Definition of Cost per Contact in a Call Center
A call center is essential for businesses and organizations to provide customer service, telemarketing, and sales support. The cost, however, for maintaining a call center can be quite expensive. One factor that contributes to the cost of running a call center is the cost per contact. The cost per contact is a metric that calculates the total cost associated with incoming and outgoing calls, emails, web chats, and other customer interactions. It represents the average cost of handling one contact in a call center, also known as the average handling cost.
The cost per contact helps organizations assess the efficiency of their call center operation by measuring the cost of each interaction between a call center agent and a customer. It gives companies a way to understand how much of their budget they should allocate to their customer support services, as well as how their customer service performance is measuring up against industry benchmarks.
The calculation of the cost per contact involves dividing the total operating costs by the number of interactions handled within a given period. To calculate the cost per contact, businesses need to take into account various elements that make up the cost of a call center, such as labor costs, technology and equipment expenses, training costs, and administrative expenses.
One of the most significant costs for a call center is labor cost. This cost includes the wages and salaries paid to call center agents, supervisors, and managers. Labor costs also encompass the expenses associated with recruitment and training for new hires, as well as employee benefits such as healthcare, vacation time, and retirement plans.
The cost of labor can vary depending on the location of the call center. For example, setting up a call center in a developing country may lead to fewer labor costs, but may also result in challenges in communication or language barriers. On the other hand, a call center in a developed country might offer employees better wages and quality equipment, but the cost per contact may be significantly higher.
Technology and Equipment Expenses
Another factor that influences the cost per contact is technology and equipment expenses. These expenses include the cost of hardware, software, and maintenance costs for any IT infrastructure that a call center requires for handling customer interactions. The cost of technology and equipment can vary significantly depending on the volume of calls and the complexity of the call center system.
Given that technology is evolving at a rapid rate, the increasing cost of equipping call centers with up-to-date software and hardware can put pressure on the budget. However, investing in the right technology can lead to more efficient and effective call center operations that benefit both customers and employees in the long run.
Call center agents need specialized training to be able to handle customer interactions effectively. Training costs can include onboarding, product or service training, and customer service training. The cost of training depends on the call center, the duration of the training, and the level of expertise it requires.
Proper training can improve the quality of service offered by call center agents, reduce the rate of errors, and increase customer satisfaction. In contrast, neglecting training can lead to inexperienced agents who lack the knowledge to provide accurate information to customers, resulting in lost sales, customer dissatisfaction, and higher costs per contact.
Administrative expenses include the costs of managing the call center operation that does not fall under the labor cost category. Administrative expenses can include supplies, rent, management salaries, and utilities expenses, among others. These expenses may be smaller than other cost categories, but they can significantly contribute to the overall cost per contact.
Understanding the various costs associated with running a call center is essential for organizations to make informed decisions. To calculate the cost per contact, businesses first need to determine what type of interaction they want to measure. They need to evaluate all costs associated with that interaction and divide the total costs by the number of instances of that interaction.
Although keeping the cost per contact low is a priority, businesses also need to maintain the quality of their customer service to satisfy their customers’ needs and expectations. Therefore, to balance the cost and quality of customer service, it’s important for businesses to monitor performance regularly, including measuring the cost per contact, to ensure that the call center is operating in a way that meets the needs of the business and its customers.
Factors Influencing the Calculation of Cost per Contact
Calculating the cost per contact in a call center is essential to monitor the financial efficiency and effectiveness of the operations. Numerous factors can affect the calculation of cost per contact, such as:
1. Agent Salaries
Agent salaries contribute significantly to the cost per contact formula, given that call centers usually have a large number of agents providing services to customers. Salaries can vary depending on the agents’ experience, the region or country of the call center, and the type of service provided. For instance, incoming sales, technical support, or outbound surveys have different levels of complexity and require different types of skills that impact the salaries paid to agents.
2. Infrastructure and Technology Costs
Infrastructure and technology investments are also significant contributors to the cost per contact formula. These costs include the expenses of equipment such as telephone switches, headsets, computers, office space, and facilities costs. Additionally, software licenses, network connectivity, and maintenance fees have to be considered. The use of forecasting tools, real-time monitoring, and analytical platforms also impact costs but are necessary to manage the call center’s resources effectively.
Therefore, call center managers must weigh the benefits and costs of investing in infrastructure and technology to optimize the cost per contact formula.
3. Training Costs
Even though call center agents may possess prior experience in customer service, they still need continuous training and upskilling in different areas. For instance, agents may need to learn new technologies, develop sales persuasion skills, or be trained in new company products or policies.
The costs of agent training programs can be significant, depending on the duration, trainer’s fees, and training materials used. However, training costs must be accounted for in the cost per contact formula, given the direct impact training has on customer satisfaction and retention.
