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Cost Justification and IP Office CC March 2014.pptx

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The document discusses the importance of cost justification for investment in the Avaya IP Office Contact Center (CC) and outlines how to effectively communicate its financial benefits to customers. It introduces the IP Office CC ROI tool, designed to assist in analyzing the potential return on investment through metrics like cash flow and payback period. The document also emphasizes the value of increased agent productivity, revenue generation, and customer retention as fundamental benefits of the IP Office CC.

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Cost Justification and the IP Office Contact Center Robin H Foster, Avaya Practice Leader for ROI Analysis March 2014
2 2 Avaya – Confidential & Proprietary. Use pursuant to your signed agreement or Avaya Policy Why look at Cost Justification for IP Office CC?  Cost Justification is the process of becoming more informed about how an investment (IP Office CC) can bring financial benefits to a business. – Some customers need only to understand advantages in general and tie the new capabilities they will get to either top line or bottom line benefits – This is where you add a story line to your demos so you not only show a feature but you tie it to financial benefits – Other customers need to hear about the success that other Contact Center customers have experienced – Customer Gallery stories and your own portfolio of customer stories and references are helpful here – And some customers need a full financial analysis to present to the decision makers who approve purchases – The IP Office Contact Center ROI tool was designed to help here
3 3 Avaya – Confidential & Proprietary. Use pursuant to your signed agreement or Avaya Policy What is a Return on Investment Analysis (ROI)?  An ROI answers the question “how much financial value will my investment bring me?” and allows the customer to compare this investment opportunity compares to other investment opportunities – Your customer may need to show that the cost of the IP Office CC project is “worth it” and that it’s better to spend money on IP Office CC instead of spending money on something else, like a new delivery truck. – Your customer may have the option of “doing nothing,” of sticking with the status quo. An ROI shows your customer what the opportunity cost is of “doing nothing” to encourage them to take action. – For comparison to other potential investments, the ROI metrics in the IP Office CC ROI tool include annual cash flow, payback period, net present value (NPV), internal rate of return (IRR) and average annualized ROI.
4 4 Avaya – Confidential & Proprietary. Use pursuant to your signed agreement or Avaya Policy The Avaya ROI Practice  The Avaya ROI Practice has been working since 1999 to help account teams show the cost justification for customers investing in Avaya solutions  The Practice Leader for ROI Analysis, Robin Foster, is responsible for – Setting the standards and methodology for cost justification analysis – Development of tools to assist the field in building a cost justification – Delivering training on cost justification methodology and tools – Providing support to users of ROI Tools
5 5 Avaya – Confidential & Proprietary. Use pursuant to your signed agreement or Avaya Policy Our Agenda  Telling the ROI Story for IP Office Contact Center – How and why customers can save money, make more money and retain customers longer when they use IP Office Contact Center  An Overview of the IP Office Contact Center ROI Tool – The 4 Step Process  Working with the Customer
6 Avaya – Confidential & Proprietary. Use pursuant to your signed agreement or Avaya Policy Telling the ROI Story for IP Office Contact Center
7 7 Avaya – Confidential & Proprietary. Use pursuant to your signed agreement or Avaya Policy The IP Office Contact Center ROI Tool  This Excel tool has been designed to help the Business Partner build a Return on Investment analysis for an IP Office Contact Center Proposal  This tool is the Intellectual Property of Avaya and is intended for use by Avaya Associates and Authorized Business Partners only for the positioning of Avaya solutions.  The results of the analysis do not constitute a guarantee of performance or financial results  The tool and additional IP Office Contact Center ROI collateral can be found on the Avaya Sales Portal at <INSERT LINK HERE>
8 8 Avaya – Confidential & Proprietary. Use pursuant to your signed agreement or Avaya Policy What customers understand about ROI  Customers may ask for an ROI, but may not understand any ROI results except payback period – Payback period is the amount of time it takes for the customer to recoup the costs up to that time. – Metrics like NPV, IRR, and average annualized ROI are generally not as well understood by customers
9 9 Avaya – Confidential & Proprietary. Use pursuant to your signed agreement or Avaya Policy How we build an ROI for IP Office Contact Center  We look at four possible ways in which IP Office Contact Center can help a customer save money, make money, and retain customers longer – Are there any current expenses that go away when IP Office CC is implemented? – What is the increase in agent productivity with IP Office Contact Center? – How much more revenue will the business expect with IP Office Contact Center? – How much increase in customer retention will the business expect with IP Office Contact Center?
