a richer “loyalty” program.

Loyal customers are willing to stick with you through thick and thin.  Loyalty comes from building a genuine relationship with your customers, not from paying them to stick around.   Because they value the relationship they have with you, loyal customers can’t be so easily lured away by competitors offering short term rewards.

Customer Experience builds relationships                 

Every point of customer contact is an opportunity to build a genuine connection with your customer. Some of these opportunities to connect are obvious, but one in particular is often overlooked– customer self-service.  Each self-service interaction creates a customer experience that influences the way a customer relates to your brand.  If you improve the customer experience in your self-service channels, you can deepen and strengthen customer relationships and build loyalty.

For example, there are many ways to create a more genuine customer experience in your IVR system by making intelligent use of what you’ve learned from a caller’s past behavior.  Consider language selection. Many IVR systems will ask every caller whether they prefer English or Spanish regardless of how many times a caller has previously answered that question in the past.  That approach makes returning callers feel anonymous and disconnected.

Learn from caller behavior to build genuine connections

A better approach: Have the IVR recognize returning callers and seamlessly switch to the language they selected in the past.   This creates a frictionless interaction at the beginning of the call instead of an unnecessary language hurdle.

More sophisticated use of caller behavior data can lead to additional opportunities to improve customer experience.   Let’s consider just one example that’s available today.  Suppose a customer calls most often to check his account balance.  Instead of waiting for that customer to select the “account balance” option from the menu every time he calls, why not just play his account balance as soon as he calls in?  It would make the interaction faster and more personal.  These touches of recognizing and responding to an individual’s preferences make interactions more genuine, create better customer experience, and foster stronger relationships with your customers.

Enrich the relationship, not the reward

Do you measure, analyze, and continuously improve customer experience in your self-service channels?   You may not think of this discipline as a customer loyalty program, but that’s exactly what it is.  Reward programs sacrifice margin to retain customers in the short term.   Continuous improvement of customer experience leads to stronger customer relationships and genuine loyalty.

If you want to improve loyalty, then focus on enriching the customer relationship- not the reward.

Agent means loss, Self-service means profit

If just one additional call from a customer gets routed to a contact center agent, the program manager will take a loss on that customer’s card for the month. But if that customer can achieve her goals through self-service, the program manager will still make a profit.

Let’s take a closer look at the numbers from SEC filings of two prepaid card companies:

These two prepaid card program managers make an average profit of $1.17 per month per card.  Now take a closer look at what happens to margins when a cardholder calls for customer service.  If the customer’s call is managed by a contact center agent, it’s going to cost about $1.50.  When the profit is only $1.17 to begin with, just one phone call will wipe out the entire month’s earnings from that card.

On the other hand, if that same customer chooses to utilize a self-service solution that costs only a dime for that call— the card remains profitable.

Continuous Improvement in the IVR can increase prepaid card profitability

It may be easy to consider this example and conclude that it highlights a handful of calls at the fringe that are essentially just one-off exceptions.  After all, the cost of customer service is already factored into the above earnings numbers, and those public companies probably already have high rates of customer self-service.  The question is: Are those self-service rates really optimized? And if not, how much margin are they leaving on the table?

If you want to seize an opportunity to increase profitability, consider every agent-assisted call an exception—then find ways to increase self-service utilization by eliminating those agent-assisted exceptions.  For every additional call you can convert from an agent to self-service, you can double profitability for a card.  This is an exercise in rejecting the status quo and mastering continuous improvement.  It’s hard work, but the returns are phenomenal.

Is your customer service fully optimized?

Read more about customer service optimization.

Tellme provides hosted IVR services to large banks, airlines, and other enterprises who must deal with millions of inbound calls from consumers.  Tellme is in the business of automating these inbound calls so enterprises can save money by reducing the number of calls that go to live agents.

Tellme is being acquired by 24/7 Inc., an offshore call center company  and BPO that has thousands of call center agents in India, the Philippines, and Central America.  24/7 gets most of its revenue by providing live agents to handle calls for large enterprises.

A fox just acquired a henhouse

Do you see the conflict?  When more calls get automated, Tellme makes more money.   When more calls go to live agents, 24/7 makes more money.  But customer service calls handled by live agents can cost ten times as much as an automated call handed by a hosted IVR.  So when Tellme makes ten cents by automating another call, 24/7 loses a dollar of agent revenue.

If you’re an enterprise customer of Tellme (or Voxify, who was also acquired by 24/7) this has to make you wonder about goal alignment.  Under 24/7, what just happened to Tellme’s incentive to automate more of your calls?

A dime of automation revenue eliminates a dollar of live agent revenue

When your hosted IVR provider also makes a lot of money by providing live agents, you’ve got a problem.  That vendor has no incentive to improve application performance.  Why should they automate more calls?  That would reduce live agent revenue.  Why should they improve the IVR customer experience?  Happier callers might use the IVR more often- and that would reduce live agent revenue.