4. Call Volume and Type
The number and type of calls received by a call center determine the average handle time (AHT) and the staff’s required number to handle calls. The AHT is an essential performance metric used to calculate the service level, which measures how efficiently a call center answers calls within a specific time frame.
For example, call types such as billing issues and complex technical support calls might require longer AHTs and specialized agents, thus increasing costs. In contrast, general customer inquiries may be quicker to handle and require less experienced staff, lowering the cost per contact.
5. Other Costs
Aside from the above-discussed factors, several other costs must be considered to calculate the overall cost per contact. These costs include marketing expenses to create awareness and generate leads to the call center insights, quality assurance, and customer satisfaction measurement tools.
Also, industry regulations compliance costs, software upgrades, utility costs, and rent and property taxes impact the overall cost per contact. Call center managers must review all their costs regularly to ensure the proper allocation of resources and the optimization of their operations.
In conclusion, calculating the cost per contact formula in a call center can be challenging, given the numerous factors that impact its calculation. Call center managers need to carefully assess their costs and operations regularly to ensure optimized performance and cost efficiency.
Calculation Methods for Cost per Contact in a Call Center
The cost per contact in a call center is a critical metric that helps managers and executives understand the efficiency and effectiveness of their customer service operations. The cost per contact is the total cost incurred to manage and resolve a single customer inquiry or service request. There are several calculation methods that call center managers can use to measure the cost per contact, and in this article, we discuss three of the most popular methods.
Method #1: Direct Cost per Contact
The direct cost per contact method is straightforward and easy to calculate. It measures the actual cost incurred in handling a single customer inquiry or service request. To calculate this cost, a manager needs to add up all the expenses that are directly related to serving the customer. These direct costs may include staff salaries, training expenses, equipment costs, telephony expenses, and overhead costs.
For example, if a call center spends a total of $100,000 on staff salaries, $10,000 on telephony expenses, $5,000 on training expenses, and $10,000 on equipment costs in a particular month, and receives 1000 calls in the same month, the direct cost per contact will be:
Direct Cost per Contact = ($100,000 + $10,000 + $5,000 + $10,000) / 1,000 = $125 per contact
The direct cost per contact method helps managers identify the actual cost of serving a single customer and provides a useful benchmark for future cost-cutting strategies.
Method #2: Fully-Loaded Cost per Contact
The fully-loaded cost per contact method takes into account all the expenses associated with operating a call center, including indirect costs. These indirect costs may include management salaries, rent, utilities, office supplies, and other related expenses.
To calculate the fully-loaded cost per contact, a manager needs to add up all the expenses, including direct and indirect costs, and divide the total by the number of calls received.
For example, if the call center in the above scenario spends a total of $125,000 on all expenses, including direct and indirect costs, and receives 1000 calls in a month, the fully-loaded cost per contact will be:
Fully-Loaded Cost per Contact = $125,000 / 1,000 = $125 per contact
By calculating the fully-loaded cost per contact, call center managers can gain a comprehensive understanding of the actual cost of serving a customer and make informed decisions regarding future investments and budget allocations.
Method #3: Activity-Based Costing (ABC) per Contact
The activity-based costing (ABC) method involves identifying and measuring the different activities that take place in a call center and assigning costs to each activity. This method helps managers understand the specific activities that drive up costs and find ways to reduce these costs.
To calculate the ABC cost per contact, a manager needs to identify the different activities that take place in a call center, such as answering a call, placing a call on hold, transferring a call, and resolving a customer issue. They also need to assign costs to each activity, based on the resources consumed. For example, the cost of answering a call may be higher than the cost of placing a call on hold.
Once the costs are assigned, a manager needs to add up the costs of all the activities that are required to serve a single customer and divide the total by the number of calls received.
Although the ABC method is more complex than the other methods, it provides a more accurate picture of the cost per contact, and it helps managers identify the most costly and time-consuming activities in the call center.
In conclusion, calculating the cost per contact in a call center is critical for managing costs and improving customer service. The direct cost per contact, fully-loaded cost per contact, and activity-based costing methods are popular and effective ways to measure this metric.
The Importance of Accurately Calculating Cost per Contact in a Call Center
Call centers are an essential component of businesses that rely on customer interaction to drive growth and revenue. They are responsible for handling customer inquiries, complaints, and feedback, and ensuring a positive customer experience. Call centers are typically staffed by trained customer service representatives who use various communication channels to address customer concerns, including phone, email, and chat. However, managing and maintaining a call center can be a costly endeavor for businesses. This is where calculating cost per contact comes in handy to the management team.
