UK Call Centre
Market Positioning
The
position of the call centre market varies somewhat depending on the role being
fulfilled. The majority of the market continues to consist of internal call
centres within companies providing a range of services ranging from customer
services primarily involving incoming calls, to telesales involving outgoing
calls. Call centres are frequently internalised when the demand is ongoing
(rather than to support a one-off campaign) and where the function is
considered to be a core activity of the company. Indeed, the opportunity for
direct feedback from customers (and in the case of telesales also
non-customers) has placed call centres at the centre of many marketing
initiatives, particularly with the growing trend for companies to focus on
customer relationship management (CRM).
However,
a growing proportion of the demand is met by third party call centre operators.
These offer the advantage of specialised knowledge and typically have
sophisticated software and hardware as well as trained staff to maximise the effectiveness
of the service. The continued trend towards outsourcing, as companies
concentrate on core activities, has seen demand in this sector grow. Indeed,
the outsourcing sector is believed to have outperformed the UK call centre
industry in recent years, and is expected to continue to do so in the near
future. Furthermore, with the pace of IT development, many potential users of
call centres are wary of investing in their own equipment which may soon become
outdated. The use of outsourcing varies between markets, with the telecom and
utilities sectors the most prolific users of outsourcers’ skills, in particular
concerning outbound sales campaigns and customer satisfaction surveys.
The
market includes both the business-to-consumer market and the business-to-business
sector. The growing acceptance of the telephone as part of modern living,
reflected in the high levels of mobile phone ownership, has resulted in the use
of telephones as a means of marketing communication becoming increasingly
accepted, whereas previously, particularly in the business-to-consumer sector,
the use of “cold calling” was believed to be an invasion of privacy.
Nevertheless, recent increases in applications to the Telephone Preference
Service (TPS) and to BT Privacy are expected to have a negative impact on
outbound telemarketing. Indeed, more than half of UK households are registered
with TPS, and cold calling is increasingly seen as old-fashioned, expensive and
potentially damaging to a company’s reputation. Furthermore, during 2005 a
number of telemarketers identified cold calling would not be economically
viable after 2010. Moreover, as a result of legislation and consumer pressure,
unsolicited outbound calling is in decline, with permission marketing taking
its place. Indeed, whilst cold calling is expected to contract, outbound
value-added service is likely to differentiate brands. An increasing proportion
of outbound calling is now to existing customers, delivering customer care and
proactively informing them about events, products and services. Moreover, the
DMA recommended best code of practice for outbound calling suggests the
over-dial rate should be no higher than 5% in any 24-hour period.
However,
the telephone has developed in an increasingly important marketing channel,
providing information in both directions. The increasing marketing focus of
companies has been facilitated by IT developments in recent years and as such
call centres are forming a growing role in the communication between companies
and their customers. Despite being the main channel of communication, telephony
is not the sole method available to call centres, as SMS text messaging and
Email services are an increasingly attractive option. Nonetheless, demand for
other communication methods such as SMS text messaging and Email has not been
as popular as previously anticipated. Indeed, they are only believed to
represent a minor sector of communications, and of the small minority of call
centres which use these methods, Email is more widespread. In 2008, Email
accounted for an estimated 8% of interactions. This is believed to represent
the poor support and attention given to Email and SMS text messaging, as call
centres focus on telephony. In turn, Email service levels are poor.
Furthermore, in a survey conducted by ContactBabel for the UK Contact Centre
Operational Review in 2007, 81% of Emails were answered manually by an agent,
with no assistance from an Email management solution linked to a knowledge base
which could, if used efficiently, help work through the volumes of Email and
also provide consistent responses. Nonetheless, there is a desire within the
industry to increase Email interaction.
There
has been some speculation that the role of the Internet will hinder the ongoing
development of the call centre market, although for reasons discussed in this
report, MBD believe that the two are increasingly complementary rather than
directly competitive. Indeed, the Internet is increasingly becoming a customer
service channel for businesses, as increasing numbers of consumers shop and
access information online. Furthermore, there has been a rise in the number of
consumers asking questions through Internet self-service systems to obtain
information. However, this is increasingly at the expense of calling or
Emailing call centres, as customers require faster responses.
