Myth busters: Unexpected insights on contact centers

| Podcast

What do customers really want from their contact centers? Myths about the importance of elements such as speed of answer and channel preference are shaping contact center and service strategy but leading to dissatisfied consumers and employees. In this episode of McKinsey Talks Operations, host Daphne Luchtenberg joins McKinsey partner Julian Raabe and senior knowledge expert Vinay Gupta to dispel some of these customer service myths and suggest how data and analytics can be used to help shape future strategy. Their conversation has been edited for clarity.

Daphne Luchtenberg: Your company’s future success demands agile, flexible, and resilient operations. I’m Daphne Luchtenberg, and you’re listening to McKinsey Talks Operations, a podcast where the world’s C-suite leaders and McKinsey experts cut through the noise and uncover how to create a new operational reality.

Customer service continues to be a critical topic for businesses across sectors, where the prospect of delivering exceptional customer service is becoming table stakes. In previous episodes, we took a deep dive into the role of voice data analytics and looked at how contact centers are applying artificial intelligence to voice recognition to gain real competitive advantage.1The hidden value of voice conversations: Part 1, Trends and technologies” and “The hidden value of voice conversations: Part 2, Reaping the rewards,” McKinsey, September 14, 2022. Today, we’re going to take a more strategic view and look at some of the myths that are prevalent today in customer care operations. We’re joined by Julian Raabe, a partner in our Munich office, and Vinay Gupta, a senior knowledge expert from Waltham, both with a deep knowledge of customer care and experience. They have both been looking at these prevalent myths through some recent research.

Welcome, great to have you here. Let’s kick off the conversation. So, Vinay, it’s no myth that customers expect simple, reliable customer service. But your view is that companies are shaping their offerings to get the right levels of service based on myths about what they think customers need. Tell me a bit about these myths and why they are prevalent. What’s the value at stake?

Vinay Gupta: Misconceptions or myths exist when customer care leaders try to imitate others without analyzing their own customer care data; they make a lot of assumptions based on what others are doing. I’ll give a couple of examples. One is when customer care would set a service level of 80/30, which means 80 percent of calls need to be answered in 30 seconds. But very few customer care leaders would analyze their own data and try to understand is 80/30 the right service level, or are they just using the benchmarks to define that service level? And these assumptions have a lot of implications on costs for the contact center, employee satisfaction, and revenue.

Daphne Luchtenberg: Julian, let’s tackle the first myth. This one I loved, being a consumer myself. The prevalent view is that customers want as many channels as possible to be able to reach out to companies—to share complaints, etcetera. Is that really true, though?

Julian Raabe: It might be true that customers want to have as many channels as possible to contact organizations. And our research also shows that it’s true that there needs to be a certain degree of diversification. But it’s not true that the more channels you offer the better it is for the overall experience or that, overall, there seems to be less contact. We see the opposite.

Organizations struggle to combine all of these different channels and integrate them into a consistent customer experience. And that’s one of the core key success factors that we see—if you can offer different channels that you integrate into the overall experience. What does it mean? It means, for example, that you have to build some kind of platform that is below all of these channels, that is integrating different requests, and that also allows an organization to follow a customer through the different interactions so that it becomes a consistent customer journey—not a set of different interactions that are somehow linked. I always say, we move from a multichannel into a real omnichannel experience.

When you integrate new channels, it is very important that you design these channels with an agile approach.

Julian Raabe

When you integrate new channels, it is very important that you design these channels with an agile approach. So you think through the experience that you want to have and the experience you want to design. And then you think through the kind of channels that are important and what the right channel is for a certain type of interaction.

Daphne Luchtenberg: Got it. So rather than thinking about creating more channels to engage with your customers, it’s better to think about how you can connect the channels that you have to make sure you’ve got a common platform and can really think through this customer experience.

Julian Raabe: Exactly. It is about the right number of channels. Most organizations naturally have three to five channels from the start. For example, people write in, they write email, sometimes even physical letters, they call, use IVR [interactive voice response], chatbots. When organizations want to introduce new channels, I always try to challenge them by asking, “Why don’t you consider stopping some of these channels and going with a set of channels that is in front of the customer and that really provides the best experience?”

