July 2008 - The battle for independents, telemarketing market examined - Broadley Speaking

Thought Leadership

22nd July 2008

July 2008 – The battle for independents, telemarketing market examined

telemarketing market
For mid-sized players, the telemarketing market is especially difficult. Without the scale to achieve economies, yet large enough to require high-volume activity, the choice for owners in recent years has often been to sell up or go bust.

The strongest pressure of all has been on specialist outbound operations where the rise in Telephone Preference Service (TPS) registrations and strong negative opinion among consumers has made life tough. What used to be a robust business has become a hard-fought category for suppliers.

So what do operators do to survive? Mark Bates, chief executive at LBM, believes the choices are difficult. “It’s not necessarily that the days of the independent contact centre are numbered, but rather that there are two solid reasons as to why consolidation will continue at pace within the industry.”

For smaller operations, it will become harder to attract bigger clients who prefer to work with partners of a similar scale. “Smaller contact centres are often typified by having a narrow service offering – more often than not, they don’t have the depth of product and service proposition that more and more companies are demanding in today’s business environment,” he says. Data and analytics are among the services he identifies as tricky for these companies to offer.

Bates sees different problems for outbound specialists. “Outbound work is traditionally results-based. It is becoming increasingly difficult to achieve the results that clients demand, particularly in the current economic climate, resulting in business revenues becoming less secure,” he says.

Compliance is another issue, especially in the financial services sector. Bates also believes staffing is an issue. “By the nature of the roles that are available and the nature of the individuals that will fill them, heavy attrition will often be commonplace,” he notes.

The days when call centres could rely on a large pool of skilled workers are gone. Equally, regional development agencies are no longer handing out the grants which did so much to develop this sector in the Nineties.

With costs going up and revenue coming down, standalone service providers are struggling to keep the lights on. Hardly surprising, then, that it is tempting to seek refuge as part of a much larger organisation.

At Broadsystem, which was recently sold to Callcredit Information Group by News International, having been independent before that, customer service director Duncan Graham says/ “In recent years there has been a definite convergence of types of call centres. There have been many examples of mergers and acquisitions, and now many contact centres are part of a much bigger marketing or service provision group.”

One of the benefits of this shift is the ability to become a hub for communications activity across different channels. Instead of being tied to a single activity, such as inbound or outbound call handling, a centre can work across voice, digital and print media.

For this reason, Graham says/ “The trend of consolidation is set to continue as call centres within bigger marketing groups go down the route of multichannel marketing and benefit from more sophisticated and informative technology systems that put the discipline at the heart of the marketing mix.”

This reflects the shift in customer behaviour which has typified this decade – the demand for acccess via fixed line, mobile line, SMS and email depending on mode and even time of day. Back in the Nineties, it was a similar shift that drove the rise of call centres – a demand for the greater convenience of phone-based, rather than face-to-face contact.

Brand owners want to be able to support this, but often do not want to own the response handling facilities, since they are very capital and labour-intensive. Outsourcing remains a key business strategy, which at least gives hope to call centre operators of every size.

Perhaps for this reason, Rob Denton, managing director of Navigator Customer Management, argues that, “despite the increasing pressure from consolidation, smaller contact centres will still have a key role to play in the industry”.

He acknowledges that cost pressures will push major players towards the global call centre networks. Automotive and FMCG are two sectors which he identifies as still being attracted to this sort of commoditised service.

“Yet it would be wrong to assume that this is what all clients are looking for in their contact centres,” says Denton. “The more savvy clients are beginning to take a longer-term view on what their customers actually want, and we are seeing a general shift away from the ‘factory farming’ of customers’ hard-earned loyalty.”

By contrast, these clients want a “free range” solution which is higher quality, less prone to flaws and commands a premium. Where this is intelligently adopted, it usually results in a better return on investment through reduced churn and higher share.

“Larger contact centres struggle to create the sort of individualised service that a boutique organisation like ours takes for granted as our norm. As a smaller firm, we also find that we are able to react more nimbly to changing customer tastes,” says Denton. In four out of the last five years, his company has topped the BPA Worldwide call performance league for the UK automotive sector.

Specialising in a specific vertical sector – or focusing on one type of customer management activity – may prove to be the best survival option. “The charity sector is not experiencing a big round of consolidation of its telephone operations,” points out Gordon Michie, director of development, Relationship Marketing.

“This has always been a niche sector for niche operators and I don’t see that changing much,” he says. The largest operator in this sector has around 200 seats, while most average between 30 and 100.

He puts their continued success down to the affinity which phone-based fundraising agencies are able to build with clients. Most of the key leaders within these call centres started out as fundraisers within charities themselves, so they understand what is required.

“Another niche aspect of telephone fundraising is that we are not just about sales. Much of our work is about ‘stewardship’ and building relationships with donors – a lot of our calling doesn’t end with an ask for a donation,” says Michie.

Other mid-sized operations that do not have a niche focus are finding a market for their services for the reason that, when it comes to managing customers on behalf of a brand owner, there is no one-size-fits-all approach. While some companies outsource the entire customer lifecycle management process, others break it down into separate parts.

This creates a combination of long-term, repeating services as well as short-term, tactical activity. That is an ideal model for any service provider to seek to sell into.

Phil Telfer, sales and marketing director at Garlands Call Centres, is certainly positive. “Client projects will continue to come in all shapes and sizes – some short-term and small, others long-term and large.”

He adds/ “Some projects will start small and in a single area, then grow organically into many different areas. For this reason, there will always be room for small boutique contact centres that operate in specific markets, just as there will be for medium-sized operators.”

Although cost is a focus, Telfer says there is not always a view that higher-priced providers will lose out. “Cost-to-serve will always be important, but the efficient delivery of quality services at the right price is what’s really driving clients’ decisions today,” he says.

A cheap service that fails to deliver the right process and quality of contact will end up costing the brand owner more in the long-term. This may explain why some specialist outbound telemarketing operations are still able to thrive despite all of the issues facing them. “The reason that traditional outbound call centres are struggling to retain their status as a standalone business model is entirely clear. In many, many cases they represent poor value for money and bring negative equity to the brand value,” says David Conn, director of Broadley Speaking Intelligent Sales.

He says that the model of an outbound centre housed in a steel barn using agents working to pre-prepared scripts has no future. “Consolidation will not cure this but only delay its decline,” says Conn.

With a business that has shown 40 per cent growth year-on-year for the last decade, he should know what works. And it is not the traditional approach to customer contact. “Many marketers – indeed telemarketing business owners – perpetuate or live by the myth that all outbound telemarketing is a literally a game of numbers, of putting hoards of scripted telemarketing folk on the chase and trying to get the agreed number of outcomes,” he says.

“They are transactional in nature and economies of scale drive them to create sheds full of chattering agents who are just reading words from a screen. This is not sales and it is not good marketing,” argues Conn.

Growth is coming instead from the more focused, personal treatment which is what all good customer management should be about. Having a specialisation, whether by industry sector or area of activity, is proving to be the best way to cope with changing circumstances.

Marketers always need to ask themselves whether, when there is a niche in the market, if there is actually a market in that niche. For call centres who have the skills, culture and focus, the answer to that is still positive?

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Telemarketing