Indeed,
in May 2007, a study conducted by Genesys identified the most prominent
emerging trends in the industry were a consumer-driven desire for proactive
contact and the need for better support for a broader set of communication
channels, including SMS, web chat and Email. Indeed, 86% of participants stated
they want Email communication, and more than 45% would like Email to become
their primary communication channel. The speed of communication is also an
important factor, with 21% expecting a one-hour response time. An additional
17% expect an Email response within four hours and 47% within 24-hours. A
further 19% would like communication via web-chat (i.e. instant messaging) and
17% want SMS messages.
Development of Market Position
The
UK market for call centres remains smaller than the US market, where both
telesales and customer service facilities are well established. Trade sources
report that in the US, 83% of the Fortune 1000 companies utilise some kind of
telephone-based marketing. Nevertheless, the UK leads the European market by a
considerable margin, although research indicates that just 27% of UK companies
identify call centres as being important for communicating with their
customers. However, this is forecast to rise to 45% by 2011. Indeed, the UK was
home to approximately a third of all European call centres in 2004, with the UK
market for call centres attracting the largest share of inward investment in
Europe. Germany is thought to operate a fifth of Europe’s call centres,
followed by the Netherlands and the Republic of Ireland, whereas France and
Greece are home to few operations. With regard to potential threats, MBD
believe that the Netherlands offers considerable potential for the multilingual
market development, while Ireland is also increasingly attracting call centre
operators, despite only claiming a very small share of the market.
The
reasons for the relative size of the UK market compared with those in other
European countries are detailed below.
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‣ Deregulation
of the telephone sector is more advanced in the UK than in many other
European countries and this has exerted a downward effect on the cost of
phone calls in the UK, despite the fact that local connections to date
remains a monopoly market. However, in contrast, state involvement in
telecommunications networks remains in many countries who view the
telecommunications network as being of strategic importance.
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‣ The
flexibility of the labour force in the UK makes the market attractive. The
needs of the industry tend to be subject to significant fluctuation in terms
of demand, often requiring manning outside of conventional office hours
either as a 24-hour service or to undertake telesales at periods when
householders are home. The UK labour force has a reputation for its
flexibility, while in other countries such as Germany, legislation has
prevented this market from developing. While increased EU employment
legislation has increased the costs of call centre operators in recent years,
the UK labour market remains relatively flexible compared with other European
countries. Furthermore, the UK workforce is becoming increasingly educated
and the Labour Government’s commitment to education has already resulted in
more students gaining qualifications in areas such as information technology,
business studies and design and technology.
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‣ Many industry
sources and commentators argue that another factor has been the widespread
availability of multilingual operators allowing the EU market to be covered
from the UK. However, MBD believe that a stronger factor is the fact that the
language is the same as in the USA, making this an obvious region of
diversification for US service providers. In addition, the UK industry tends
to follow the management and marketing practices of the US culture more
closely than many other EU countries.
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‣ The market
concept of call centres is older in the UK and the industry has therefore had
more time to develop.
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The
relative maturity of the UK market however, suggests that while sustained
strong growth in demand is still anticipated in the medium term, the rate of
growth in other European markets is likely to be stronger than in the UK.
Eastern European countries are now following Ireland in providing a pool of
skilled, cheaper labour and are likely to see the most growth in the industry,
as well as an increasing number of smaller concentrations of call centres now
locating in the Carribean, India, Australia and New Zealand, although these are
predominantly used by US companies.
With
agent salaries in the UK accounting for nearly two thirds of a company’s operating
budget, a staff cost saving of at least 30% can be achieved by offshoring.
Indeed, the potential costs savings have attracted many companies, as detailed
below.
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‣ BT,
Prudential, Lloyds TSB and Royal and SunAlliance are some of the major
players who have set up overseas call centres in recent years, although with
some since having returned to the UK.
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‣ In October
2003, HSBC announced a three year plan to cut 4000 UK jobs, mainly processing
and call centre roles, with the intention of relocating centres to India,
Malaysia and China.