10 10 Avaya – Confidential & Proprietary. Use pursuant to your signed agreement or Avaya Policy Fundamental Benefit Current Expenses That Go Away  Look for any services or systems that become obsolete once the customer adopts IP Office Contact Center, for example -- – A Centrex service that will be discontinued or a telephone or ACD system that will be replaced – A voice mail service that will be discontinued or the annual support costs of a voice mail system that will be replaced – A caller prompting service or annual support costs of an IVR or auto- attendant system – A contract with a local telecom support firm for customers who can now do their own administration without outside help and expense – Lots of analog lines being replaced by a more economical T-1 or E-1 connection
11 11 Avaya – Confidential & Proprietary. Use pursuant to your signed agreement or Avaya Policy Fundamental Benefit Increased Agent Productivity  When operations go from an informal, ad-hoc, unmeasured, unmanaged situation to a formal process with reporting efficiencies tend to go up 10% to 15%  Incremental capabilities over top of the basic ACD functionality can add greater efficiency, for example – Self-service impact can be substantial, but depends on what self-service applications have been designed, so use an appropriate percentage – Screen-pop ~ 2% to 4% is the typical range – Routing based on customer history, product set, etc, ~ 1% to 5% -- more if call transfers are eliminated with better choice of agent – Customer history immediately accessible to the agent ~ 1% to 4%, depending on how often it’s needed – Blending turns idle time into productive time, ~2% to 10% depending on how much idle time is available to repurpose
12 12 Avaya – Confidential & Proprietary. Use pursuant to your signed agreement or Avaya Policy Agent Efficiency Examples  A customer with 20 agents changes from ad-hoc operations to a formal ACD – With a 10% to 15% productivity gain, 20 agents can now do the work of 22 to 23 agents, sparing the customer the need to hire 2 or 3 more agents as the business grows, or letting the staff shrink by 2 or 3 over time – Self-service in the IVR could add additional productivity points  A customer that has 10 agents on an ACD for calls but has only a 2-agent, informal email operation based on Microsoft Outlook. Voice agents get lots of calls (~5% of volume) following up on emails that have not been answered. – Getting email into a managed operation could improve response turn-around and reduce voice calls about missing email replies. – Blending email into the Inbound agent position will let inbound agents take half of the email, eliminating 1 position. Efficiency = (10/12) x 5% + (2/12) x 50% = 12%  A customer with 50 agents intends to open a web chat channel for the first time, and expects revenue gains as a result. – Screen-pop and improved routing on the inbound side will give them ~6% efficiency gains, meaning 3 agents (50 x ~6%) are freed up for web chat. – If the customer thought they’d need to add 5 agents for web chat, you’ve saved them 3 agents and give them access to the increased revenue.
13 13 Avaya – Confidential & Proprietary. Use pursuant to your signed agreement or Avaya Policy Fundamental Benefit Increased Revenue  IP Office CC enables many refinements that can contribute in whole or in part to driving revenue up – for example, – Screen-pop to inform the agent about special offers, rates or up-sell/cross-sell recommendations applicable to the customer – Knowing what went on in the IVR – Choosing agents based on sales opportunities and/or customer history – Outbound campaigns to reach existing customers or prospects – Opening channels in which customers want to buy, especially web chat – Reducing caller abandon which enables the business to capture revenue that would otherwise be lost
14 14 Avaya – Confidential & Proprietary. Use pursuant to your signed agreement or Avaya Policy Increased Revenue Examples  A customer begins routing calls with greater sales potential to its better sales agents, increasing sales conversion rate and average order size – Calls accounting for 65% of revenue see conversion increase from 55% to 60% and average order size increase 20% means sales increase 65% x [(60%/55%) x (1+20%) -1] = 60% x (131% -100%) = 20% increase in total revenue  A customer with lots of abandoned calls as a result of its ad-hoc operation is losing sales – formalizing helps them reduce abandons and capture lost revenue – 6% abandons drops to 3% with 60% retry assumed improves revenue by (6% - 3%) x (1- 60%) = 1.2% increase in revenue  A company begins to offer web chat online. – Online sales are today only 10% of total revenue. Web chat is expected to increase sales conversion from 8% to 12% and to increase cart size by 25%. Web sales should rise 80%. Given some cross-elasticity of revenue channels, expect total sales to increase by perhaps 6%
