Off-Shoring/Outsourcing Customer Service Gets Dismal Grades

Discussion
Jul 14, 2008

By Tom Ryan

A new survey finds that outsourcing customer service – whether to offshore providers or domestically – typically causes a “significantly negative” impact on customer satisfaction. But the study’s authors still contend that despite widespread bad press, off-shoring customer service can work if done right.

The research, according to The Wall Street Journal, came from analyzing the off-shoring and outsourcing activities of 150 North American companies and business units from 1998 to 2006. The study’s authors were Jonathon Whitaker, assistant professor of management at the University of Richmond’s Robins School of Business; MS Krishnan, professor of business information technology at the University of Michigan’s Ross School of Business; and Claes Fornell, a professor of marketing at the University of Michigan’s Ross School of Business.

Writing in the Journal, the scholars offered a few steps companies can take to improve the quality of outsourced customer service yet still reap the savings from moving offshore:

  • Make sure the provider has enough information and full authority to help
    customers. To protect customers, the customer-service provider often isn’t
    given complete customer histories and profiles. The provider also may not
    be permitted to grant credits to customers to resolve complaints. The authors
    wrote, “Companies need to weigh their concerns about information security
    and financial control against the damage that such arrangements can do to
    customer satisfaction.”
  • Companies can take advantage of the technological innovations available
    to some foreign firms. According to the authors, “Some foreign outsourcing
    providers have offerings their domestic counterparts can’t match in terms
    of technologies that help guide customer service by recognizing patterns
    in consumer behavior.”
  • Invest the money saved by outsourcing to improve the quality of the company’s
    products or services, or to cut prices. The authors found that most companies
    are only pocketing the savings. “Among the companies we studied that had outsourced customer service, there was no increase in the perceived-value component of their overall customer-satisfaction score: Their customers didn’t feel that they were getting any more for their money than they did before the company started outsourcing,” the
    authors wrote.

Discussion Questions: What are the main problems arising from outsourcing customer service functions to offshore providers? How can companies resolve these issues?

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13 Comments on "Off-Shoring/Outsourcing Customer Service Gets Dismal Grades"


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Mark Lilien
Guest
13 years 10 months ago

Customer satisfaction scores with service personnel aren’t secret. Everyone knows that calling a consumer software provider or a cellular phone company or a cable TV company or a hospital billing department or a mass merchant is likely to be torture. Doesn’t matter if the folks are outsourced or not. Doesn’t matter if the folks are American citizens or not. And the CEOs know their service quality stinks. They just can’t say so publicly. The neat thing is finding a business with routinely great customer service, like Canon or Harry & David.

Mary Baum
Guest
Mary Baum
13 years 10 months ago
I have to say my own experiences with offshored customer service–principally dealing with auto-club road service–have been generally positive. But the task there is simple: take the customer’s info, call the contracted tow services, check the location on Google Maps and hope the maps are basically accurate. Also, I have a good ear for language and can understand (and mimic) most accents, and I do my best to make the CSR’s job as easy as I can, when I can, so I can store up karma of a sort for those times when I have to play that old game from Johnny Carson’s version of the Tonight Show known as Stump The Band. But in retrospect, it’s easy to see that outsourcing call centers, here or there, was never going to work if companies weren’t going to train the reps in the task–or, better yet, hire for it. Now, here’s an even more radical thought: What if we manufactured products that, when they came out of the box, it was obvious how they fit together–or… Read more »
John Gaffney
Guest
John Gaffney
13 years 10 months ago

I get concerned about the disconnect between companies and customers. Maybe some offshoring is necessary, but I don’t think it reflects a retailer’s brand very well. Maybe IVRs are necessary in some cases, but I think customers are looking for personality as much as efficiency. Anytime you put customer communication in the hands of a third party, you’re risking your brand and you’re risking that customer’s loyalty. Offshoring then, should be taken very seriously as a customer-centric decision, not just a financial one.

John Lingnofski
Guest
John Lingnofski
13 years 10 months ago

Since the overall result of this survey was “Our research indicates the effect in most cases is significantly negative–but similar to the effect of outsourcing customer service domestically,” it’s ironic that the authors propose that companies can benefit from outsourcing/offshoring their customer service if they “do it right.”

Why spend the time and money to conduct a scientific survey if we’re going to discount its overriding conclusion? Doing it right, in this case, would seem to mean that companies should do it themselves.

It’s my impression that most of the largest companies in America have already abandoned the outsourcing of any direct customer contact, utilizing it instead for “backroom” functions that can be accomplished invisibly to the consumer.

Steve Bramhall
Guest
Steve Bramhall
13 years 10 months ago

A subject close to my heart and I agree with the comments here. Outsourcing in the past was effectively throwing the accountability over the fence, without any focus on the responsibility. Clearly it takes a lot of ongoing management to integrate an outsourced provider and get them up to the consistent service levels expected in the West.