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‣ Norwich Union
announced the move of 2350 jobs to India in December 2003. However, during
2007 the company announced it is to move some of its call centre work back to
the UK, as Indian call centre staff had difficulties in understanding what
customers are talking about.
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‣ In November
2005, Cheltenham and Gloucester, Lloyds TSB’s mortgage arm, announced the
closure of their mortgage application centre in Warwick, resulting in the
loss of around 400 jobs, which would be transferred to Mumbai in India.
Cheltenham and Gloucester had already previously transferred more than 2500
jobs to Mumbai in a cost cutting drive, as the company closed a call centre
in Newcastle during 2004.
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‣ In December
2005, BT advised employees at Client Logic in Derby and Bristol it is to move
broadband operations to India. Nevertheless, the company offered employees
the possibility of working at one of its call centres in Nottingham,
Leicester or Stoke.
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‣ HSBC announced
plans to establish a global operations call centre in Malta, to handle
in-bound calls from its high value customers to complement existing call
centres. In April 2006, the company approved the reported Ⓤ7 million to
set up the global call centre in Malta, which employs around 350 new
employees and commenced operations at the end of 2006. More recently, in
March 2009, HSBC announced 1200 job cuts in the UK and will move a 'small
proportion' of UK call centre positions overseas following a shake-up of the
business.
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‣ In August
2006, Orange reported plans to close its Northern England contact centre and
create new jobs at its Indian facility in a move to improve customer
relations and cut costs. 900 call centre agents at the Peterlee centre will
reportedly either be moved to the North Tyneside or Darlington contact
centres or be offered redundancy packages. The restructure is to allow for
another 300 agents to be added to the company’s 1000 member customer service
team in India. The company reported the arrangement was primarily to reduce
customer waiting times.
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‣ Also in August
2006, the travel firm Thomson announced it was to close its call centre in
Glasgow on 12 December 2006, resulting in the loss of 450 jobs. The company
has said it will retain its six smaller call centres in England, although
blamed the closure on increasing numbers of people booking their holidays
online, rather than by phone. Indeed, Thomson said Internet bookings
increased from 10% to 50% of business since the Glasgow call centre opened in
1999.
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‣ A second
high-profile call centre closure in Scotland was that of the NTL Telewest
customer contact centre at South Gyle in Edinburgh in September 2006, causing
the loss of 150 jobs. Following the merger of NTL and Telewest at the
beginning of 2006, bosses announced plans to cut 6000 jobs between the
combined businesses by the end of 2007, although NTL Telewest denied rumours
of plans to outsource the work overseas, possibly to India.
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‣ Following the
successful opening of a contact centre in the Philippines in February 2006,
Dell opened a second call centre in the Metro-Manila area in February 2007.
The company selected the Philippines for the customer contact centre
expansion reflecting the areas high-quality work force with strong language
and communication skills.
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‣ In March 2007,
Barclaycard announced it was to move some of its operations to India
following the closure of its Manchester call centre in the summer of 2007,
with jobs going to a number of other locations including Delhi, Mumbai and
Teesside.
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Nonetheless,
customers are increasingly dissatisfied about overseas call centres, with some
high street banks advertising their commitment to keeping call handling in the
UK as an incentive to satisfy existing customers and attract new customers from
their rivals. Customers face problems understanding overseas call centre
employees, they dislike the practice of foreign call centre agents assuming
false English names and also consider overseas agents to be unhelpful. Indeed,
in August 2007, research from Nationwide Building Society revealed that 93% of
people believed it is important that their calls are handled by a call centre
based in the UK. Of those surveyed, 79% said they would be less likely to deal
with a company that used call centres abroad and 52% would change to another
provider if they found their main bank or building society had started using a
call centre abroad. According to the research, one in 10 adults (74%) prefer
call centres in the UK as they believe they can get a better service, it’s
better for the UK economy and that their calls are answered quickly and
efficiently.
