McKinsey on Banking An in-depth look at the challenges facing senior managers Published by The McKinsey Quarterly May 2006 Chris Corr Many companies can turn their inbound call centers into powerful engines for growth. Article at a glance For some telecom and credit card companies, call centers account for more than half of all new revenues. But a fear of putting service customers off with sales pitches and an ignorance of how much value is at stake have made many retail banks slow to implement a service-to-sales program. We estimate that successful efforts to cross-sell during inbound service calls could boost a retail bank s sales of new products by 10 percent, based on a study of North American banks. To realize this goal, companies must first provide consistent, high-quality customer service. Then executives must ensure that all employees have the proper mind-set, motivation, and skills.
2 Andy Eichfeld, Timothy D. Morse, and Katherine W. Scott A decade ago, most companies hadn t even considered the revenue potential of inbound customer service call centers. But today, call centers generate up to 25 percent of total new revenues for some credit card companies and up to 60 percent for some telecos. The top priority of agents in these call centers is resolving service issues. But they are also encouraged to initiate conversations to uncover the needs of customers, and this component of the job can lead to sales of new products or upgrades of current ones. Partly for fear that a sales pitch will put off customers seeking service, other sectors, such as retail banking, have been slow to turn service calls into sales calls. Yet our research indicates that when agents meet the service needs of customers and then ask them about their broad needs in a sincere way, customers are receptive to buying new products. We also find that companies have failed to tap the full revenue potential of their call centers because they just don t understand the extent of the opportunity. In retail banking, for example, we estimate that every five inbound service agents could generate as much new retail business as one mature branch. Since call centers handle more than 30 percent of all customer interactions for top banks in North America, efforts to cross-sell during inbound service calls could increase annual sales of new products by an amount equivalent to 10 percent of the retail sales generated by a bank s entire branch network. To transform call centers, banks and other companies in the early stages of efforts to turn service calls into sales must first provide consistent, high-quality customer service. Then executives must ensure that all employees, from the top leadership to frontline agents, have the proper mind-set, motivation, and skills. Untapped call center potential for banks Banks have been slow to embrace a service-to-sales program, mostly because their products (such as home equity loans) are inherently more complicated than, say, telecommunications products (callwaiting, for example). During the first half of 2005, we studied the service-to-sales performance of six large retail banks in North America among other things, by monitoring 250 bank call center agents and evaluating more than 600 service calls. We found a large gap between these companies and those in more mature service-to-sales industries in the motivation of agents and their skills for crossselling. In telecommunications, for instance, agents try to explore the needs of customers in half of all service calls. The service agents of many banks do so less frequently (Exhibit 1). On average, bank agents cross-sell less than one core product for every 100 inbound calls they handle. But each call center we studied had a group of top-performing agents who sold more than three core products for every 100 calls, as well as a large number of agents with no sales at all. Our findings suggest that banks have a real opportunity to improve the average performance of their agents. Indeed, we know of two North American banks (not covered in our study) that have turned their inbound customer service call centers into powerful engines for growth. Typically, these banks sell up to four core products 1 for every 100 calls their service agents handle and as many as five additional relationship-building products (for example, direct deposit and online banking and bill-payment services). At this rate, we estimate, every five inbound service agents can generate new-product sales equivalent to the sales of one mature bank branch (Exhibit 2). Making sales through call center agents does considerably bump up the demands on day-today management and operations processes. Nevertheless, launching a comprehensive serviceto-sales program typically requires lower up-front 1 Core products include deposit products (such as checking and savings accounts, debit cards, certificates of deposit, and money market deposit accounts) and credit products (such as credit cards, mortgage loans, home equity loans and lines of credit, and overdraft protection) as well as other investments.
