Optimizing Sales and Marketing Performance
The Outsourcing Advantage: Optimizing Sales and Marketing Performance
Edited from the original document written for Zacson Corporation by their outsourced partner Cooper Leaf Communications, A Marketing Services Companycooperleaf@earthlink.net
Fact: Over 90% of Fortune 500 companies have outsourced at least one major business function. (source: Forbes, October 1995).
A recent research study showed that 85% of Fortune 500 sales and marketing executives are outsourcing more key marketing services than ever before. When asked why they are outsourcing more today, 90% of these companies reported that the more they outsource the more competitive they become (source: Business Marketing, August 1994). A Bain Research study demonstrated that a mere 5% increase in customer retention can increase revenues up to 125%. Do what you do best and outsource the rest. – Tom Peters Organizational Management Expert
“Today, outsourcing is not just a trend; it is an integral part of how smart companies do business. But this was not always true; as business has evolved – from the vertical organizations of the ’70s, to the horizontal organizations of the ’80s and ’90s, toward the virtual organizations of the next century – the scope and focus of outsourcing has changed. It can no longer be defined simply as a long-term contract with another company for supplies/services. The concept has matured. It now connotes a strategic relationship between partners, with shared risks and goals – a relationship in which a company concentrates on its core business and relies on outsourcing partnerships to get the rest done. Unless managers periodically reexamine how they make sourcing decisions – and how resources get allocated – they can find themselves… starving what is core”.- Harvard Business Review.
In a study examining why businesses choose to outsource, 70% of reporting firms cited greater efficiency and economies of scale and 45% said it allows them to focus on core business (source: Coopers & Lybrand). At the 1995 Conference on Strategic Outsourcing, Arthur Slotkin, the worldwide manager of outsourcing for Unisys Corporation, outlined three factors to consider when making an outsourcing decision:
- 1. Financial – Evaluate whether outsourcing will reduce expenses, control costs, preserve capital and/or avoid additional investment expense
- 2. Business – Ask if this area is part of the core business, will outsourcing make the company more competitive, how will outsourcing impact the company’s business transitions (e.g., mergers, downsizing)
- 3. Technological – Decide whether outsourcing will provide flexibility, improve the level of service, give the company new talent, or help solve problems stemming from the increased complexity of technology
“Whatever specific reasons a company may have for outsourcing, the underlying principle is a conviction that astute companies share: To stay competitive they must outsource non-core aspects of their business. Because each partner brings its “core competence” to the effort, it may be possible to create a best of everything organization. Every function and process could be world-class – something that no single company could achieve”. Business Week
In the sales and marketing arena, optimum profitability is realized through cost-effective customer acquisition and improved customer retention. When reviewing methods for acquiring and retaining customers, many companies have found that outsourced call centers provide a marketing channel that is not only cost-effective but highly profitable. Following are four case studies of major corporations who proved that outsourcing sales and marketing services is good for business.
Increasing Productivity and Efficiency –
The RBOC Case Study This case study illustrates how efficiency and productivity can be negatively affected when a company – working outside the scope of its core competencies – does not fully understand the requirements of a successful call center operation.
A Regional Bell Operating Center (RBOC) set up a call center to sell and service its voice mail products. Staffed with employees hired from seven different temporary agencies, the center was plagued with problems, including lengthy calls, high abandon rates, high staff absentee rates, and a lack of service continuity. At the same time the center was projected to increase both its customer base and range of services. Realizing the strength of the technology already in place at the center, company management decided to approach the problem as an outsourcing opportunity.
Working together, they developed a training program for both the staff already at the center as well as new hires. After three weeks of instruction, they assigned each newly trained employee to one of three skill-based groups: the priority group, who serve the largest customers; the regular customer service group, who handle the majority of existing customers; and the telemarketing group, who field inbound sales calls. “Outsourcing is a strategic tool that can react faster to the demands of the marketplace and their customers. It allows companies to shift gears quickly while not losing their emphasis on maintaining the core business”. – Business Weeks. – Business Week
The call center made significant improvement in all areas, including: Improved the sales close ratio by 19% Reduced the length of business calls by 20% Reduced the length of residential customer calls by 40% Decreased the wait time – with 80% of the calls answered within 20 seconds – resulting in a significant reduction in the abandon rate
Maximizing Revenue –
The Sun Microsystems Case Study
Service/maintenance contract sales are highly profitable for many high-tech businesses. In order to reap the financial rewards however, a company must have in place a focused channel strategy for implementing and managing maintenance contract sales. It is well documented that an expertly run contract sales program can net a corporation millions in incremental revenue. Without such a program much of that income is lost.
Sun Microsystems is a case in point. When they discovered that this important revenue stream was eroding, they quickly identified the cause: Because their field sales force did not have the “bandwidth” to provide cost- effective service contract sales to small-to-mid-size customers, they were not adequately covering those accounts. This opened the door to third-party vendors and also resulted in customers who were out of warranty or whose contracts had expired. When they needed assistance, those customers would have to renew before they could get service. Needless to say, these were not satisfied customers.