In
an attempt to improve difficulties concerning language barriers, IBM’s India
research laboratory has developed web-based interactive language technology to
help people who speak English as their second language to improve their verbal
skills. Based on advanced speech processing techniques, the technology
evaluates grammar, pronunciation, comprehension and other spoken language
skills. The technology also provides detailed scores for each category.
Nonetheless, a number of companies are returning call centre operations to the
UK, as detailed below.
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‣ In 2005, Abbey
switched call centre work back to Scotland and England from India, announcing
plans to shut a centre in Bangalore. It followed growing complaints from
customers, which included language problems.
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‣ In June 2006,
the UK based BPO firm Vertex, which has around 1800 employees in Gurgaon,
reported it was to move around 700 jobs from its Powergen project back to the
UK, citing customer satisfaction as being more important than cost cutting.
Furthermore, in January 2007, Powergen announced it was to create 150 new
jobs in Nottingham, adding to a further 1000 staff already recruited across
the UK, after the company closed its Indian call centres in 2006. The result
has been a significant improvement in Powergen’s standing in the Energywatch
league table, from last to second place.
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‣ In January
2007, Teleperformance announced it was to create 450 jobs in Northern Ireland
following support from Invest Northern Ireland for a new £6.5 million call
centre in Newry. At its peak the company employed 300 call handling agents in
first Bangalore and then Mumbai, however this has since been reduced to 100
agents.
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‣ eSure also
announced call centre work outsourced to India would be back in the UK by the
end of January 2007. eSure had said that the move to India had been a
temporary solution to a recruitment problem, as opposed to a cost-saving
measure.
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‣ Aviva insurance
brand Norwich Union announced plans to bring 150 call centre staff back from
India in January 2007. The new 150 British positions were likely to be filled
by existing Norwich Union staff and only deal with first-contact calls. The
subsequent work remained to be completed in India.
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‣ Lloyds TSB
closed its call centre operations in Mumbai in April 2007. This was a major
u-turn for the company which has routed calls through to India since 2004.
The Mumbai call centre typically handled overflow calls when UK agents were
busy, however the success of the banks automated speech-enabled phone
self-service system deemed the Mumbai call centre unnecessary. Furthermore,
in November 2007 Lloyds TSB announced plans to create a further 150 jobs at
its call centre in Glasgow, which already employs more than 1000 people.
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‣ In June 2008,
Orange announced plans to hire 500 new customer care staff in the UK to work
in call centres and Orange shops, meaning more customers would be connected
to a UK agent rather than one in India. Although Orange has 1500 agents
working in India, the company believes this number is unlikely to increase in
the future.
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‣ In October
2008, tour operator Jet2holidays.com brought its call centre back from Delhi
to the UK, creating 30 new jobs.
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In
recent years, Wales has surfaced as a suitable location for call centres. The
Welsh callt centre market is one of the fastest growing sectors of the
country’s economy. At the end of 2005, the call centre market in Wales was
worth £400 million. There were 160 call centres, employing 24 000 people,
although this figure could increase by 20% to 30% by the end of 2008. In
January 2007, Yell announced plans to create more than 250 jobs at a new call
centre in Newport, Gwent to support its 118 247 directory inquiries service.
Yell won a grant of up to £910 000 from the Welsh Assembly to help towards
building the new site.
Despite
the adverse publicity regarding the offshoring of call centre operations, trade
sources report the offshoring movement is not likely to disappear anytime soon.
Companies continue to see the benefits of providing some elements of customer
care in offshore locations. Benefits include lower costs, along with access to
agents with excellent language skills and commercial sophistication. It is
reported that many companies are re-thinking their strategy and incorporating
nearshore / onshore capabilities in addition to self-service.