Daphne Luchtenberg: Got it, really helpful. And that’s a nice pivot. Vinay, let’s talk a little bit about interactive voice response. The prevalent idea is that this is on its way out. But I think that’s also one of our myths, right?

Vinay Gupta: Yes, definitely. A lot of executives believe that IVR is going to be a dead channel, just because they believe the contact center itself is going to be a dead channel. But our research has shown that over the past decade or so, the relevance of contact centers has been increasing. And that’s where the importance of IVR has gone up. It’s also true that many customers don’t like to interact with IVR, because they have to navigate through multiple menu items. Sometimes it’s frustrating to understand what IVR is saying. Sometimes IVR does not recognize what a customer is saying. But all of this is changing.

What we are seeing in the banking industry, telcos, and utilities, for example, is that more than 50 percent of callers are engaging with IVR meaningfully. And there are multiple advantages of using IVR from an organization’s point of view and from a customer’s point of view. Advantage number one could be if a customer needs to resolve basic inquiries—for example, where is my package or what is my balance—IVR could serve as a channel to answer those simple questions.

The second advantage is IVR can help route customers to the right agent without getting transferred too many times from one agent to another. And then the third, as Julian was describing, is that IVR can play a critical role in helping agents to really understand the context behind a conversation. And then, before handing that conversation to another agent, it can provide all the necessary context. I think that IVR will have a lot of great predictive capabilities and NLU [natural-language understanding] capabilities down the line, making the customer experience even better.

Daphne Luchtenberg: Yes, and I love this concept of helping to triage the cases, right? I imagine this is an area where natural-language understanding, a concept we introduced our listeners to in one of our episodes on voice data analytics, is going to start adding value in this realm, too.

Vinay Gupta: There’s a lot of improvement that has happened in the NLU-capability space. IVR can understand customer intent without the customer having to navigate a complex menu of options. And a lot of companies have already implemented NLU-based IVR, where a customer can say anything—they don’t have to navigate the options.

But as we were discussing earlier, omnichannel integration is becoming table stakes. Being able to pass on to an agent all of the context and information you might have collected through a conversation—that’s where I think an omnichannel view and advanced analytics, predicting why a customer might be calling, would become equally critical.

Daphne Luchtenberg: Fascinating. OK, let’s look at another myth. Julian, surely getting the phone picked up quickly is critical. Isn’t it an important aspect for satisfaction?

Julian Raabe: Who would not love to have their call picked up as quickly as possible when you call a line? However, when we looked at the research across 100 companies, we found that, actually, it is by far not the most important aspect of great customer experience. The biggest driver of great customer experience that we saw is the ability to solve customer issues in the first contact—what we call first-call, or first-contact, resolution.

After that, and drawing on results from a number of questions about time to answer, when we looked into it further, if you wait, for example, longer than two or three minutes, we see for many organizations a certain drop, where customer satisfaction suddenly becomes lower. So we see a cliff or threshold, and understanding that is utterly important to managing cost and experience.

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Daphne Luchtenberg: Got it. Vinay?

Vinay Gupta: To build on what Julian says, organizations need to take a hard look at their existing data and try to understand where that break point is. As we understand, all these interactions are very different—for example, some of these interactions require you to respond as soon as possible. So it’s important to look at your customers’ interaction data in the past and really try to understand which call types were highly correlated with a quicker average speed of answer or higher satisfaction, and which call types were mostly just about having the call resolved rather than waiting on the call. There has to be a balance with these two. And there’s a downward implication if organizations are not able to get the right average speed of answer.

If you’re trying to get to a very low average speed of answer, then what might happen is, as an organization, you might need to staff a lot of people, and hence costs will go up. Conversely, if you have a very high average speed of answer, then what it means is you might have a customer waiting for multiple minutes, which is always a bad experience for the customer. There is no single average speed of answer. Every call type is different. And for each call type, you might have different targets for average speed of answer.

