The Metric That Matters: Understanding Cost per Sale vs. Cost per Hour in the Teleservices Industry

By Arthur W. Conway

In today’s highly cost-conscious business environment, companies seeking to utilize teleservices strategies to acquire or service customers are meticulously scrutinizing pricing from both onshore and offshore providers. Regrettably, most prospects – particularly in procurement departments – see teleservices as a commodity. Looking for ways to maximize service delivery, while stretching company dollars, they gravitate towards vendors that offer the lowest cost-per-hour for teleservices representatives.

While such an approach would seem to save money, in many cases it actually represents the antithesis of how teleservices cost-effectiveness should be evaluated. A far more meaningful approach is one that focuses on cost-per-sale for acquisition programs or cost-per-transaction for customer care programs. Cost-per-sale/acquisition – the ultimate bottom line of a teleservices campaign – is the metric that really matters. Why? Because it reflects the real, bottom-line value a company receives – not just the cost it incurs.

The following table illustrates a hypothetical comparison of two teleservices vendors, each engaged in a customer acquisition campaign. Vendor A charges $29 per hour for its reps, while vendor B bills $25 per hour, $4.00 per hour less.

On the surface, vendor B’s costs would appear to be more economical. However, vendor A operates more productively. Its reps are better trained, more closely supervised, and more highly motivated. In addition, these reps are supported by stronger account management and better technology. While both vendors have the same sales budget, vendor A makes more sales per hour and requires fewer hours to hit goals. Thus, despite the fact that vendor A operates at a higher cost per hour, it achieves a substantially lower cost per sale, $36.71 versus $47.16.

Vendor A Vendor B
Cost per hour $29 $25
Sales budget (# of sales generated) 2,000 2,000
Sales per hour 0.79 0.53
Hours required 2,532 3,773
Total spent $73,428 $94,325
Cost per sale $36.71 $47.16

This comparison clearly demonstrates that a conventional, cost per hour mindset can mislead a prospect into making a bad business decision about the selection of a teleservices provider. So if cost per sale is the metric that matters, how does one evaluate a vendor’s ability to deliver it? Here are eight key criteria:

1) Company Management: Does the company’s management have deep experience in the teleservices industry and in serving the specific marketplace sectors of importance to the client?

2) Infrastructure: Does the company have a disbursed network of fully linked call centers, enabling it to efficiently manage and transfer loads as client needs and external circumstances, such as weather or natural disasters, dictate?

3) Recruiting/Training: Does the company recruit high-potential agents and train them rigorously?

4) Supervision: Does the company supervise its reps closely via a low supervisor to agent ratio (ideally 1:10) to achieve maximum performance and productivity of each team of agents?

5) Technology Platform: Does the company employ advanced predictive dialing, database management and modeling, skill-based routing, and security capabilities to guide and support its staff?

6) Account Management: Does the company have knowledgeable, accessible account managers who are experienced in designing optimally effective campaigns, monitoring and adjusting them as necessary?

7) Reporting: Does the company continuously provide timely, actionable online reports that provide transparency and clear decision-support?

8) Compliance: Does the company have ethical procedures and an impeccable record of compliance, assuring clients that they will not be subject to federal and state regulatory problems, citations, and fines?

A teleservices company that meets these criteria will, in all likelihood, be able to penetrate lists more deeply, conduct more productive rep conversations, convert more contacts into sales, and ultimately deliver the metric that matters: the lowest cost per sale. At a time of great scrutiny of every business expense, what could be more important?

Arthur W. Conway is president and CEO, DialAmerica, Inc. Visit www.dialamerica.com for more information.

[From Connection Magazine September 2007]

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