Furthermore,
some developers have identified an interest in Goa as an additional location
for call centre offshoring, as prices in India’s property market increase. Goa
is considered a suitable location, reflecting cheap land and a workforce with
good English speaking skills. However, advisers to the offshoring industry
believe companies are considering moving call centres away from India as a
result of the negative impact on their brands. India is also keen to move
beyond its association with call centre outsourcing, in order to expand into
more sophisticated areas of industry. With many Indian call centre employees
seeking higher pay and/or leaving the industry altogether, India seems to be
experiencing what happened to Ireland in the early 1990s. Indeed, industry
insiders believe India could lose approximately 45% of its outsourcing to
countries such as the Philippines, Malaysia, Vietnam, Tunisia and Poland. In
the Phillippines alone, the number of call centre employees increased from 2000
in 2001 to around 200 000 in 2005. Indeed, in March 2007, Dell opened a second
call centre in the Phillippines.
2.5
UK Economy
Overview
During
the first few years of the current decade, the UK economy has been growing at
more than four times the pace of the Euro region. However, growth slowed during
2004 and 2005, with GDP increasing by 1.9% in the latter year. In 2006, GDP
growth accelerated once again, rising by 2.7%, while full year data for 2007
indicates that GDP increased by a stronger 3.1%. Latest government data shows
that GDP contracted by 1.5% in quarter four 2008, the steepest quarterly drop
since 1980. This fall follows a 0.7% decline in quarter three, which means the
UK is now officially in recession. Over 2008 as a whole, the UK economy
increased by 0.7% compared with 2007, although this is down from 3% in the
previous year.
In
quarter four 2008, manufacturing output made the largest contribution to the
slowdown, falling by 4.5% compared with a 1.7% decline recorded in the previous
quarter. Construction output contracted by 1.1%, compared with a 0.2% decline
in quarter three, while services output weakened by 0.9% compared with a 0.5%
decline in the previous quarter. The current economic downturn has resulted
from the turmoil on the financial markets that started in 2007, the resulting
global credit crunch, falling house prices, and high inflation, which has been
fuelled by rising food and fuel prices.
In
the Government’s 2008 Pre-Budget Report, the Chancellor revised his economic
growth forecast for 2008 downwards to 0.75%, significantly lower than the 2.5%
increase predicted in March 2008. Latest official figures reveal that the UK
economy actually shrank by 0.7% in 2008. Economic growth forecasts for 2009
were also slashed from 2.75% to between minus 0.75% and minus 1.25%. For 2010,
the Chancellor predicts economic growth of between 1.5% and 2%. Forecasts for
GDP by independent analysts average around minus 2.5% for 2009, thus showing a
more pessimistic outlook than the government’s predictions. Furthermore, the
IMF expects that the UK will be hardest hit in the developed world by the
current global downturn, with the IMF predicting the UK economy to shrink by
2.8% in 2009, with a moderate 0.2% increase forecast for 2010.
In
the 2008 Pre-Budget Report the Chancellor significantly revised his borrowing
and spending plans for 2008/09 and onwards in a bid to soften the impact of the
current economic downturn, with key measures including :
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‣ Government
borrowing will be taken to record levels, reaching £78 billion in 2008/09, up
from £43 billion predicted in the 2008 Budget. In 2009/10, borrowing is
planned to increase by a further 8% to £118 billion. the Chancellor predicts
that borrowing will fall from 2010 onwards so that by 2016 the UK would once
again be borrowing only to invest.
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‣ the Government
will bring forward £3 billion capital spending from 2010/11. The money will
be used to increase motorway capacity, improve and build new social housing,
renew schools and invest in energy measures. However, the Government also
announced a cut in the rate of growth in public spending, now expected to
grow by 1.2% per year, down from 1.8% previously planned. Public sector net
investment will move to 1.8% of GDP by 2013/14.
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The
UK economy has traditionally been characterised by a fluctuation between boom
and bust. During the first half of the current decade, this cycle had
increasingly appeared to have been at least condensed and elongated. However,
the recent apparently longer term slower levels of overall growth have been
achieved with a two speed economy. The growth stimulus seen during the early
part of the current decade has arisen from the consumer spending activity,
(which in turn has been fuelled by low interest rates, high house price
inflation and low unemployment which has given consumers a considerable ‘feel
good’ factor), as well as strengthening government spending. However, the
current economic downturn, suggests that the boom and bust cycle has not been
eradicated, with the Chancellor warning that the current downturn will be more
prolonged than previously expected.