Sun decided to outsource the development of a dedicated TeleServices Center – in essence creating a new distribution channel for this product. Working closely together, they designed and installed an on-site TeleSales Center whose charge is to thwart third-party vendors and to comprehensively target contract renewals in small-to-mid-size accounts.
Selling maintenance contracts requires TSRs who understand the service requirements of each customer. The right TSR has a background in both inside sales and customer service and can identify decision makers and close a sale. In addition, they must be “specialists” in Sun’s service products. The typical sales cycle for a renewal contract is 90 days, involves two decision makers, and six-to-twelve conversations with the customer. Each TSR can contact and service 25-30 customers per day, far more than possible with field staff alone.
They developed a Renewal Program based on a 90/60/30-day strategy: Quotes are sent out 90 days prior to the contract expiration date, a phone call is made 60 days prior to the expire date, and the contract is renewed at 30 days.
Results of this program speak for themselves:
- Increased the contract renewal rate 24.6%
- Reduced the cost to retain customers 34.5%
- Lowered the cost of new customer contracts more than 33%
- Freed field staff to focus on major accounts
- Developed a renewal management database to efficiently handle the contract renewal process
- Designed an instructional curriculum that reduced TSR training time by 40%
Focusing on Core Competencies –
The IBM Case Study
In 1992 IBM encountered a different set of problems. Facing fierce competition, they realized the need to re-engineer their go-to-market strategy to dramatically reduce both sales and service costs – to move away from a “blue suit,” field sales business model. Looking for the best solution, IBM decided a call center would provide the best blend of quality and cost- efficiency as a channel for both sales and customer service.
They also recognized they had no experience designing, much less managing, a call center. And, as if this weren’t enough of a challenge, the center needed to be up and running “yesterday.” “Outsourcing enables executives to focus their energies on the “what” of their business and less on the “how.” Executives believe this is often the most compelling reason for outsourcing”.- The Outsource Institute
IBM outsourced the design, staffing, and management of a TeleServices Center capable of supporting customers in all phases of their life cycle. Within 90 days, the first TeleServices Center was up and running – a third of the time IBM estimated it would take to accomplish internally. Working in partnership, they set up a strategically located call center at an IBM facility in California. The call center was charged with all facets of customer acquisition and retention – from lead generation to assuring customer satisfaction to inbound customer service and support.
To provide truly integrated and comprehensive marketing, the IBM TeleServices Center was carefully organized into three groups: The Customer Service Group handles simple inquiries as well as provides customers with technical support and assistance solving complex problems. The Telesales Group handles account management and sales of IBM products and services that do not require field sales support. The Direct Marketing Group is responsible for generating new product leads, upgrades, service contracts and seminar attendance.
The successful integration of the TeleServices Center within IBM’s corporate structure requires that TSRs receive training to develop the required product knowledge and customer skills to act as an agent of IBM. As one would expect from such thorough planning and implementation, the results have been dramatic:
- Reduced the cost of customer contact 97% – from $500 for field contact to $15 for telesales contact
- Shortened the field sales cycles up to 80%
- Generated 125% of goal for leads
- Exceeded customer expectations 78% of the time – based on a customer service satisfaction survey
- Built a marketing database – with customer information that improves targeting, responsiveness, relationships, and retention.
Turning a Cost Center into a Profit Center –
The Siemens ROLM Case Study
There are many aftermarket sales that cannot be handled cost- effectively by field sales staff – their cost-of-sales-to-revenue ratio is too high. Yet the sale of these products offers significant income possibilities and can serve as a relationship bridge that helps identify future big-dollar sales. Siemens ROLM was faced with just such a dilemma; they needed to devise a strategic and cost-effective program for aftermarket sales. They required a solution that allowed field staff to focus on strategic clients while developing a low-cost distribution channel to support mid-tier clients.
Siemens ROLM working in conjunction with an outsource agency, designed and implemented an on-site Client Call Center. With performance goals jointly set by field staff, management, and the agency, the center’s three pronged mission is to manage leads, stop third-party encroachment, and extend client relationships and contracts.
The call center, which provides a cost-efficient alternate sales and marketing channel for Siemens ROLM’s move/add/change (MAC) product lines, has more than proved its worth. Both leads and sales generated far exceeded goals, the center reversed a projected MAC revenue decline, and more than 2,800 customers are contacted each month. In the first six months of operation, the center:
- Generated 116% of goal for sales leads
- Grossed over $4.2 million in MAC sales
- Produced leads valued as high as $1M
The center allows field staff to concentrate on what they do best: develop face-to-face client relationships and sales; and the outsource agency to focus on what it does best; provide teleservices for lead generation and sales.
“If you do not outsource any of the activities where you are not best in world, and your competitor does, you have just lost the competitive edge. Simple as that”- Professor James Brian Quinn Tuck School, Dartmouth
THE OUTSOURCING ADVANTAGE
In summation, there are four main reasons why a savvy company would choose to outsource their call center operations:
1.To retain their focus on core competencies
2.To achieve superior call center performance
3.To speed up implementation
4.To maintain flexibility