15 15 Avaya – Confidential & Proprietary. Use pursuant to your signed agreement or Avaya Policy Fundamental Benefit Increased Customer Retention  Customer Retention refers to the percentage of customers a business is still doing business with a year later – For example, if on January 1, Year 1, there are 10,000 customers and by January 1, Year 2, 1500 of these customers have cancelled their contracts, the Customer Retention has been (10,000 – 1500)/10,000 = 85%.  When retention is poor, it’s harder for a business to grow, For example, here Company A retains 80% of customers and Company B retains 82%.  Company B’s 7% advantage is like having 3.5 more weeks to sell per year! 7% x 52 weeks = 3.5 “more weeks” to sell each year http://www.avaya.com/usa/campaign/magazine/2013/CEM/measuring-customer-lifetime-value.html
16 16 Avaya – Confidential & Proprietary. Use pursuant to your signed agreement or Avaya Policy More on Customer Retention and Customer Lifetime Value (CLV)  When you retain a customer longer, you have the benefit of continuing revenue but do not incur the cost of customer acquisition  For many businesses, repeat customers buy more, or buy higher margin products/services than new customers  Slight increases in Retention can produce large gains in Customer Lifetime Value. Your customer will see this value in terms of higher annual revenue. http://www.avaya.com/usa/campaign/magazine/2013/CEM/measuring-customer-lifetime-value.html
17 17 Avaya – Confidential & Proprietary. Use pursuant to your signed agreement or Avaya Policy Increased Customer Retention Examples  Low Customer Effort is more highly correlated with Customer Loyalty than either Net Promoter Score (NPS) or Customer Satisfaction  Anything that reduces Customer Effort helps to increase customer loyalty and retention – Eliminate the need for the customer to repeat information – Eliminate transfers – Don’t make the customer switch from one channel to another because you can’t handle the channel of their choosing – Get the customer’s needs met on the first contact, eliminating the need for the customer to make 2nd or 3rd requests – Anticipate what else the customer needs based on their situations – don’t leave it to the customer to discover related needs later on – Examine new customer retention and focus on on-boarding new customers using helpful proactive communications http://hbr.org/2010/07/stop-trying-to-delight-your-customers/ar/1
18 Avaya – Confidential & Proprietary. Use pursuant to your signed agreement or Avaya Policy Working with the Customer
19 19 Avaya – Confidential & Proprietary. Use pursuant to your signed agreement or Avaya Policy The IP Office CC ROI Tool in a Nutshell  Step 1 – Collect information about the customer’s revenue, personnel, and customer churn  Step 2 – Enter the total cost of the solution, both initial and recurring, for IP Office CC as well as any other expenses the customer will incur – The tool covers both purchase situations and lease/finance situations  Step 3 – View the impact IP Office CC will need to have on revenue, agent productivity and customer retention to yield a 12 month payback (this step combines the data from Step 1 and 2), and enter the impact to use in the ROI – This is a “Reverse Engineering” approach designed to help you identify highly justifiable sales opportunities  Step 4 – Look at the Return on Investment Results – Set up for 3 or 5 years
Avaya – Confidential & Proprietary. Use pursuant to your signed agreement or Avaya Policy 20 The “Reverse Engineering” Approach Year 1 costs of solution X% increase in sales  We assume a 12 month payback is desirable and ask 3 questions 1. What % increase in sales would produce additional Gross Margin dollars = Year 1 costs of the solution? 2. What % of annual loaded agent payroll is = Year 1 costs of the solution? 3. What % improvement in Customer Retention would eliminate lost revenue (gross margin) = Year 1 costs of the solution  The answers are only targets to inform you as to how easy (or difficult) it would be to justify the IP Office CC project using just that one area of benefits  Of course, you may be in a situation where all 3 areas of benefits are applicable  This approach allows you to circumvent a more involved data gathering process Just a 1.5% increase in revenue would justify your costs in only 12 months. With all the ways we can impact revenue, that should be easy to reach.