With
a growing UK trade deficit and record levels of household debt, economic growth
has been sustained by public and consumer spending during recent years.
However, public spending had come under tighter control since the March 2004
budget, with the Chancellor previously announcing plans that by 2011/12 the
Government would be running a surplus of £13 billion per year. However, with
the current economic downturn and Government plans to significantly increase
public borrowing, the budget deficit is set to rise strongly over the next
years, and is now not expected to reach a balance until 2015/16. According to
the 2008 Pre-Budget Report, the budget deficit, excludinginvestment, is now
projected at 2.8% of GDP in 2008/09, at 4.4% in 2009/10, at 3.4% in 2010/11, at
2.3% in 2011/12, at 1.6% in 2012/13 and at 1% in 2013/14.
Latest
figures reveal that there was a surplus on current budget of £8.4 billion in
January 2009, compared with a surplus of £15.3 billion in January 2008. Between
April 2008 and January 2009 of the financial year 2008/09, the public sector
recorded a deficit of £42.5 million, up from a deficit of £7 billion recorded
in the same period of the previous year.
The
employment rate for people of working age was 74.1% for the three months ending
December 2008, down 0.3% from the previous quarter and down 0.7% over the year.
The number of people in employment was 29.36 million in the three months ending
December 2008. The number of people in employment fell by 45 000 over the
quarter and down 37 000 over the year.
The
unemployment rate in the quarter to December 2008 was 6.3%, up by 0.4% over the
previous quarter and up by 1.1% over the year. The number of unemployed people
increased by 146 000 over the quarter and by 369 000 people during the year,
reaching a level of 1.97 million people by the end of December 2008. This
represents the highest number of people unemployed for 11 years.
Inflation
The
CPI measures inflation each month in the European Monetary areas as a whole and
individually measures and compares each Member State, enabling reliable
comparisons of inflation rates across EU member states. In terms of commodity
coverage, CPI excludes a number of items that are included in the RPIX such as
council tax, mortgage interest payments, house depreciation, buildings
insurance, estate agents and conveyancing fees. The CPI covers all private
households, whereas the RPIX excludes the top 4% by income and pensioner
households who derive at least three quarters of their income from state
benefits. The CPI also includes the residents of institutional households such
as student hostels and foreign visitors to the UK which will therefore
incorporate university accommodation fees, foreign students university tuition fees,
unit trust and stockbrokers fees.
Latest
data for January 2009 indicates that annual inflation dropped to 3% compared
with 3.1% in December 2008. The largest downward pressure came from transport
costs where the price of fuel and lubricants fell in January A fall in car
prices, lower costs of vehicle maintenance and repair and a decline in air
fares also contributed to the downward effect. A further large downward
contribution came from housing and household services. However, a large upward
contribution came from recreation and culture, where the price of toys and
games increased following heavy discounting in December. Many analyst expect
CPI to further drop strongly over the coming months.
RPI
inflation, which includes mortgage interest payments slowed to just 0.1% in
January 2009, down from 0.9% in the previous month. There was a large downward
contribution from housing with the main effect coming from mortgage interest
payments and house price deprecation. RPIX, which excludes mortgage interest
payments was 2.4% in January 2009 down from 2.9% in the previous month.
Following the publication of the latest figures, analysts warned that Britain
is now on the verge of deflation. However, the Bank of England believes that
deflation in the UK will be short-lived if decisive action is taken.
As
an internationally comparable measure of inflation, the CPI shows that the UK
inflation rate in December, at 3.1%, was above the provisional figure for the
European Union as a whole of 2.2%.
Interest Rates
The
Bank of England is solely charged with meeting Government determined inflation
levels, and interest rates are primarily reviewed to accommodate inflation
targets.