When a dime of automation revenue eliminates a dollar of live agent revenue, your vendor’s goals are completely the opposite of yours.  That means your vendor isn’t aggressively looking for ways to improve application performance, so you’re losing opportunities to save money and improve customer experience.

Vendors who provide both live agents and automation might argue that they’re giving you choices.  But if you were in their shoes and had to choose between a dime of revenue and a dollar of revenue, what would you do?

Reduce costs and improve customer satisfaction

You CAN reduce costs AND improve customer satisfaction in your contact center, but you have to choose vendors whose goals align with yours.  Make sure your vendor has the right incentives to keep raising the bar on application performance, a team dedicated to continuous improvement, and a track record of reducing the number of calls routed to live agents year after year.

Read this related blog post: Does your call center cost reduction strategy include continuous improvement?

For example, our continuous improvement practice recently recommended a change to a client’s IVR system that will result in an automation rate increase of a fraction of one percent.  The higher automation rate will save the client about $4000 a month by reducing transfers to agents.  On the scale of operating a large contact center, $4000 in savings sounds like a drop in the bucket.

But look at what happens over time if you have a real continuous improvement program in place.  Make just one improvement every six months that generates only $4000/month in recurring savings, and soon those drops will have your bucket overflowing.  After five years you will have accumulated over a million dollars in cost savings for your contact center.

This is the value of a mature continuous improvement program for the call center, but it doesn’t come easily.  Once all of the low hanging fruit is gone, it takes a lot of expertise and analysis to keep finding new ways to improve your contact automation solutions year after year.  Our continuous improvement team has been at it for nearly a decade, and we’ve accumulated our expertise by analyzing hundreds of applications for improvement opportunities each year.

Yes, it takes a lot of work to keep raising the bar on performance, but you should demand just that.  If your IVR performance hasn’t improved in years, many may argue that you’ve long since reached the point of diminishing returns.  Don’t fall into that trap… it could cost you millions.

Here’s a glimpse of some data that can help influence opinions and guide your call center investment decisions.  This new report (which we highly recommend) from Forrester Research, To Invest Wisely, Know The Business Value Of Diverse Contact Center Solutions, analyzes 18 types of contact center technologies used for customer service.

IVR is a business critical technology

Of the 18 technologies analyzed, Forrester rates four as business critical:

• Quality Mentoring
• Case Management
• IVR
• Knowledge Management

According to the report, solutions that focus on improving productivity are the most certain to add business value.

IVR is a powerful tool that is often misused 

The report also noted that of the four business critical technologies identified, all of them have a positive reputation – except IVR.  IVR has a mixed reputation, which is no surprise.  While IVR is known to be a safe bet in improving productivity, it is routinely ranked lowest in customer satisfaction.

This is unfortunate, because in our view the IVR is a powerful tool that is often misused.  Too many enterprises have kept poorly performing IVR systems in service for years.  Worse yet, many executives have given up on investing in their IVR systems because they mistakenly believe that they’re as good as they’re ever going to get and their IVR performance can’t be improved.

Don’t be afraid to go for the gold

Don’t fall into this trap.  As you consider your investment options, challenge the status quo.  If IVR is a critical technology that handles a large number of customer transactions in your contact center, it has too much of an impact to ignore.  Investments in IVR performance improvements can generate a fabulous ROI, but only if you demand more than just “acceptable” performance.  You have to be willing to go for the gold.

Which technology in your contact center do you consider to be the most neglected?

Automation = Convenience and Speed

 Check out this excerpt from the J.D. Power and Associates 2011 North America Airline Satisfaction Study^SM,

“Despite initial declines in satisfaction with increased automation of check-in and reservations, passengers have adjusted their expectations during the past several years and now appear more satisfied with the convenience and speed that technology has enabled, while airlines benefit from reduced costs and greater efficiencies in these areas,” said Stuart Greif, vice president and general manager of the global travel and hospitality practice at J.D. Power and Associates.

What does this mean?

•  Customers trust automation- If you earn it. One of the biggest hurdles any automated solution has to overcome is trust.   If customers don’t trust the information an automated system provides, they’re going to bail out and find a live person to verify.  But accurate and up-to-date information can earn their trust over multiple transactions.  Earn trust over time, and automation rates will rise.

•  Cost savings don’t have to come at the customer’s expense.  You can save money and increase customer satisfaction at the same time.  Automation done well can not only reduce costs, but also can provide customers with the convenience and speed they value.

So the next time you want to increase customer satisfaction, consider how your customers could benefit if you automate more transactions.  Automate well, earn their trust, and provide the convenience and speed they want.  You’ll save money, and your customers will be delighted.

Here’s a real life example.  One enterprise we approached had a contact center with 160 agents supporting 400,000 calls a month.  The enterprise had an IVR that had been operating for years at a performance level they considered well-tuned to meet their business needs.  Yet after talking with the management team we found that they had:

• Few measurements in place to track performance (especially cost savings)
• No idea how their performance level stacked up relative to industry benchmarks

After assessments of their call center and IVR, we developed an IVR solution that would provide this client a significant cost improvement.  Just like you, this client was skeptical about our proposal, thinking at best only tiny marginal improvements could be achieved in their IVR.