Avaya – Confidential & Proprietary. Use pursuant to your signed agreement or Avaya Policy 21 ROI Results shown in the ROI Tool
Avaya – Confidential & Proprietary. Use pursuant to your signed agreement or Avaya Policy 22 Payback Period Graph from the ROI Tool
Avaya – Confidential & Proprietary. Use pursuant to your signed agreement or Avaya Policy 23 Some Tips for Working with the Customer Concern Suggestion The customer does not use the same terms as you use and does not always understand what you are asking Learn to ask the same question in different ways or to give examples of how a question might be answered under different circumstances Customers who understand the question might still give the wrong answer, for example providing a monthly instead of an annual figure. Approach the ROI process as an iterative process. Show how you used the numbers in your process of checking your understanding of their numbers Customers might hesitate in sharing numbers with you, maybe even saying “I can’t give you that.” Assume (but check!) that this as a lack of certainty in answers rather than a claim that information is proprietary. Many customers hesitate to share numbers in fear that they are “wrong.” Learn to ask for a range as a way to get them sharing. Be prepared for customers who want a “baseline” case and an “upside” case where the “upside” case contains more revenue or customer retention improvements than the “baseline” Accommodate customers who need to show two views of the same investment Customers worry that all benefits will not start on Day 1 Remember to delay benefits, even if by just a couple months, in Step 4 as you set up the ROI Customers worry that all the numbers aren’t “right” Remember to set the Confidence Factor to something like 90% or 80% in Step 4
Avaya – Confidential & Proprietary. Use pursuant to your signed agreement or Avaya Policy 24 Do you have a call center? Question Suggestions for asking again, when the customer answers “No, we don’t have a call center” Do you have a contact center (or a call center)? Do you have people who take orders over the phone, or people who answer questions about bills or shipments? When someone needs help with what you sold them, what options do they have for getting help? Who answers the numbers you publish on your web site or in your ads? Who are customers chatting with when they launch a web chat from your web site? If someone is overdue in paying their bill, do you have people who work collections? Who answers the email you get from customers?
Avaya – Confidential & Proprietary. Use pursuant to your signed agreement or Avaya Policy 25 Customer Reactions to the ROI Results Concern Suggestion The payback is just too fast – the results seem over the top and too aggressive Don’t overload your case with too many benefits. Adjust the expectations down (Step 3) to give a payback that will please your customer and the decision maker and leaves room for over delivering. Do all these benefits start on Day 1? Won’t it take time to get some new training done and make these improvements happen? Make sure you use the option to delay the start of benefits – don’t use “Month 1” for a customer who has expressed concern about ramping everything up on Day 1. (Step 4) What if all these numbers aren’t right? Share with the customer that it’s possible some of the numbers are, in fact wrong, but point out that you’ve worked to use reasonable and conservative numbers. Then, point out the Confidence factor you are using (Step 4) – for example, if you are using 80%, you’ve thrown out 20% of the estimated benefits before calculating the ROI My decision maker doesn’t want to see any “soft dollars” in our case. Inquire whether “soft” refers to revenue or to some other characteristic of the benefits in the case. Some customers do want to see a “hard dollars only” case, which generally means no revenue improvement and no customer retention improvement. Run one case without revenue and retention improvements, then run another case with just very small revenue and retention improvements for comparison
Avaya – Confidential & Proprietary. Use pursuant to your signed agreement or Avaya Policy 26 More Customer Reactions to the ROI Results Concern Suggestion We don’t use this kind of analysis here – we’re not used to this financial terminology Emphasize the Payback Period for this customer, as most customers understand that concept the most. I like the analysis but I don’t think we have the cash for this right now. Help them look at the lease/financing option – a lease or finance gets them into the solution and the benefits will help them pay for it. This analysis is very helpful, but our board won’t meet for another 6 months to consider capital purchases. Look at the opportunity cost (Step 4) for a 6 month delay. Use this figure to get the customer eager to promote the solution internally and perhaps to get early consideration for the project. It looks like you expect us to lay off our workers. We don’t want to do that. If your customer’s business is growing, compare the improvement to agent productivity to the target rate for growth of the business. If productivity increases 5%, but the business wants to grow 10%, the value is in avoiding so many new hires in the CC. If the business is not growing, ask about the natural agent attrition. In many businesses, attrition is greater than 20%. If your customer’s expected improvement is 10%, within 6 months the number of staff would have “right sized” on its own – set the beginning of benefits to >= half the months it would take to shrink naturally.
