Be Careful What You Bill For

By Peter Lyle DeHaan, PhD

Peter DeHaan, Publisher and Editor of Connections MagazineOver the years, I have heard ample discussion on a multitude of creative ways to bill clients for call center services. The prevailing goal of each consideration is to maximize billable services and fees. While this is an admirable business objective – since the goal of commerce is to make money – the deliberations that I have been privy to take a decidedly pro-business point of view, ignoring a more holistic customer-focused perspective.

To illustrate, let’s consider billing for telecommunications services, something that call centers are all too familiar with. From my local service provider, the rate for a business line is a fraction of the total bill, a mere 52 percent. Added to the fee for a standard business line is the subscriber line charge, a federal excise tax, a state tax, emergency telephone, a 911 operational charge, and a federal universal fee, plus fees for touch-tone and call forwarding. If I were to ask the cost of a business line, the answer would be $20.62. Unfortunately, with the above taxes, surcharges, and add-on services, the resulting bill is almost double. Pity the poor start-up who actually believes and budgets $20.62 for phone service.

Next, consider long distance, which is generally quoted as a cost per minute. Unfortunately, what we are told is never what we pay. My long-distance service is represented to be five cents a minute. However, ancillary items add 33 percent to the bill. These include a telecom restructuring fee, state tax, a FCC Common Carrier regulatory fee, a Federal Universal Service Fund charge, and a network access fee. The result is that my effective cost per minute is actually 6.8 cents. For my small enterprise, this is not a big deal; for a call center, it becomes an astronomical disparity. I have even seen bills in which the effective cost per minute is double the quoted rate.

Even my cell phone provider has been sucked into this deceptive practice, tacking on regulatory and administrative fees, state and local 911 fees, an E911 carrier recovery fee, a Federal USF charge, and a state tax. The upshot is that another 20 percent is added to the quoted rate for each additional phone.

Does the billing from these folks win them any respect? Not in the least. It does, however, earn them the derision of their customers, some of whom are locked into long-term contracts. The truth is that there is an appalling disparity between marketing and billing, the accuracy of charges is doubted, and their brand is disparaged each time a bill is paid. No wonder the customer churn in these industries is so high.

So, what happens when a person gets a bill that is 20 percent, 33 percent, or 48 percent higher than what they expected? They complain. They tell everyone they know; they may even post something online for the whole world to see. They will denigrate and besmirch the brand name that these companies pay vast sums of money to build, promote, and grow. Some will switch providers; others will remain customers, albeit unhappy ones. Sometimes the cost to switch – either in terms of time and money — is too great. Often there is a resigned acceptance that it is pointless to change providers because “they all do it.”

However, just because everyone does it doesn’t make it right. It certainly isn’t good business to routinely mislead customers and charge them more than they expect. That is one reason why innovative approaches that offer fixed rate packages are winning business away from the entrenched providers who prolong these practices.

For an alternate consideration, contemplate gasoline stations. Yes, prices are high and we all like to complain about them, but at least what is posted is what we pay. Did you know that about 62 cents paid for every gallon of gas goes to taxes? Most people don’t, because stations are required to display the total cost per gallon, including all taxes and surcharges.

Suppose this wasn’t a requirement. One station, desiring to list a more attractive price, would opt to not include sales tax, which is common practice in most other retail pricing. So instead of listing $2.89, their sign would display $2.73 (sales tax is 6 percent in Michigan). Not to be outdone, the outlet across the street elects to back out the federal gasoline tax of 18.4 percent as well, thereby allowing them to advertise an attractive $2.54 per gallon. The station down the street responds by removing all taxes and ancillary charges, resulting in an astounding $2.27 a gallon.

Imagine filling up your car for a mere $2.27 a gallon, only to be charged $2.89. Would you be happy? Most certainly not. You would complain and grouse about it, but you would continue to buy gas, albeit unhappily, because you need gas. To avoid this, laws were enacted to enforce uniformity in gas pricing and protect consumers from misleading practices.

Speaking of gas, a related issue is mileage. I remember, back in the seventies, reading a car ad that boasted 69 miles per gallon. Although this result may have been achieved while coasting downhill with the engine idling, such stellar results were far from what could be expected in real-world conditions. Because of these inflated and bodacious claims, a legally binding methodology for determining and reporting automobile fuel economy was created.

Something similar is the promotion of interest rates on various investment vehicles. In order to boast a more attractive rate of return, all manner of “tricks” were employed to seduce the public with a higher return rate. Eventually, a standard methodology was imposed on the industry.

You may think these examples have nothing to do with the billing of call center services, but they do. I have heard of all manner of “tricks” being implemented – often with great glee – that serve to increase billing. I’m not talking about fraudulent practices, such as billing for services never rendered or padding usage, but rather add-on charges, ancillary services, and generous usage calculations that result in a higher – sometimes much higher – bill then what the client was expecting.

These techniques are viewed as “common business practice” and accepted as normal. However, when attempting to adopt a customer-centric perspective, there is much that is in need of correction.

Granted, billing for call center services is vastly more complicated than charging for gas by the gallon. Plus, there is a need for innovative and creative billing schema that properly bills for all work done. (Invariably call center work entails some activity that is difficult to track and therefore goes unbilled.)

However, to be ethical, all chargeable items need to be easily explainable and clearly communicated. Don’t bury charges in a minutia of contract fine print or in unreadably small text in the sales literature small print. The means and methods of billing need to be something that the common person can understand without the need for a PhD in mathematics. A sure sign that your billing calculations are too complex is when you find yourself repeatedly explaining them to your staff. The final step is to present this in an understandable manner on the invoice. Don’t bury charges in pages of confusing dribble, but instead use a few lines of understandable itemization.

All call centers boast about their quality and most make mention of their pricing (be it low pricing or competitive rates). A third item that needs to enter into the picture – in both promotion and in reality – is fair billing. As an industry, we have a long way to go. Will you lead the way?

Peter Lyle DeHaan, PhD, is the publisher and editor-in-chief of  Connections Magazine. He’s a passionate wordsmith whose goal is to change the world one word at a time.

[From Connection Magazine March 2008]