The Rise of Outcome-Based Pricing for Contact Center Outsourcers (BPOs)
Customers want answers, and, increasingly, they are asking more complicated questions using a variety of devices. Over the past 10 years, the demand for multichannel support (via email, chat, social, phone and text) has surged as customers have incorporated the latest technological options into their daily lives. Basic customer care now often requires more qualified agents who can solve complex problems, along with robust contact center software that can support multiple communication channels. In response, contact center outsourcers have been increasingly turning to remote and at-home agents. Contact center outsourcers are striving to differentiate themselves based on their ability to hire and retain the most highly skilled workforce in the customer care field. Managing this workforce has traditionally been a challenge, but outcome-based reporting has shown a great deal of promise in removing much of the uncertainty.
Defining Outcome-Based Pricing
Outcome-based pricing puts the emphasis on achieving specified outcomes rather than FTE replacement. Outsourcers earn their fees by aligning their goals with the client's business objectives, such as new accounts, increased profits or reduced operating costs. According to Katrina Menzigian, the Everest Group's vice president of research relations, "This whole concept of outcome-based pricing has been growing in the BPO space for about five years and in contact centers we've noticed a bigger pickup in the last two to three years." In our own research, we've found that more than two-thirds of our contact center outsourcer customers are already committed to outcome-based options. Just over one-fourth (28 percent) have already put procedures in place to take advantage of outcome-based pricing, and another 39 percent intend to implement them within the next 18 months.
Proponents of this pricing and reporting model point out that it is uniquely able to align the interests of the client and the provider for a closer partnership while favoring continuous improvement. On the other hand, it can often be difficult to precisely quantify the outsourcer's contribution to critical metrics. Instead of low handle time and high service levels, outsourcers are searching for more complex measures like net promoter scores and user experience improvements. While these factors definitely affect profitability, they do so obliquely, through brand loyalty and referrals. In order to achieve those goals, outsourcers have to make sure that they have adequately trained employees and current technology in place to handle the volume and variety of channels that customers expect from their preferred brands. Phaneesh Murthy, CEO of iGATE, chose to move to outcome-based pricing to generate measurable improvements in his loan originations. In his experience, other executives who chose to implement this operational model did so primarily to help them build their brand reputation in the market and establish closer compliance by remote agents. He concluded, "These companies want a better customer experience. This is a big swing from an emphasis on efficiency."
The Ideal Model
In the end, the ideal pricing and reporting model would be one that minimizes risks for clients and outsourcers while unifying their goals. It would be flexible and fair, but it would recognize the realities of what drives outsourcers. From the outsourcers standpoint, it encourages innovation to reach greater profitability. Customers win by finding the answers they need on the channel they use most. Considering all these factors, it's clear why the implementations of outcome-based pricing are reshaping the relationship between outsourcers and their clients.