I remember the horror when my bank outsourced customer service to an Indian call centre. Absolutely no tangible benefits for me, just pain and dissatisfaction. Where was the cost benefit analysis?

Outsourcing vs. Insourcing is driven by shareholder pressure, i.e., let’s see something different for a few years. I have traded in India for many years and it is difficult with the language and the job hopping that’s happening.

Doron Levy
Guest
Doron Levy
13 years 10 months ago

My experience in this is that the companies I have dealt with in the past are bringing the service end back to North America and giving up on offshore outsourcing. One major telco here in Canada feels that outsourcing has in fact hurt the customer and are in the process of bringing everything back in-house.

For this to work, there has to be a deep synergy between the vendor and the client. What I don’t like is that in the morning, the crew may be servicing Lexmark customers while in the PM they are helping HP buyers. How could they possibly learn the product knowledge required to effectively service the customer? And what about monitoring systems? Big corporations have let the bad service slide for far too long. It may cost more but in the long run, a happy customer is a profitable customer!

Paula Rosenblum
Guest
13 years 10 months ago
This is a subject dear to my heart. Due to various problems with about 4 different brands of electronics products I found myself on the phone with Indonesia several times about a year ago. In each case the reps were very well scripted. And actually quite sincere. And they can move effortlessly from one script to another. Unfortunately, the scripts often make no sense at all. Like when I had a $150 TV break in my condo in St. Croix (in the Caribbean). When I called the RCA help line, they advised me to bring the TV in to my nearest service center, or ship it there at my expense. That service center was in Dallas. DALLAS. She had no way of understanding that it would cost far more to ship the thing there than it would to just throw it away and buy a new one. That’s just one of about 5 stories from that go-round. Having said that, are we any happier with our non-outsourced service from companies like Comcast? No need to… Read more »
Laura Davis-Taylor
Guest
Laura Davis-Taylor
13 years 10 months ago

This topic made me think of one in which we explored what effect consistently repugnant restrooms might have on a retailer’s business. Does anyone truly know how much business/loyalty might be lost because someone was physically repelled by a store restroom’s condition? Probably not and same question applies here.

Outsourcing may make plenty of sense on a financial spreadsheet, but at what expense? And can you truly measure it? We as consumers are getting weary of the black and white numbers taking precedence over the simple common sense issues. We want to understand our customer service reps, we want problems resolved, we want our nation’s economy supported and we want to speak to a human without 5 minutes of prompts and commands. It’s not rocket science.

Camille P. Schuster, Ph.D.
Guest
13 years 10 months ago

Whether off-shore or in country, customer service has to be done right to work. Employees need to be able to communicate effectively (language AND listening skills) with consumers and have the authority to resolve the consumers’ problems. If either are missing, consumer service will not work whatever the geography or company in charge.

Gene Hoffman
Guest
Gene Hoffman
13 years 10 months ago

As stated above, off-shoring customer service can work if done right. But so could on-shore customer service if done right and be conducted attentively in prevailing American English.

In view of the lower cost but unsatisfying process of off-shore customer service, it would seem that our key customer service challenge might be to re-discover innovative and affordable ways for American companies to resume on-shore customer service and do it better than anyone else overseas could do it.

Max Goldberg
Guest
13 years 10 months ago
Most of my experiences with outsourced customer service has been disastrous. First there is the language problem. One can sense this coming when someone with an Indian accent tells you that his name is Fred. As Ryan points out, two people can be speaking English, but not understanding each other. A mastery of American English usage is a must. Second is empowerment. The person at the service center must be empowered to solve the problem and not constantly put the customer on hold to check with a supervisor. Third is knowledge. At most technology-based customer service centers, the employees do not have the knowledge to solve a consumer’s problem. They have a manual or a list of items that they as the consumer to perform, but they do not have enough hands-on knowledge to actually fix the problem. US companies are shooting themselves in the foot with consumers if they do not tackle the problems of language, empowerment and knowledge. I have yet to encounter one company that outsources its customer service and that “gets”… Read more »
Ryan Mathews
Guest
13 years 10 months ago

Language is the key–or more precisely the ability to speak conversational English without too much of an accent. American ears aren’t nuanced enough to understand accents well and the frustration of two people trying to understand each other when both are speaking the same language is well documented. Beyond that, outsourcers often sound like they are going through a checklist (which they probably are) and when the checklist is over so is their ability to help.

Bob Phibbs
Guest
13 years 10 months ago

Outsourced customer service personnel seem, from my experience, to be too disconnected from what the customer is experiencing. In-house CS reps usually understand the product better and don’t just have a list of questions to ask that ultimately may not help. For a good example of customer service, call Apple for any of their products. They not only “get it” but also “use it.”

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