Hard work continues to pay off for the teleservices industry

Hard work continues to pay off for the teleservices industry

Nadji Tehrani

Yogi Berra once said, “Prophecy is very hard… especially about the future.” Despite that admonition, I think it fairly safe to say that the $6 billion outsourcing portion of the $81 billion teleservices market will continue its explosive growth in the next few years. Dain Bosworth estimates that the $6 billion outsourcing segment will grow at a 50 to 60 percent rate in 1997. Corporate America has truly given phenomenal recognition to the teleservices industry.

But let’s take a moment to briefly examine how we got where we are, in hopes that it helps us figure out where to go, for as Yogi Berra said, discerning the future is quite difficult.

Growth Of Teleservices In General

Perhaps the driving force behind the growth of teleservices as a whole is that it is cost-effective. For example, a single outbound telemarketer can contact many more potential customers in a single day than a single field salesperson. Add in the fact that the telemarketer hardly has to move to make these contacts and that the contacts can be made at a fraction of the cost to the 4 Telemarketing (R) & Call Center Solutions (TM) company, the advantages to phone versus field becomes much more apparent. This is not to say that direct, faceto-face contact is unimportant or obsolete. With the advances in technology, we are seeing a return toward personal contact as the video-enabled call center rapidly becomes a reality.

It is also important to note that telesales is more effective than direct mail campaigns, for instance. The success rate of direct mail is, on average, 1 percent. The average success rate of an outbound telemarketing campaign is anywhere from 5 to 15 percent. A tremendous difference, indeed! When the two are married, success rates can soar to almost 30 percent.

Legislation, too, hasn’t been all bad. It has served to regulate and restrict the practice of telemarketing as a whole, but this standard of conduct has separated the wheat from the chaff, or the crooks from the legitimate telemarketers. This, in turn, has bolstered public opinion about telemarketing as it has forced the smaller companies to adopt operating practices similar to the larger telemarketing service agencies.

Advanced technology, and advancing technology, has also revolutionized the call center. Predictive dialers enable agents to become far more productive in that every call is a live one – a potential sale. On the inbound side, ACDs and CTI technology, in all its myriad forms, allow the service call to be routed to the agent best suited to answer the call, but that agent, via screen pops, is usually able to determine who is calling and possibly even why.

Given these few factors I’ve touched on here, let us turn our focus to the outsourcing segment of the teleservices industry. A projected annual growth rate of 60 percent is absolutely staggering. When we speak about outsourcing, we generally mean the business that corporate America has contracted out to teleservices companies.

Factors Driving The Growth

Why has outsourcing teleservices become a viable alternative for corporate America? It allows a company to focus on its core competency, while at the same time reducing its costs while improving its service and effectiveness in marketing.

Core Competency: Teleservices represent the most efficient means today of staying in touch with customers and marketing products and services. Although these functions are vital to a company’s longevity, it goes without saying that a company proficient in developing or manufacturing widgets may not be expert in managing a telemarketing campaign. Constructing an in-house call center and then hiring and training people to work in it is certainly an option that has hitherto been chosen. This choice, however, directs valuable capital toward a function outside of the company’s core competency, making widgets, to conducting teleservice activities. In the long run, the company will probably find that it is much too expensive to keep up with the advances in technology, and to keep the in-house call center up and running all day, every day. In fact, this is exactly what corporate America is discovering, and this is perhaps the paramount reason as to why outsourcing is booming.

Reduced Cost: A telemarketing service agency can offer reduced cost to its client company (the outsourcer) because they, generally, do not have employees whose wage is tied to a larger corporate compensation/benefits package. This is because, at least in sum for the Top 50 Outbound and Inbound service agencies, the number of part-time employees nearly equals the number of full-time. These agents are usually drawn from a less costly labor pool, whereas many of the corporate giants are located on the coasts where wages tend to be higher. As far as technology goes, an in-house operation may not be able to justify the capital investment required to purchase a cutting-edge predictive dialer, ACD, CTI or switch, to name a few. They simply may not employ enough agents or make enough calls to realize a rapid return on investment. Telemarketing service agencies, however, do. It is their core competency to remain abreast of technology so as to best serve their clients. Some of the biggest firms employ more than 10,000 agents. There isn’t a corporate call center in America that can make that claim. If you figure that the average cost for outfitting a single workstation is anywhere from $5,000 to $20,000, and that a top-tier service agency can generate an annual revenue of about $45,000 to $65,000 per workstation (numbers per Dain Bosworth), the return on investment can be realized within a few months.