Cost Justification and IP Office CC March 2014.pptx

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Cost Justification and IP Office CC March 2014.pptx

  • 1. Cost Justification and the IP Office Contact Center Robin H Foster, Avaya Practice Leader for ROI Analysis March 2014
  • 2. 2 2 Avaya – Confidential & Proprietary. Use pursuant to your signed agreement or Avaya Policy Why look at Cost Justification for IP Office CC?  Cost Justification is the process of becoming more informed about how an investment (IP Office CC) can bring financial benefits to a business. – Some customers need only to understand advantages in general and tie the new capabilities they will get to either top line or bottom line benefits – This is where you add a story line to your demos so you not only show a feature but you tie it to financial benefits – Other customers need to hear about the success that other Contact Center customers have experienced – Customer Gallery stories and your own portfolio of customer stories and references are helpful here – And some customers need a full financial analysis to present to the decision makers who approve purchases – The IP Office Contact Center ROI tool was designed to help here
  • 3. 3 3 Avaya – Confidential & Proprietary. Use pursuant to your signed agreement or Avaya Policy What is a Return on Investment Analysis (ROI)?  An ROI answers the question “how much financial value will my investment bring me?” and allows the customer to compare this investment opportunity compares to other investment opportunities – Your customer may need to show that the cost of the IP Office CC project is “worth it” and that it’s better to spend money on IP Office CC instead of spending money on something else, like a new delivery truck. – Your customer may have the option of “doing nothing,” of sticking with the status quo. An ROI shows your customer what the opportunity cost is of “doing nothing” to encourage them to take action. – For comparison to other potential investments, the ROI metrics in the IP Office CC ROI tool include annual cash flow, payback period, net present value (NPV), internal rate of return (IRR) and average annualized ROI.
  • 4. 4 4 Avaya – Confidential & Proprietary. Use pursuant to your signed agreement or Avaya Policy The Avaya ROI Practice  The Avaya ROI Practice has been working since 1999 to help account teams show the cost justification for customers investing in Avaya solutions  The Practice Leader for ROI Analysis, Robin Foster, is responsible for – Setting the standards and methodology for cost justification analysis – Development of tools to assist the field in building a cost justification – Delivering training on cost justification methodology and tools – Providing support to users of ROI Tools
  • 5. 5 5 Avaya – Confidential & Proprietary. Use pursuant to your signed agreement or Avaya Policy Our Agenda  Telling the ROI Story for IP Office Contact Center – How and why customers can save money, make more money and retain customers longer when they use IP Office Contact Center  An Overview of the IP Office Contact Center ROI Tool – The 4 Step Process  Working with the Customer
  • 6. 6 Avaya – Confidential & Proprietary. Use pursuant to your signed agreement or Avaya Policy Telling the ROI Story for IP Office Contact Center
  • 7. 7 7 Avaya – Confidential & Proprietary. Use pursuant to your signed agreement or Avaya Policy The IP Office Contact Center ROI Tool  This Excel tool has been designed to help the Business Partner build a Return on Investment analysis for an IP Office Contact Center Proposal  This tool is the Intellectual Property of Avaya and is intended for use by Avaya Associates and Authorized Business Partners only for the positioning of Avaya solutions.  The results of the analysis do not constitute a guarantee of performance or financial results  The tool and additional IP Office Contact Center ROI collateral can be found on the Avaya Sales Portal at <INSERT LINK HERE>
  • 8. 8 8 Avaya – Confidential & Proprietary. Use pursuant to your signed agreement or Avaya Policy What customers understand about ROI  Customers may ask for an ROI, but may not understand any ROI results except payback period – Payback period is the amount of time it takes for the customer to recoup the costs up to that time. – Metrics like NPV, IRR, and average annualized ROI are generally not as well understood by customers
  • 9. 9 9 Avaya – Confidential & Proprietary. Use pursuant to your signed agreement or Avaya Policy How we build an ROI for IP Office Contact Center  We look at four possible ways in which IP Office Contact Center can help a customer save money, make money, and retain customers longer – Are there any current expenses that go away when IP Office CC is implemented? – What is the increase in agent productivity with IP Office Contact Center? – How much more revenue will the business expect with IP Office Contact Center? – How much increase in customer retention will the business expect with IP Office Contact Center?