The client finally agreed to implement our solution in late 2010.  Here are the results they achieved at implementation:

• 32.6% reduction in calls transferred to live agents
• Automation rate improved from 23.7% to 48.6%
• Customer experience rating improvement from 27.5 to 82.1
• Cost savings exceeded $1M/year

We bring up this example- which is one of many we routinely encounter- because we find that it is common for business leaders to make dangerous assumptions about how well their IVR applications perform.  Could this be you?  Make sure you to understand the business results your IVR delivers and how well you compare to benchmarks in your industry.  Maybe it’s time to revisit the assumptions behind your IVR investment and find out if you’re leaving money on the table.

Read a related post on IVR Optimization Point.

Do you know where Customer Experience ranks among the big and important trends in the hosted contact center market? Our friends at Frost and Sullivan just released a report, North American Hosted Contact Center Markets, that recognizes a very encouraging trend.  The report considers a wide swath of the contact center market, including IVR, ACD, outbound and proactive customer contact, customer chat, and agent performance applications such as quality monitoring, workforce management, and analytics.  These are two big trends that we find particularly interesting:

Big Trend 1:  Balanced cost containment and customer experience

The report says there is a shift from a focus on just cost containment to a balanced focus on both cost reduction and customer experience.   This is very consistent with our own market observations as we’ve seen many executives struggle to achieve the right balance between customer experience improvements and cost reductions in the contact center.

An example of how to reduce cost and improve customer experience can be found at Fidelity Investments.  As a winner of the 2011 Voice Of The Customer Awards from Forrester Research, Fidelity noticed customers having trouble with account authentication in the IVR.  The fix they implemented led to higher customer satisfaction and an estimated $4 million in annual cost savings.

Recommendations: Consider improved customer experience in the IVR a top priority because improvements there can yield big results.  Also, ask any vendor you’re considering  to explain how mature their IVR customer experience practice is and how they can provide the data you need to make informed business decisions.

Big Trend 2: Enterprises Increasingly Adopting Hosted Contact Center Solutions

Frost says that more enterprises are considering hosted as a viable option over premise systems. Brian Hopkins said in a recent blog “What’s not up for debate is the impact that service-enabling disruptions such as cloud, in all its forms, are having. They fundamentally shift IT service acquisition and consumption models.”

We also have seen this trend.  More enterprises- even those who were once die-hard advocates of premise IVR- are opening conversations about hosted solutions.  We’ve also seen those conversations begin to expand from a basic hosted vs. premise infrastructure decision to a more comprehensive viewpoint that includes application performance and customer experience as an integral part of the deployment decision.

Recommendations:  Business leaders should consider whether adopting a hosted model will fundamentally change their ability to optimize resources available to their business.  Most importantly, consider the impact hosting could have on application performance, particularly if your chosen vendor has a mature practice around improving customer experience and reducing operating costs.

Netflix executives have since admitted that they knew this decision would upset some of their customers, and they planned for the backlash. In fact, they expected some customers would be upset enough to downgrade or cancel their Netflix subscription plans. Yet the executives believed it would be a good move for the long-term health of the business. Streaming video is much less expensive to deliver than mailing DVDs back and forth. If Netflix can steer customer preferences toward the lower cost delivery model, the decision will result in a more profitable, sustainable business that’s good for both Netflix and its customers.

So where was the problem? In the wake of a shareholder meeting in which Netflix executives spent most of their time defending their pricing decision, the company continued to be the target of sharp criticism. Investors weren’t satisfied with the justification behind the pricing decision and were worried that the increased margins wouldn’t offset the loss of customers. In other words, the perception seemed to be that the executives made an educated guess and didn’t have enough data to support their risky decision.

In our business, we often see customer service and contact center executives struggle with similar decisions. Like mailing DVDs back and forth, answering customer calls with live agents is the most expensive way to deliver customer service. It’s much less expensive to automate routine interactions through IVR, text messaging, or other channels, but sometimes higher automation rates can reduce customer satisfaction. The problem is, automation rates are easy to measure but it’s difficult to predict how changes in automation will impact the customer experience. Executives who have to make decisions affecting both cost and customer experience are forced to make educated guesses.

This is the problem we solve with our customer experience initiative at Contact Solutions. We measure customer experience in a unique way that captures detailed data from both caller perceptions and their actual experience in the IVR. Combined with our advanced analytics and Continuous Improvement methodology, we can predict how changes in automation will impact customer experience.

Our data-driven analysis takes the guesswork out of some difficult decisions customer service and contact center executives have to make. We don’t know how much data the Netflix executives had to support their pricing decision, but we do know that difficult decisions are a lot easier to defend when you have plenty of supporting data. Wouldn’t you rather know that if you made THIS change to your IVR you’d get THAT much improvement in automation, lower your costs by THIS much, and impact your customer experience rating by THAT amount? That’s how we can make your life easier as a decision maker.

Read another post on Informed Business Decisions