Daphne Luchtenberg: Thanks, Vinay.

Julian Raabe: Let me add one aspect that I always find very interesting. When we look at organizations and their average speed to answer and average handling time—that is, the total time that an agent spends on the phone with a customer—we see across many data points a positive correlation with high customer satisfaction. I have had a lot of discussions with different leaders of care organizations about what the root cause of this is. The first hypothesis is always that the people were waiting a long time on the line, so they were going to complain in the beginning—this not only takes time but also produces costs.

But the more important factor that we’ve learned is that when customers finally get through to an agent, they want to be sure that, by the end of the call, their case is really solved. Because the thing that they really, really want to avoid is waiting another 20 minutes on another call. This leads to a situation where people do not believe that, for example, an agent is resolving a customer issue offline after a call; customers prefer to stay on the phone with an agent until they really are sure the process is complete and the problem is solved. And this is a very difficult thing, because it leads to an effect that when you are already under capacity constraints or you’re not good at planning consistently, you have long wait times, which creates a backlog of even more work. So it’s an inflating effect that is very hard to manage.

Daphne Luchtenberg: Yes, thanks for that, Julian. Really interesting trying to get that balance, right? Let’s move on to another myth: outsourcing contact centers. It was always thought that when you outsource, you get a lower level of quality. Is that still the case? What’s the latest thinking on that?

Vinay Gupta: Yes, there’s a common misconception that if you outsource your contact center, customer experience scores are going to drop and the quality of the outcome is not going to be great. But based on our research, we have found that there are many companies who have partnered with BPOs [business-process-outsourcing centers], and their customer satisfaction scores are at least equal to their in-house contact centers, or sometimes even better. Another interesting thing we have found is different companies might be working with a similar set of outsourcers, and they have completely different experiences, even working with the same set of suppliers.

Daphne Luchtenberg: Thanks, Vinay. Julian, what have we learned about how to get that right?

Julian Raabe: Having worked a lot on the other side, I can say from experience that it’s mainly three things that you need to get right. One is the right partnership model, and the right commercial model behind it, so that you ensure that your incentives are the same as for the BPO provider.

Second is the right governance structure. We often see that organizations have visited their partners just three to four times a year. Instead, they should visit more frequently so they really know what’s happening. They need to listen to calls and sit next to people and get a real sense of how things are working. That is the only way that you can work with an outsourced organization and ensure good quality.

And then probably the last one, especially over time, is if a company is too reliant on one BPO. If you have only one BPO covering most of your topics, then over time you can lose the sense of what good means. Over time, processes change, practices change, products change. It all leads to a situation where, for example, handling times or resolution quotas change. So what good means becomes more and more unclear. That’s typically when we recommend a certain competition between BPOs, ideally on similar topics, so that you can understand what good means. And then, for example, you can shift volumes between these players—quarterly, monthly—or you have an internal team running against an external team to see what is happening and who is performing better.

There’s a common misconception that if you outsource your contact center, customer experience scores are going to drop.

Vinay Gupta

Daphne Luchtenberg: Yes. And it also will drive innovation, right, Julian? So you’re always trying to implement the best approaches. Another myth is the correlation between average handle time and first-contact resolution? Does it really take more time on a first contact to deliver a higher resolution rate?

Julian Raabe: That’s my favorite one. Because this is what I hear more or less every time I enter an organization and an operation. I am told, “Oh, no worries, we can solve it, but we need 15 percent, 20 percent, 30 percent longer time.” And I sit there and say, “I don’t believe so.” And then we do the math, we look at people who have high first-contact resolution rates and we look at the same agents and see what their handle time is. And I can tell you, there’s no correlation between higher resolution and higher handle time. Actually, what we see is that it is much more important to really understand what matters to the customer. And this way, you can do it in a short or a proper period of time.