  • 10. 10 10 Avaya – Confidential & Proprietary. Use pursuant to your signed agreement or Avaya Policy Fundamental Benefit Current Expenses That Go Away  Look for any services or systems that become obsolete once the customer adopts IP Office Contact Center, for example -- – A Centrex service that will be discontinued or a telephone or ACD system that will be replaced – A voice mail service that will be discontinued or the annual support costs of a voice mail system that will be replaced – A caller prompting service or annual support costs of an IVR or auto- attendant system – A contract with a local telecom support firm for customers who can now do their own administration without outside help and expense – Lots of analog lines being replaced by a more economical T-1 or E-1 connection
  • 11. 11 11 Avaya – Confidential & Proprietary. Use pursuant to your signed agreement or Avaya Policy Fundamental Benefit Increased Agent Productivity  When operations go from an informal, ad-hoc, unmeasured, unmanaged situation to a formal process with reporting efficiencies tend to go up 10% to 15%  Incremental capabilities over top of the basic ACD functionality can add greater efficiency, for example – Self-service impact can be substantial, but depends on what self-service applications have been designed, so use an appropriate percentage – Screen-pop ~ 2% to 4% is the typical range – Routing based on customer history, product set, etc, ~ 1% to 5% -- more if call transfers are eliminated with better choice of agent – Customer history immediately accessible to the agent ~ 1% to 4%, depending on how often it’s needed – Blending turns idle time into productive time, ~2% to 10% depending on how much idle time is available to repurpose
  • 12. 12 12 Avaya – Confidential & Proprietary. Use pursuant to your signed agreement or Avaya Policy Agent Efficiency Examples  A customer with 20 agents changes from ad-hoc operations to a formal ACD – With a 10% to 15% productivity gain, 20 agents can now do the work of 22 to 23 agents, sparing the customer the need to hire 2 or 3 more agents as the business grows, or letting the staff shrink by 2 or 3 over time – Self-service in the IVR could add additional productivity points  A customer that has 10 agents on an ACD for calls but has only a 2-agent, informal email operation based on Microsoft Outlook. Voice agents get lots of calls (~5% of volume) following up on emails that have not been answered. – Getting email into a managed operation could improve response turn-around and reduce voice calls about missing email replies. – Blending email into the Inbound agent position will let inbound agents take half of the email, eliminating 1 position. Efficiency = (10/12) x 5% + (2/12) x 50% = 12%  A customer with 50 agents intends to open a web chat channel for the first time, and expects revenue gains as a result. – Screen-pop and improved routing on the inbound side will give them ~6% efficiency gains, meaning 3 agents (50 x ~6%) are freed up for web chat. – If the customer thought they’d need to add 5 agents for web chat, you’ve saved them 3 agents and give them access to the increased revenue.
  • 13. 13 13 Avaya – Confidential & Proprietary. Use pursuant to your signed agreement or Avaya Policy Fundamental Benefit Increased Revenue  IP Office CC enables many refinements that can contribute in whole or in part to driving revenue up – for example, – Screen-pop to inform the agent about special offers, rates or up-sell/cross-sell recommendations applicable to the customer – Knowing what went on in the IVR – Choosing agents based on sales opportunities and/or customer history – Outbound campaigns to reach existing customers or prospects – Opening channels in which customers want to buy, especially web chat – Reducing caller abandon which enables the business to capture revenue that would otherwise be lost
  • 14. 14 14 Avaya – Confidential & Proprietary. Use pursuant to your signed agreement or Avaya Policy Increased Revenue Examples  A customer begins routing calls with greater sales potential to its better sales agents, increasing sales conversion rate and average order size – Calls accounting for 65% of revenue see conversion increase from 55% to 60% and average order size increase 20% means sales increase 65% x [(60%/55%) x (1+20%) -1] = 60% x (131% -100%) = 20% increase in total revenue  A customer with lots of abandoned calls as a result of its ad-hoc operation is losing sales – formalizing helps them reduce abandons and capture lost revenue – 6% abandons drops to 3% with 60% retry assumed improves revenue by (6% - 3%) x (1- 60%) = 1.2% increase in revenue  A company begins to offer web chat online. – Online sales are today only 10% of total revenue. Web chat is expected to increase sales conversion from 8% to 12% and to increase cart size by 25%. Web sales should rise 80%. Given some cross-elasticity of revenue channels, expect total sales to increase by perhaps 6%