PA or Web only Using call centers Call centersto boost revenue Exhibit 1 of 3 Glance: Conversion rates rise with sales attempts. 3 e x h i b i t 1 Fewer attempts, fewer sales % of calls during which sales attempts were made 1 Conversion rate (booked sales per 100 agent calls), % Bank 1 29 2.1 4.7 6.8 Bank 2 28 1.9 2.4 4.3 Bank 3 23 0.4 3.3 3.7 Bank 4 13 0.6 0.1 0.7 Bank 5 9 0.5 0.7 0.2 Bank 6 3 0.4 0.7 0.3 Core products 2 Relationship-building products 3 1 For eligible calls only (ie, all inbound calls handled by agents, except 3rd-party or misdirected calls). 2 Include deposit products (eg, checking and savings accounts, debit cards, certificates of deposit (CDs), money market deposit accounts), credit products (eg, credit cards, mortgages, home equity loans and lines of credit, overdraft protection), and other investments. 3 Those likely to promote customer loyalty (eg, online banking and bill payment, account upgrades, card upgrades, combined statements, balance transfers, direct deposits). investments and expenses than opening a handful of new branches. In any case, the extra costs incurred through higher average call handle times, additional training and coaching for agents, and lower supervisor-to-agent ratios add up to less than 10 percent of the new sales value. We found that it is not so much a lack of investment that slows the progress of most banks and other companies trying to turn call centers into profit centers but rather deeply rooted mind-sets that prevent agents from achieving their sales potential. Arguments over who gets the credit for new sales, managers and agents who think that cross-selling will annoy service customers, and the perceived stigma of telephone sales combine to create a formidable change-management challenge. Improving service-to-sales performance Within two years of starting to implement a service-to-sales strategy, most bank call centers that already deliver high-quality service can boost their sales levels to at least three core products for every 100 calls. To succeed, bank executives must first determine whether they need to shore up the basic service functions. Once they are confident that the service needs of their customers are being met, they must convince all bank employees from the top leadership to frontline agents that crossselling is desirable and then provide agents with effective training, incentives, and call-routing tools to pick up the pace and boost sales. Shore up the customer service foundation Call center agents must earn the right to sell by demonstrating that they have fulfilled their primary function: meeting the customer s immediate needs. If agents don t adequately resolve questions or problems, it is clearly inappropriate to explore other needs in hopes of making a sale. Likewise, if agents don t show empathy while resolving service inquiries, it s unlikely that customers will want to talk about their needs, let alone show interest in new products or services. Competence, confidence, and a genuine concern for the customer are obviously prerequisites to cross-selling. Yet we found several banks trying
PA or Web only Using call Call centers to boost revenue Exhibit 2 of 3 Glance: Call-center agents can achieve sales equivalent to those of a number of bank branches. e x h i b i t 2 A big boost to sales capacity At a core product 1 conversion rate of...... the following number of inbound call center agents are necessary to achieve sales equivalent of 1 mature bank branch. A bank with 1,000 branches and a ratio of inbound agents to branches of...... can generate sales equivalent to the following number of mature bank branches. 2... 1% 19... 2% 10... 3% 7... 4% 5... 5% 4... 35% 50 38 88... 50% 71 54 125... 65% 93 70 163 Conversion rate = 3% Conversion rate = 5% 1 Include deposit products (eg, checking and savings accounts, debit cards, certificates of deposit (CDs), money market deposit accounts), credit products (eg, credit cards, mortgages and home equity loans, lines of credit, overdraft protection), and other investments. 2 Assumes mix of customers who use remote channels varies by region. to implement service-to-sales strategies without first establishing a strong service foundation. Call centers that lack one and nonetheless try to crosssell will not only fail but also risk further damaging existing customer relationships. Bank executives shouldn t underestimate the difficulty of turning around poorly performing service centers. Changes to several core processes (such as scheduling, recruiting, coaching, and measurement) are usually required, and it often takes more than a year for behavioral and process initiatives to take root and for customer satisfaction to rise. 2 Align service-to-sales goals across the organization Senior managers throughout an organization may firmly believe that selling is an important part of call center service. But when this conviction breaks down within or beyond the walls of the call center, it is often for fear that overly aggressive selling alienates customers and erodes the value of cross-selling. That is a genuine risk, but it can be mitigated. The best way to address it is to measure and monitor the customer experience by using postcall customer surveys that track the performance of individual agents. Resistance to service-to-sales conversions among executives who work outside call centers is largely political. Many of these executives firmly believe that a branch owns each customer and that call centers are trying to grab sales (and related commissions) that rightly belong to the branch. To minimize such channel conflict, one North American retail bank with strong service-to-sales performance designed a commission system that shares the benefits of any sale made through a call center between its agents and bankers in branches. Under this system, call center agents can book appointments with those bankers for customers, who receive a seamless service experience as a result. Within the call centers themselves, managers and team leaders must believe that eliciting the needs of customers and recommending products are aspects of providing great service. One technique for changing the behavior of call center agents 2 For more on this topic, see Marc Beaujean, Jonathan Davidson, and Stacey Madge, The moment of truth in customer service, The McKinsey Quarterly, 2006 Number 1, pp. 62 73 (www.mckinseyquarterly.com/links/21554).