In
March 2009, the Bank of England cut interest rates by half a percentages point
to 0.5%, a new all-time low. The latest rate cut is an attempt to boost the
shrinking economy and encourage bank lending, which so far has not increased
despite significant cuts in the base rate in recent months. In an attempt to
boost bank lending, the Bank of England has also introduced quantitative
easing, a process of increasing the amount of money in circulation. The bank
will initially add £75 billion and use it to buy government bonds and corporate
debt over the next three months to boost the flow of money in the economy. The
bank has also been given permission by Alistair Darling to spend a total of
£150 billion on asset purchases. The idea is that if the amount of money in the
system is boosted, commercial banks will find it easier to lend. The Governor
of the Bank of England believes hat this policy would “eventually work”.
The
rate cut in March 2009, follows five rate cuts since October 2008, reducing the
base rate significantly from 5%. The previous rate cuts were also aimed at
steadying the faltering economy and improving the tight credit supply.
Prior
to the rate cuts in 2008, in the period between August 2006 and July 2007,
interest rates were increased five times from a level of 4.75% to 5.75%, in an
attempt to control inflation. In the 12 months up to August 2006 interest rates
were held at 4.5%, while in the 12 months to August 2005, interest rates were
held at 4.75%.
In
the Eurozone, the Europan Central Bank has cut its base rate four times since
October 2008, with the latest cut in March 2009 taking the base rate to a
historic low of 1.5%. Prior to that, the bank increased the base rate to 4.25%
in July 2008, the highest level since it started setting Euro rates in January
1999.
Business Investment
Data
from the ONS suggests that business investment for the fourth quarter of 2008
is estimated to be 3.9% lower than the previous quarter and 7.7% lower than the
same period of last year.
The
quarterly fall in business investment was due to reduced capital spending by
industries classified within private sector and public sector
non-manufacturing. There was also a contribution from reduced capital
expenditure in manufacturing. Within private and public non-manufacturing
industries, reduced investment of -3% was driven by private sector
non-manufacturing other services, distribution services and construction. The
reduced investment in manufacturing was driven by a reduction in private sector
manufacturing.
Recent
surveys such as the ICAEW UK BCM suggest that business confidence declined for
a fourth consecutive quarter to reach its lowest level since the survey began.
The survey suggests that the consumer and housing slowdown is set to create at
the very least the most challenging business environment since the survey began
and in all probability as far back as the 1990s.
The
main rate of corporation tax was reduced from 30% to 28% in April 2008. The
UK’s corporation tax rate is now lower than the G7 and EU15 average ensuring
that the UK remains an attractive destination for foreign investment. The
first-year capital allowances were replaced in April 2008 by an Annual
Investment Allowance of £50 000 for all firms. This is to provide support for
all businesses that are investing for growth. The tax credit for research and
development rose to 175% for small firms and 130% for large companies. Small
companies’ corporation tax increased from 19% to 20% in April 2007 to 21% in
April 2008 and is set to reach 22% in April 2009. The Treasury states that this
measure should reduce the differential between incorporated and unincorporated
businesses and refocus investment incentives for small businesses. Trade
sources suggest that on balance these measures should stimulate business
investment in the future.
Market Factors
There
are a number of factors that have influenced the development of the call centre
market. These include:
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‣ economic
strength
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‣ technology
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‣ legislation
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While
in theory the demand for call centres could be considered as being resistant to
economic fluctuation, in practice, investment levels in such facilities tend to
increase during periods of economic growth. Indeed, in line with other
marketing expenditure, investment in call centres is typically one of the
earliest sectors to experience cuts in expenditure as corporate profitability
declines.
The
pace of development in the market has been largely enabled by technological
developments, particularly by the integration of telephone and computer
software. This has created a number of opportunities for the market development
for call centres. Indeed, inbound activity in some cases has been replaced by
multimedia contact methods such as web self-service via the Internet. Consumer
demand for Internet services has been facilitated by the provision of broadband
services. According to Ofcom, by the end of 2007 there were an estimated 15.6
million broadband subscriptions in the UK. Thus, the Internet is increasingly
becoming a customer service channel for businesses, as increasing numbers of
consumers shop and access information online. Furthermore, there has been a
rise in the number of consumers asking questions through Internet self-service
systems to obtain information. However, this is increasingly at the expense of
calling or Emailing call centres, as customers require faster responses.