  • 15. 15 15 Avaya – Confidential & Proprietary. Use pursuant to your signed agreement or Avaya Policy Fundamental Benefit Increased Customer Retention  Customer Retention refers to the percentage of customers a business is still doing business with a year later – For example, if on January 1, Year 1, there are 10,000 customers and by January 1, Year 2, 1500 of these customers have cancelled their contracts, the Customer Retention has been (10,000 – 1500)/10,000 = 85%.  When retention is poor, it’s harder for a business to grow, For example, here Company A retains 80% of customers and Company B retains 82%.  Company B’s 7% advantage is like having 3.5 more weeks to sell per year! 7% x 52 weeks = 3.5 “more weeks” to sell each year http://www.avaya.com/usa/campaign/magazine/2013/CEM/measuring-customer-lifetime-value.html
  • 16. 16 16 Avaya – Confidential & Proprietary. Use pursuant to your signed agreement or Avaya Policy More on Customer Retention and Customer Lifetime Value (CLV)  When you retain a customer longer, you have the benefit of continuing revenue but do not incur the cost of customer acquisition  For many businesses, repeat customers buy more, or buy higher margin products/services than new customers  Slight increases in Retention can produce large gains in Customer Lifetime Value. Your customer will see this value in terms of higher annual revenue. http://www.avaya.com/usa/campaign/magazine/2013/CEM/measuring-customer-lifetime-value.html
  • 17. 17 17 Avaya – Confidential & Proprietary. Use pursuant to your signed agreement or Avaya Policy Increased Customer Retention Examples  Low Customer Effort is more highly correlated with Customer Loyalty than either Net Promoter Score (NPS) or Customer Satisfaction  Anything that reduces Customer Effort helps to increase customer loyalty and retention – Eliminate the need for the customer to repeat information – Eliminate transfers – Don’t make the customer switch from one channel to another because you can’t handle the channel of their choosing – Get the customer’s needs met on the first contact, eliminating the need for the customer to make 2nd or 3rd requests – Anticipate what else the customer needs based on their situations – don’t leave it to the customer to discover related needs later on – Examine new customer retention and focus on on-boarding new customers using helpful proactive communications http://hbr.org/2010/07/stop-trying-to-delight-your-customers/ar/1
  • 18. 18 Avaya – Confidential & Proprietary. Use pursuant to your signed agreement or Avaya Policy Working with the Customer
  • 19. 19 19 Avaya – Confidential & Proprietary. Use pursuant to your signed agreement or Avaya Policy The IP Office CC ROI Tool in a Nutshell  Step 1 – Collect information about the customer’s revenue, personnel, and customer churn  Step 2 – Enter the total cost of the solution, both initial and recurring, for IP Office CC as well as any other expenses the customer will incur – The tool covers both purchase situations and lease/finance situations  Step 3 – View the impact IP Office CC will need to have on revenue, agent productivity and customer retention to yield a 12 month payback (this step combines the data from Step 1 and 2), and enter the impact to use in the ROI – This is a “Reverse Engineering” approach designed to help you identify highly justifiable sales opportunities  Step 4 – Look at the Return on Investment Results – Set up for 3 or 5 years
  • 20. Avaya – Confidential & Proprietary. Use pursuant to your signed agreement or Avaya Policy 20 The “Reverse Engineering” Approach Year 1 costs of solution X% increase in sales  We assume a 12 month payback is desirable and ask 3 questions 1. What % increase in sales would produce additional Gross Margin dollars = Year 1 costs of the solution? 2. What % of annual loaded agent payroll is = Year 1 costs of the solution? 3. What % improvement in Customer Retention would eliminate lost revenue (gross margin) = Year 1 costs of the solution  The answers are only targets to inform you as to how easy (or difficult) it would be to justify the IP Office CC project using just that one area of benefits  Of course, you may be in a situation where all 3 areas of benefits are applicable  This approach allows you to circumvent a more involved data gathering process Just a 1.5% increase in revenue would justify your costs in only 12 months. With all the ways we can impact revenue, that should be easy to reach.
