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.

Contact Solutions provides customer self-service to over 16 million prepaid cardholders

On Tuesday at 2pm, Contact Solutions CEO Paul Logan will participate in the panel discussion “Building Loyalty in Times of Tight Margins.”  Through our experience providing customer self-service to over 16 million prepaid cardholders, Contact Solutions has developed best practices for optimizing prepaid card customer service. Improving self-service can have a direct impact on prepaid card margins in this highly competitive industry.

If you can’t attend Prepaid Expo, follow us on twitter (@cntactsolutions) for live updates and insights from the show.

Contact Solutions has been recognized as one of the fastest-growing companies in the greater Washington DC area.  SmartCEO Magazine’s annual Future 50 awards celebrate the region’s 50 fastest-growing companies based on employee and revenue growth over the past three years.  Over 350 nominations were submitted for this prestigious award.  Contact Solutions was the only contact automation company among the winners.

Making a difference together

While we are delighted to have the recognition, I think there’s a bigger story behind this Future 50 award as well as our recent press release about our 2011 growth and the performance milestones we achieved.  I believe this is a sign that we and our customers are doing something right together.  When we deploy a new customer self-service solution, millions of people have a better experience than they did before.   If we keep working together to make customer service more efficient so it eliminates frustration and saves everyone money, we will all benefit from that success.

Read the Future 50 article about Contact Solutions

Check out the full issue of SmartCEO Magazine

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?

Is my identity at risk?  Why aren’t you answering the phone?

Zappos got hacked.  A criminal gained access to some sensitive customer information, triggering a communications crisis.  The company knew as soon as they made the security breach public, Zappos’ call center would suffer a barrage of inquiries from customers wanting to know if they were at risk of identity theft.  If only 5% of their customers called, that would be over a million phone calls- and there was no way their call center agents could handle that many inbound calls.

So they came up with an interesting way of handling all those customer inquiries: Shut off the phones and communicate only by email until the crisis passes.   This way, they reasoned, they could respond to as many customer inquiries as possible.  But imagine trying to call Zappos because you’re worried about the cyber attack, only to get a busy signal and find out they will communicate with you only by email.  Though Zappos did the best they could with the resources they had in place, their constraints led to a customer experience unbecoming of their high standards.

All I really want is a ¼” hole

As part of their corporate customer service strategy, Zappos decided to have live call center agents answer every customer call.  They surely knew this was the most expensive way to provide customer service, but they believed customers always preferred speaking to people instead of interacting with automated systems.  This faulty assumption led to their customer experience disaster.

As the saying goes, customers don’t buy a ¼” drill because they want the drill.  What they really want is a ¼” hole.   Customers are no different when they phone your call center.  Some may like speaking to a live agent, but what customers really want is to have their questions answered and issues resolved quickly, easily, and at a reasonable cost.  That’s exactly what well-designed contact automation systems can provide.

How to shine during a crisis

Imagine how the Zappos crisis might have played out differently if they had made a different core assumption.  Instead of designing their customer service delivery around the exclusive use of live agents, what if they had focused on providing answers and resolving issues for their customers as quickly and easily as possible?  That likely would have led them to a mix of automation and live agents.

A hosted IVR system easily could have handled the million (or more) phone calls Zappos expected.   Rather than let calls go unanswered, Zappos could have offered an initial message in the IVR that acknowledged the security breach and addressed most customer concerns right at the beginning of the call.  This alone would reassure some customers and take pressure off of live agents who might then be able to keep up with the remaining call volume.   That would have been a much more customer-friendly solution than shutting off the phones.

Read an eBook about IVR customer experience.

Automation—done right—could have helped Zappos live up to their reputation as a leader in customer service, especially in a crisis. When you make your core assumptions about how to deliver customer service, make sure you keep focused on what customers really want.

Many consumers embrace the value of self-service in today’s society.  Most people would much rather use an ATM than stand in line for a bank teller.  It’s not unusual to see people use the self-checkout at the grocery store while a cashier stands idle at an empty express lane.  Almost everyone pays a lower price at the self-service pump instead of paying a premium for an attendant to pump gas for them… except in New Jersey where self-service is prohibited and consumers are forced to pay a higher price per gallon.

If Doc is like most consumers, he doesn’t hate ATMs, self-serve checkouts, or pumping his own gas.  He probably chooses self-service more often than not because it’s fast, convenient, and it keeps costs down for the consumer.  Why has Doc lost his faith in IVR self-service?

Because he never had faith in the first place.  This industry has never given him a reason to believe.  So many IVR systems deliver a poor customer experience, it seems like they’re everywhere.   As a result, millions of callers have been conditioned to expect a poor experience every time they encounter an IVR.

This is a problem we can fix, and it’s a problem worth fixing.  We invested a lot of our resources to develop a way to measure customer experience accurately and a methodology to manage and improve it. We brought science to the art of customer experience, and that drives predictable results that make good sense for business.

We’re raising the bar on customer experience in the IVR, and we know from the data we’ve collected that callers have memory that affects their behavior.  If they have a good experience with an automated system, they’re a little more likely to use an automated system on their next transaction.  We can measure this effect, and we know that we can improve customer expectations one call at a time. It won’t happen overnight, but in time we’ll give Doc and many others like him a reason to believe.

 Get your IVR customer experience rating.

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.

Unlike our competitors, we realize that the IVR can actually be a tool for improving customer experience (CX). For almost a decade, we have been singularly focused on continually improving our hosted IVR solutions in the areas of CX, contact center efficiencies, and cost savings.  We have known for years that people don’t hate IVR… they hate bad IVR.

We are proud to help our customers monitor, improve, and manage IVR solutions to create a positive CX. Through our service, we also are helping our clients foster better customer relations and opportunities for increased brand and customer loyalty.

This award is an indication that the industry is taking notice of potential in the IVR. Why dump millions into a system that actually makes your customers angry when you can work with an expert IVR provider that will make sure you receive a return on that investment with a platform that is efficient, cost-effective, and customer friendly?

If you’re losing money and customers with your existing IVR platform, maybe it is time to evaluate your provider. Download the Frost & Sullivan white paper about our CX framework to learn more about a solution that could help you stop losing and start gaining through your IVR.