By Tony Murray
I was at the Amtelco user’s group meeting last month in Atlanta and the subject of networking was discussed at a number of sessions. I get many questions from owners who are interested in participating in a Group or network. Like everything else there are pitfalls that need to be avoided.
First of all let me clarify what is meant by networking. I am talking about the sharing of the workload created by high call volume accounts in the enhanced telephone services market place. Centers with limited positions cannot handle the volume of calls expected from a new client but do not want to lose the account. They have the option of handling a proportion of the account and diverting overload calls to another service or services.
Let me make it very clear that networking is not the way to get into the market. It is very unlikely that anyone will succeed in this market if they rely on the overload from others. Networking should only be looked upon as a bonus to your operation and not an end in itself.
Initially, networking started with friends helping each other out in an informal way. It then began to grow and small groups of owners who had the same software worked together. Some of the software suppliers tried to form customer groups to ensure that they would grow and expand their systems. This is where we are today and all in the garden is not rosy.
What are the problems? The price structure. Quality and quality control factors. Payments to the backup. Retention by the client of moneys due because of bad service. How are all of these problems handled?
First, let’s clarify some terms. The seller is the business that originally made the sale and who will manage the project. The seller will be responsible for all the client contact and the collection of the money due to the Group . The seller supplies the set up information to the Group and keeps them updated with all changes. They should also be responsible for checking the data supplied by the Group for accuracy before downloading this to the client.
The backup is the service or services that are going to handle the overcalls. They will have no contact with the client. The entire network Group is made up of the seller and backups.
If you are going to participate with a Group, then you need to be sure that the others involved have the same standards as you do. You need to know, in advance, the price structures that the Group is prepared to accept. In a good operating Group, all members will be playing the part of seller and backup at different times.
In my opinion, based on the structures discussed last week, the prices are weighed too heavily in the favor of the seller. This is not surprising because the seller is usually the one that sets up the deal. There is no doubt that the seller must get a larger share of the revenue. But at the same time, it is not sensible for the backup to dilute their profits because the seller cut the price or is unwilling to cut the cake fairly.
The consensus of opinion at the meetings is that the seller takes the whole setup charge and a percentage of the call charge. It is expected that the seller will be able to download or at least supply the backup with a floppy of the account setup. This is important as the client usually wants all their callers to get the same information from the same script.
In the words of one of the sellers I spoke to, “the backup has basically no work to do and therefore does not need any of the setup money.” This same seller told me his main problem was the terrible quality of service supplied by some of his backups. Surprise. He had not given the backups any money to train their staff about the product. This same seller was undercharging the setup fee by about 75%.
This brings us back to pricing. In my last article, I said setup charges should be charged at $30 to $60 per hour. Let us use the $30 rate for this example. With a major account, it is likely that at least one and one half hours will be required with the client to clarify their complete needs. (This is also an opportunity to up sell your services.)
You will then need to spend anywhere from one to five hours, maybe even more, setting up the account in the computer; preparing the reports; downloading procedures; and most important of all, implementing procedures to examine and edit the downloads received from the backups.
Let’s say, for our example, that this takes three hours.
Finally, and I suspect that this is often overlooked, your staff must be trained on the new client. I do not believe that self-training is good enough; in other words, it is not good enough to put a message in the computer for “all operators to look and understand the new account ID1234.” For best results all operators should go over the account with a trainer/supervisor.
At the same time, they should be shown the product or catalogue, the advertising piece, and all other relevant information supplied by the client.
I do not believe that the client should ever train your operators. Train the trainer or supervisors yes, but never the operators. Let’s say that this takes two hours of the trainer / supervisor’s time and ten minutes of each operator’s time. Twelve operators therefore needs two hours. So far, this example setup will cost the client eight and one half hours or $255.
Now we need to look at the backups costs. Let’s say that there are three backups supplying twelve operators (for simplicity 4 each). There should b e an allowance of one hour for each backup to input the information into their computer system and arranging their administration. This adds an additional three hours.
Finally, there should be 90 minutes per site for training time totaling 41/2 hours. We now have a further 7 1/2 hours at $30 or $225 due to the backups. This gives us a grand total setup price of $480, with $75 for each backup and $255 for the seller. Personally I think that this is fair to everyone including the client, and the price is certainly competitive with your professional competitors.
Now we come to the call costs. The only savings made by the backup are sales and collections costs. In looking at many operations’ financials, the average sales cost is about 10% of revenue and the collections cost is about 1.5% of revenue. Therefore, the reduction to the call cost should be 11.5%. This assumes that the call price is close to the backup’s standard pricing; if not, the backup may need to negotiate with the seller. The price paid to the backup, in my example, should be call charge less 11.5%. It is essential that you know your own figures to ensure that any deal offered to you by the seller is a financially viable proposition for your operation. Additional call volume, badly priced, is no benefit to your business.
Payment terms: the backup should bill the seller on their regular terms and the seller should pay the buyer within these terms irrespective of when the client pays the seller. The backup has passed on all his collection charges to the seller; therefore, the seller has no right to pay late.
Earlier I said that the seller should monitor all the backup’s information before downloading it to the client. If there are any problems, then the seller must discuss them with the errant backup. If the problems continue, the seller should either charge the errant backup a fee to correct the errors or stop passing calls to that backup operation. The problem with one backup should have no impact on the other backups even when the client makes a deduction from their bill for bad service. There is no excuse for the seller to wait until the project is over before warning the backups that there have been problems.
If the client underpays their account for perceived service problems, it the backup’s is the responsibility of the seller and the loss should not be passed on to the backups. I heard recently of a situation where the client paid only half of their bill; the seller then divided this underpayment between the Group. This was unfair, as the backups had carried out their end of the bargain and had not been informed of any problems.
Finally, monthly or project charges: I believe that with these enhanced services there should be a flat rate monthly management fee or service charge. This is important for these networked accounts as the seller has costs directly related to being a project leader. In my opinion, the seller should not share this income. Depending on the size of the project, this fee should be between $50 – $500 per month, based on the hours worked.
As in all cases where money is involved, the seller and the backups should have a written agreement clearly stating the agreed terms and responsibilities. I am presently preparing an outline which will be available in November. It will be included in my Enhanced Services consulting package.
I said at the beginning that networking is an excellent way to enhance your services but it is not an end in itself. I think that once you have had a number of good experiences with your Group, the next step is to look at a joint advertising and sales program for the Group. As I point out at all my presentations, there is an enormous market out there but it must be nurtured with care.
Tony Murray can be reached at Douglas Communications Services, LTD, PO Box 3353, Lisle, IL 60532, 888- 254-1554.
[From Connection Magazine, November 1996]