There is a perpetual tension between cost and customer experience. Financially, a business wants to keep costs low, since that helps keep prices low and profits high to satisfy customers and shareholders. But businesses also know that customer service is increasingly important to consumers, and the level of service they offer can make or break the company. Balancing these has been part of the success behind the Business Process Outsourcing (BPO) industry in the Philippines. But what are those tensions and trends in the industry?
"Traditional economic thinking has become increasingly outmoded in the twenty-first century. The twentieth-century Homo economicus—the idealised individual who always acted in rational self-interest—has largely been abandoned, and It's now generally recognised that for what might seem an inconsequential purchase, consumers are actually buying a package that has emotional as well as physical content. They may consider things like the social status of the product or the company's values and, for many purchases, customer service is a major component of that," says Ralf Ellspermann, CEO of PITON-Global, an award-winning BPO in the Philippines.
"Just as bad service comes with a price—around one-third of consumers will abandon a brand after just one negative customer service experience—it is recognised that good customer service has a cost, and consumers are prepared to pay for it. Gartner estimated that people were prepared to pay, on average, a premium of 16% for good customer service," he adds.
This is not to say that customer service needs to be costly. A company using a BPO provider in the Philippines might expect savings of 40-50% on their customer service costs. The trick is to balance those savings against the customer experience. It is always possible to go cheaper, but the danger of excessive cost-trimming is that the savings are rapidly outweighed by lost customers and negative reviews driving new customers away. One of the attractions of BPOs in the Philippines has been that high-quality services are available, and while low costs of living mean reduced staff costs, the agents have the benefit of a Western outlook and often, a Westernised accent that works well with customers in the markets they serve.
"The trend towards improved customer service is, if anything, accelerating. Some of this is generational change. Marketing research shows that Millennials and Generation Z are both pickier and more demanding than their predecessor generations. They make choices actively, so when they buy anything, they do so consciously: they spend their money in a way that is aligned with their values. As the buying power of these generations grows, both in size and as a share of the market, this trend will become more important. Increasingly, these are the generations that will be making buying decisions, not just for themselves and their families, but for businesses, corporations, and governments," says Ellspermann.
"Other factors driving this trend are changes in customer behavior and expectation and a move away from in-person service towards remote service and even non-human customer service. While this trend was already well-established, it has accelerated during the coronavirus pandemic, where in-person customer service opportunities have been limited. However, the changes in human caution, seeking to avoid potentially infectious contact and situations, are likely to persist beyond the pandemic and become habitual," he explains.
Again, this has cost implications. While it might, for example, be less expensive to process retail returns remotely, and perhaps even automatically, rather than in a shop, there will still be demands for high-quality human customer service for the more complex cases and the customers who are expecting a premium service. High-quality automated and artificial intelligence customer service requires investment—when it does not work, it can have a highly damaging effect on customer opinion. It also means that the human part of the customer service process has to be highly skilled, which itself comes at a cost, both in training and salaries.
These trends are largely driven by external forces, and businesses have to adapt to them or, better still, get ahead of them. They will have little opportunity to shape them. This means some careful consideration of the balance between costs and customer service and how this translates into BPO requirements. BPOs in the Philippines have succeeded by being in a sweet spot for clients: they offer significant savings while still ensuring customer service standards are maintained or improved. Finding that sweet spot in an evolving market is going to be increasingly important for both BPOs in the Philippines and businesses outsourcing in the years ahead.