Cost per contact is a critical metric that should be tracked and calculated for a call center. It refers to the total cost incurred by a business for each customer interaction that takes place in the call center. This metric includes the cost of staffing, technology, infrastructure, and training, among other factors. Accurately calculating cost per contact is essential to ensuring that call centers remain profitable and are optimized for operational efficiency. Here are four reasons why:
1. Cost Control
Calculating cost per contact is an effective way of managing operational costs in a call center. By identifying the cost of each customer interaction, call center managers can take steps to reduce costs and improve efficiency. For example, they can invest in automation tools and self-service options to minimize the number of customer interactions handled by live agents. By reducing the demand on live agents, the business can reduce staffing costs without sacrificing the quality of service provided.
2. Resource Allocation
Calculating cost per contact helps in making informed decisions about resource allocation within the call center. By identifying which channels are most expensive, businesses can allocate resources accordingly. For instance, they can shift customer interactions from expensive channels to lower-cost channels. Investing in workforce management software that allows businesses to measure the costs associated with different channels can help with effective resource allocation.
3. Optimized Staffing
Calculating cost per contact can help managers optimize staffing levels in a call center. By identifying the busiest periods and channels, call center managers can adjust staffing levels accordingly. This helps reduce staffing costs during low-traffic periods while ensuring adequate coverage during peak demand. By investing in workforce management tools, businesses can also optimize staffing levels by forecasting demand and scheduling staff accordingly.
4. Improved Customer Experience
Calculating cost per contact can help improve the overall customer experience. The cost per contact metric can be used to identify which channels are most suitable for specific customer segments. By investing in the channels that customers prefer, businesses can provide better customer experiences, which can lead to improved satisfaction and loyalty. In addition, by reducing wait times and improving response times, businesses can further enhance the customer experience and improve their reputation.
In conclusion, calculating cost per contact is a vital aspect of call center management. By tracking this metric, call center managers can control costs, allocate resources effectively, optimize staffing levels, and improve customer experiences. Investing in workforce management tools that automate the process of calculating cost per contact can lead to significant cost savings and improved operational efficiency.
Strategies for Reducing Cost per Contact in a Call Center
Call centers are large operations with teams handling millions of calls each day. It comes as no surprise that managing such a department can become expensive. One way of keeping costs down is to aim for a low cost per contact (CPC), which is a financial metric used to evaluate a center’s efficiency.
Lowering CPC means a reduction in operational costs, allowing the department to allocate resources more efficiently and ultimately being able to serve more customers. Here are some strategies that managers can consider when trying to reduce cost per contact in a call center:
1. Optimize Call Scripts
Call scripts are a useful tool in a contact center, providing a standardized approach to handling customer calls. However, outdated or overly complex scripts can put off customers and extend call times, leading to inefficiencies. Reviewing and optimizing call scripts to ensure they’re relevant, up-to-date, and concise can help reduce average handling time (AHT) and the number of transfers, ultimately reducing CPC.
2. Automate Processes
Modern call center solutions offer various automation capabilities, which can help reduce the workload of agents and improve customer interaction. Automating basic tasks like data capture, call logging, and routing can free up agent time, reduce training costs, and ensure accuracy, accelerating the resolution of customer inquiries and reducing AHT. Additionally, automated responses to common customer queries can decrease the number of calls reaching agents, reducing overall costs and improving the customer experience.
3. Optimize Staffing
Poor staffing levels can increase AHT and CPC. For a call center to be cost-efficient, it’s important to match agent shifts to forecasted customer demand and ensure service levels are maintained. Employing workforce management solutions and scheduling software can help design optimized schedules that meet service level agreements (SLAs) while reducing staffing costs. Additionally, providing agents with the right level of training and monitoring their performance can further optimize staffing levels, enabling efficient and effective handling of customer inquiries.
4. Use Analytical Tools and Metrics to Monitor Performance
Analyzing call center performance metrics like AHT, occupancy rates, first call resolution (FCR), agent adherence, and customer satisfaction scores can help managers understand the efficiency of daily operations. Employing analytical tools to gain insights and identify problem areas can empower managers to optimize performance across the call center, improving service levels while keeping costs low.
5. Focus on Customer Experience
Focusing on the customer and delivering a great experience can help reduce CPC. Customers aren’t only looking for quick resolution but also transparency, care, and empathy. They want to feel like their issue matters and that the agent is invested in their problem. Encouraging agents to use the right tone, actively listen, and provide solutions that meet the customer’s needs can go a long way in reducing CPC, improving FCR, and retaining customer loyalty. Additionally, leveraging customer feedback opportunities can help call centers adapt to their customers’ changing preferences and needs.
A successful call center is one that’s committed to efficiency and customer satisfaction, recognizing that the two are closely linked. By optimizing staffing, automating processes, and focusing on the customer experience, call center managers can reduce cost per contact and improve overall profitability.