5 is to study the way they feel about selling and then to address their concerns directly. If, for example, the study finds that agents (and possibly their managers) worry that attempts to cross-sell will annoy customers, one response would be for management to gather testimonials from customers who are pleased with products or services they purchased through the call center. Customer feedback about which specific circumstances of sales attempts may have annoyed them can also be a useful tool. Sometimes managers and team leaders just don t believe that agents can learn to be great salespeople. Seemingly innocent comments such as we try to avoid the word sales because it intimidates the agents or agents can be successful here without selling indicate resistance and a lack of alignment. Worse still, it is common for supervisors and support function managers to pay lip service to the importance of the service-to-sales conversion while contradicting their words with their actions. At This is unfortunate, since our research suggests that the amount of coaching that agents receive is a critical element in driving service-to-sales performance (Exhibit 3). One of the best ways for call center managers to set ambitious but attainable sales goals is to hold a pace-setting event, which involves working with a few teams of agents to introduce updated training, job aids, coaching, metrics, and incentives simultaneously. Success depends on the immediate measurement of results. Other needs include a constant feedback loop from the teams to the leadership about what could help them make sales and an effort to monitor both the customer experience and the agents morale. A successful pace-setting event gives agents and managers an objective and realistic assessment of the call center s sales potential and helps to build service-to-sales support throughout an organization. An awareness of the relevant data can help to change the focus of most bank most banks in our study, the agents supervisors executives, the majority of whom just want to beat spend less than PA a or third Web of only their time coaching the previous year s sales performance when they agents, and fewer Call centers than a quarter of those sessions should actually be working toward an order-ofmagnitude increase in conversion rates. deal with ways Exhibit to improve 3 of 3 cross-selling skills. Glance: Coaching agents in cross-selling skills pays off. e x h i b i t 3 Coaching pays off 8 Conversion rate for all products, % 7 r 2 = 0.87 6 5 4 3 2 1 0 0 10 20 30 40 50 % of team leader s time spent on coaching Example banks r 2 is the proportion or percentage of variance explained by a regression.