  • 21. Avaya – Confidential & Proprietary. Use pursuant to your signed agreement or Avaya Policy 21 ROI Results shown in the ROI Tool
  • 22. Avaya – Confidential & Proprietary. Use pursuant to your signed agreement or Avaya Policy 22 Payback Period Graph from the ROI Tool
  • 23. Avaya – Confidential & Proprietary. Use pursuant to your signed agreement or Avaya Policy 23 Some Tips for Working with the Customer Concern Suggestion The customer does not use the same terms as you use and does not always understand what you are asking Learn to ask the same question in different ways or to give examples of how a question might be answered under different circumstances Customers who understand the question might still give the wrong answer, for example providing a monthly instead of an annual figure. Approach the ROI process as an iterative process. Show how you used the numbers in your process of checking your understanding of their numbers Customers might hesitate in sharing numbers with you, maybe even saying “I can’t give you that.” Assume (but check!) that this as a lack of certainty in answers rather than a claim that information is proprietary. Many customers hesitate to share numbers in fear that they are “wrong.” Learn to ask for a range as a way to get them sharing. Be prepared for customers who want a “baseline” case and an “upside” case where the “upside” case contains more revenue or customer retention improvements than the “baseline” Accommodate customers who need to show two views of the same investment Customers worry that all benefits will not start on Day 1 Remember to delay benefits, even if by just a couple months, in Step 4 as you set up the ROI Customers worry that all the numbers aren’t “right” Remember to set the Confidence Factor to something like 90% or 80% in Step 4
  • 24. Avaya – Confidential & Proprietary. Use pursuant to your signed agreement or Avaya Policy 24 Do you have a call center? Question Suggestions for asking again, when the customer answers “No, we don’t have a call center” Do you have a contact center (or a call center)? Do you have people who take orders over the phone, or people who answer questions about bills or shipments? When someone needs help with what you sold them, what options do they have for getting help? Who answers the numbers you publish on your web site or in your ads? Who are customers chatting with when they launch a web chat from your web site? If someone is overdue in paying their bill, do you have people who work collections? Who answers the email you get from customers?
  • 25. Avaya – Confidential & Proprietary. Use pursuant to your signed agreement or Avaya Policy 25 Customer Reactions to the ROI Results Concern Suggestion The payback is just too fast – the results seem over the top and too aggressive Don’t overload your case with too many benefits. Adjust the expectations down (Step 3) to give a payback that will please your customer and the decision maker and leaves room for over delivering. Do all these benefits start on Day 1? Won’t it take time to get some new training done and make these improvements happen? Make sure you use the option to delay the start of benefits – don’t use “Month 1” for a customer who has expressed concern about ramping everything up on Day 1. (Step 4) What if all these numbers aren’t right? Share with the customer that it’s possible some of the numbers are, in fact wrong, but point out that you’ve worked to use reasonable and conservative numbers. Then, point out the Confidence factor you are using (Step 4) – for example, if you are using 80%, you’ve thrown out 20% of the estimated benefits before calculating the ROI My decision maker doesn’t want to see any “soft dollars” in our case. Inquire whether “soft” refers to revenue or to some other characteristic of the benefits in the case. Some customers do want to see a “hard dollars only” case, which generally means no revenue improvement and no customer retention improvement. Run one case without revenue and retention improvements, then run another case with just very small revenue and retention improvements for comparison
  • 26. Avaya – Confidential & Proprietary. Use pursuant to your signed agreement or Avaya Policy 26 More Customer Reactions to the ROI Results Concern Suggestion We don’t use this kind of analysis here – we’re not used to this financial terminology Emphasize the Payback Period for this customer, as most customers understand that concept the most. I like the analysis but I don’t think we have the cash for this right now. Help them look at the lease/financing option – a lease or finance gets them into the solution and the benefits will help them pay for it. This analysis is very helpful, but our board won’t meet for another 6 months to consider capital purchases. Look at the opportunity cost (Step 4) for a 6 month delay. Use this figure to get the customer eager to promote the solution internally and perhaps to get early consideration for the project. It looks like you expect us to lay off our workers. We don’t want to do that. If your customer’s business is growing, compare the improvement to agent productivity to the target rate for growth of the business. If productivity increases 5%, but the business wants to grow 10%, the value is in avoiding so many new hires in the CC. If the business is not growing, ask about the natural agent attrition. In many businesses, attrition is greater than 20%. If your customer’s expected improvement is 10%, within 6 months the number of staff would have “right sized” on its own – set the beginning of benefits to >= half the months it would take to shrink naturally.