And the second one is, we know that people don’t really want to spend too much time on the phone. If you have a customer on the phone for 30 minutes, I can tell you, the customer won’t appreciate it—even if they get to a good result. If it’s a ten-minute call with the same result, they would always have a better appreciation and a better experience. That’s why we train people on how they can find the proper and the best solution, how they can help the customer, and how they can do it in a way that is empathic.

Vinay Gupta: And just to add on to Julian’s point, if I put myself in the customer’s shoes, I would not want to be on a call for ten, 20, or 30 minutes. That is the last thing I would want. So from a customer’s point of view, they are trying to get off the call as soon as possible because they have other things to do. That’s where this phenomena exists of how can you handle the call in the shortest amount of time while still being very effective? A lot of organizations are already doing this more effectively than they realize. And that’s also a common myth, we found, in the operation—that solving customer problems needs to take a long time.

Daphne Luchtenberg: Yes, Vinay. So, actually, quite a few things that need to be right in terms of getting the balance right to meet customer needs. So far, we’ve talked about outsourcing, we’ve talked about the speed of answer, we’ve talked about channel choice. What about agent tenure, different call types, service level agreements, and defining KPIs? Why is it important for organizations to think critically about these factors? Vinay, you are first.

Vinay Gupta: Yes, another common practice we are seeing, that a lot of operations and a lot of contact center organizations are following, is having a similar set of standards for all kinds of agents. That leads to a lot of dissatisfaction among agents and employees within the contact center. There are multiple things happening. One is the new hire who has just joined and is learning about the contact centers and call types—it’s not fair to compare this person with the rest of the group, who have been in place for multiple years.

Second is the time of the shift. For example, in the morning, there are different call types that could come. And in the evening, again, there could be different call types. So there could be times during the month, during the week, during the day, where a wait time is really high. And that high wait time sometimes leads to a little bit higher frustration from the customer. So then, as an agent, I might not have full control of what the handle time is and what the right balance of handle time is. A lot of organizations miss these nuances, and they try to coach every agent using similar methods and similar kinds of coaching templates, which is not right.

Daphne Luchtenberg: Yes, thanks, Vinay. Julian, what are some of the best practices to get this combination of things right?

Julian Raabe: The core of it is to really understand, in as much granular detail as possible, what is the best mix for certain agents, customer types, and call types, and what aspects are really relevant in the mix that an agent is handling? Also, this should be mirrored, obviously, with the tenure of an agent.

In the end, it doesn’t matter if an agent is in the fourth quartile or in the second quartile. What matters much more is, are people developing? When we do coaching, do we see a positive trajectory, because this is what counts in the end. I believe everybody can develop. The only thing that worries me is if an organization tells me, “We have people in the fourth quartile, they are not developing, and we do not believe that they can develop.”

Daphne Luchtenberg: Got it. Very interesting. So when it comes to the future of the customer care center, Julian, what, in your mind, are some of the critical success factors?

Julian Raabe: It’s a very good question. One is, obviously, not falling into the trap of believing in the myths. The second point is, I personally believe that technology analytics, speech analytics, is one of the key enablers that we will see in the coming years that will drive the performance of organizations. And it’s not about replacing agents with chatbots, and so on. What we see as the big opportunity is how we can enable agents to be more effective through real next-best actions, to predicting potential outcomes, and helping agents to succeed in these, to use voice analytics at scale for coaching and training, ideally in real time. If we can do that, I believe strongly that we will be able to uplift at scale the performance of customer care operations in the next years and also counter the effects that we currently see in the demand and supply gap.

Daphne Luchtenberg: Yes, got it. A fascinating challenge for creating the next generation of customer call centers and ensuring that we’re meeting the needs of customers, which is absolutely still an area for huge competitive advantage.

Thank you both for your time today. Thanks for your insights and your expertise. We’ve not only managed to put some of the common myths about contact center priorities to bed but also covered how organizations can provide a better service and that will answer real customer needs.

You’ve been listening to McKinsey Talks Operations with me, Daphne Luchtenberg. If you’ve liked what you heard, subscribe to our show on Apple Podcasts, Spotify, or wherever you listen. We’ll be back with a brand-new episode in a couple of weeks.

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