Improved Service And Effectiveness: There has been a growing demand for 24-hour, seven-day-a-week customer service. While a telemarketing service agency can handle this demand with relative ease, integrating that kind of program into a corporate, 9 a.m. to 5 p.m. shell is much more difficult. Often, a company will choose to outsource the off-hours service while retaining the daytime work for themselves. Even if a company opts for this scenario, it still demonstrates that corporate America is becoming dependent on the high-quality and flexible service offered by telemarketing firms. Having years of accumulated experience upon which to draw, a telemarketer can often be much more effective in the marketing of a product or service. Think of it as a massive juggernaut just waiting for some impetus to bring it to life – the infrastructure for an outbound campaign or service solution is already in place. The outsourcer draws on existing facilities, staff and support, thus decreasing their time to market, and increasing the ability to make their best showing in the potential consumers’ eyes.

Down The Road

As teleservices outsourcing continues to evolve, both from market, client and technologic demands and advancements, I think we will witness a transformation in the kinds of services a telemarketing agency offers. We will probably see them offering more help desk service solutions for high-technology companies, and ever-more-precisely targeted outbound campaigns as database-enhancing technologies continue to mature. Computer-telephony integration will also continue to play an ever-increasing role, in that it will be possible to determine and route much more information about potential and existing customers in much less time. We will probably also witness greater penetration into existing outsourcing markets, as more and more of corporate America realizes its benefits and potentials. Hitherto untouched markets will probably also take corporate America’s lead and begin to outsource some of their needs.


With all of these wonderful and exciting developments in teleservices, we must not forget the dragons that lurk in shadowy caves, waiting to hamper and impede our development.

Workforce Shortages: One of the greatest challenges facing our industry at this time, and certainly into the foreseeable future, is the shortage of welltrained and experienced agents and supervisors. Not too long ago I received a call from a good friend who is president of one of the Top 50 service agencies you see highlighted in this issue. He offered me a ridiculously large finder’s fee if I could point him in the direction of an experienced call center director. I couldn’t help him, as much as I would’ve liked to. My point is that we need experienced managers and agents to deal effectively with the staggering growth being experienced. True, this growth is wonderful, but it is putting a great deal of strain on the existing management and infrastructure, so much so, that if this trend continues for too long, quality will suffer. And that will threaten our growth!

High Turnover: Hand in hand with the above is the astronomical turnover rate we experience in the call center. Turnover, on average, can be as high as 250 to 300 percent per year in outbound arenas. This state of affairs can also damage the quality of service, especially if training lapses or the agents don’t receive the best supervision possible. The capital diverted to hire and train new agents could also increase, detracting from the agency’s ability to offer the best service at the lowest price to its potential clients.

Price Erosion: This occurs when companies that don’t really know or understand the industry leap into the fray and offer a lower price, and inevitably shoddy service (unbeknownst to the potential client), than their better-equipped competitors. What they lack in ethics and experience is unfortunately compensated for in the exuberance to make a quick buck. True, they are offering a lower price, but they are also offering less bang for that buck. This lowballing will force competitors to lower their prices, which will, in the long run, impact their ability to offer a top-notch, quality service, and eventually drive them right out of business. Quality is the core of every single product and/or service. If you can’t provide that, the consumer will discount you and look elsewhere. We do not want this to happen to the industry as a whole.

What Is To Be Done

I will leave you with a strong caveat emptor. In the words of John Ruskin, “There is hardly anything in the world that someone cannot make worse and sell cheaper, and the people who consider price only are this person’s lawful prey.” Before you outsource your teleservice needs, investigate the companies you are considering. Make certain they understand your needs and quality requirements, and can match them now and down the road. I also suggest that you call the number below and purchase a copy of a booklet we’ve published called Telemarketing Service Agencies — Everything You Always Needed To Know. It offers some valuable insights as well as some more extensive analysis of the role of service agencies. I welcome your input and opinions. Please send your comments to ntehrani@tmcnet.com

I would like to extend my thanks to Maureen H. Pettirossi and Stephen D. Lowe at Dain Bosworth, as well as Richard R.S. Northrop at Smith Barney for their invaluable assistance in preparing this editorial.

Copyright Technology Marketing Corporation Mar 1997

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