6 Build the agents will and skill One of the thorniest challenges in motivating agents to cross-sell is developing their skills. Over a third of the agents we studied said that they generally don t feel comfortable with sales. An anonymous survey of more than 300 agents found, not surprisingly, that conversion rates tend to be higher at banks where more agents believe that selling is an important way to serve customers. The key element in changing the will and skill of the agents is clear: training and coaching agents in the art of cross-selling. The right performance metrics and incentives, as well as a fun working environment, also help to boost sales. But most bank leaders, excessively focused on processes, tend merely to check off boxes that in their view address each cross-selling requirement. The priority should be to change people, not just processes. Fortunately, many service agents can learn how to uncover customer needs and make referrals to sales specialists. As in other industries, high turnover makes some bank call centers resist bigger investments in training and coaching. But in our experience such investments demonstrate a bank s commitment to giving agents a career path, which helps to motivate them. More important, giving them the skills to succeed, particularly in cross-selling, makes their jobs less stressful and improves their performance. Both benefits combat attrition effectively. 3 Adults learn most effectively by experimenting with new knowledge, integrating it into what they already know, and learning from peers rather than superiors. 4 Yet if call center agents at most banks receive any formal training to cross-sell, it consists of no more than a single classroom program. At one bank, trainers used a call flow mnemonic to help service agents remember how to make the transition to the sales pitch but when asked what this mnemonic stood for, none of the coaches remembered. Only one agent, who had attended a training session a few weeks earlier, could recall the mnemonic s content, but her supervisors failed to reinforce the training, and she had no opportunity to practice what she had learned. By contrast, a successful bank trained its agents to cross-sell in a program that unfolded in stages over several weeks. Its agents could explain the sales methodology they had learned and remembered specific tips and phrases. Further, the bank s management sent all call center supervisors through the same program so that they could coach agents and reinforce messages effectively. Our survey of agents confirmed that in bank call centers, monetary incentives can act as a strong motivation to cross-sell, especially for topperforming agents. But while a good incentive plan is necessary, it is not a panacea. In the six banks we studied, we found no correlation between cross-selling performance and the way such plans were structured, including the size or frequency of payouts and the number of agents receiving them. Segment by value Once a bank delivers consistently high-quality service to its customers, aligns its service-to-sales goals across the organization, and builds the crossselling skills of its agents, segmented call-routing tools can further boost sales. Managers may, for example, direct a string of similar customers or of customers with similar problems to a single agent. This approach allows agents to develop a sort of rhythm, which helps them to resolve problems more quickly and to make the transition to sales more smoothly. One North American telecom provider, for instance, adjusted its incoming call queues to route high-value, high-potential, and atrisk customers to specially trained agents. By doing so, it improved its retention of at-risk customers and increased satisfaction rates among high-value customers. 3 For more tips on how to control attrition, see Keith A. Gilson and Deepak K. Khandelwal, Getting more from call centers, The McKinsey Quarterly, Web exclusive, April 2005 (www.mckinseyquarterly.com/links/21555). 4 For more on learning and reinforcement systems, see Emily Lawson and Colin Price, The psychology of change management, The McKinsey Quarterly, 2003 special edition: The value in organization, pp. 30 41 (www.mckinseyquarterly.com/links/21774).
7 Banks might also boost their sales by harvesting pulling a few selected customers from an interactive-voice-response (IVR) system. Up to 85 percent of all bank customers who call for service never reach agents. At times when their utilization is low, merely initiating more conversations with customers creates more opportunities for sales. Once customers identify themselves, harvesting software locates the highpotential ones, pulls them out of the system, and routes them to agents with skills that match their needs. One bank, for instance, harvests customers who don t use branches but are likely candidates for home loans, which are worth up to ten times more to the bank than its other core products. It now makes nearly three home loan sales for every 100 customers harvested. To achieve this degree of success, top-performing agents who are better at capitalizing on highpotential sales as well as more self-confident should handle the harvested callers, since being pulled out of an automated system can disconcert customers. It is critical that banks not only address the entire menu of service-to-sales imperatives but also address them in the right order. Customers will not be receptive to cross-selling without first-rate call center service. Once agents deliver it consistently, they must embrace selling with enthusiasm, and that simply won t happen until team leaders and support managers demonstrate an unwavering commitment to service and sales. Above all, executives must realize that it is hard to encourage new mind-sets and behavior for all managers, agents, and support functions. But when every stakeholder is convinced of the potential gains increased sales and long-term growth banks can realize the full revenue potential of their inbound call centers. Q Andy Eichfeld is a principal in McKinsey s Washington, DC, office; Tim Morse is a principal in the New Jersey office; Katherine Scott is a consultant in the New York office. Copyright 2006 McKinsey & Company. All rights reserved. In our view, banks should resist the temptation to invest excessively in automated prompts that tell agents what products to offer. If anything this approach encourages mechanical sales pitches that rely too much on call scripts and makes it harder for agents to pick up cues from customers. In both the credit card and the telecom industries, we have observed that agents who listen to customers and ask real questions to ascertain their needs are much more likely to uncover sales opportunities than agents who follow automated prompts like robots.