An
additional development in the call centres industry is voice over Internet
protocol (VoIP). VoIP allows users to make voice calls via the Internet, and is
said to be far more cost-efficient than traditional circuit switching, making
it an attractive proposition for business users, particularly large
corporations. The penetration of VoIP in terms of business usage is increasing,
albeit at a slow rate.
In
June 2007, Ofcom introduced a new regulatory code for VoIP users. The VoIP code
makes it obligatory for VoIP providers to offer customers information which
they may otherwise fail to mention. Thus, providers of IP telephony solutions
must now inform customers whether or not their service requires the users home
power supply, if it includes access to emergency services, how portable their
number will be if they switch providers and what additional operator-type
services are available.
The
deregulation of the telecommunications sector in the UK is more advanced than
in most other EU countries and, partly as a result the cost of phone calls in
the UK, is one of the lowest in Europe. This has made the UK an obvious market
for development in Europe.
The
market is also affected by the legislative environment, particularly relating
to the potentially sensitive area of data protection. The Data Protection Act,
which came into effect in March 2000, restricts the amount of personal
information that can be stored in an electronic system without the individual’s
permission and this has potential consequences for the call centre industry.
In
addition to the Data Protection Act, telemarketing companies have also been
restricted by TPS, which is operated by the DMA. During the latter part of the
1990s, this was a voluntary scheme, but in June 1999 it received statutory
backing. Under the scheme, telemarketers are required to check with the Service
to find out which numbers are to be removed from lists in order to avoid contacting
those who have requested not to be contacted by cold calling companies. This
service also applies to customer service calls and those aimed at after sales
service. Recent increases in applications to the TPS and to BT Privacy are
expected to have a negative impact on outbound telemarketing. At present, more
than half of UK households are registered with the TPS. Consequently, the
number of outbound calls as a percentage of all calls has declined in recent
years, from approximately 34% in 2004 to an estimated 29% in 2007. Furthermore,
a number of telemarketers believe cold calling will not be economically viable
after 2010.
As
a result of legislation and consumer pressure, unsolicited outbound calling is
in decline, with permission marketing taking its place. An increasing
proportion of outbound calling is now to existing customers, delivering
customer care and proactively informing them about events and products and
services. Moreover, the DMA recommend best code of practice for outbound
calling suggested the over-dial rate should be no higher than 5% in any 24-hour
period.
However,
in March 2006 UK telecom regulator Ofcom ordered new, more stringent rules to
prevent ‘silent and abandoned’ telephone calls generated by automatic diallers
run by telemarketing organisations. Such calls occur when automated calling
systems used by call centres generate more calls than the available call centre
agents can manage.
Ofcom’s
three key requirements stipulate:
|
|
‣ abandoned call
rates must be below 3% in any 24 hours for each campaign
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‣ all abandoned
calls must carry a short recording naming the source of the call
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‣ calling line
identification (CLI) must be delivered so that 1471 will identify the calling
company
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Ofcom
will take action to enforce the new rules where appropriate, including UK-based
organisations using offshore call centres. In order to demonstrate compliance,
records must be kept for a minimum of six months. If organisations are found to
be in breach of the requirements, fines will be issued. Indeed, the Government
announced the maximum fine Ofcom can impose for breach of the rules was
increased from £5000 to £50 000, which came into effect towards the end of
2006. In January 2007, Ofcom imposed financial penalties for the first time on
four companies found to be in breach of silent call guidelines. The statutory
body issued penalty notices to Space Kitchens (£45 000), Bracken Bay Kitchens
(£40 000), Carphone Warehouse (£35 000) and Toucan (£32 500). However, many
call centres still deal predominantly with inbound calls and are therefore not
restricted by such high levels of regulatory control.
It
is difficult to quantify the number of silent or abandoned calls, but customer
complaints offer one useful measure. At the beginning of 2006, BT reported that
it was handling about 80 000 complaints a month about silent calls. Since June
2006, the company has been reporting around 30 000 complaints per month. NTL
Telewest were reporting 60 complaints a month on silent calls in January 2006,
but since June 2006 the company has been reporting around 30 complaints a
month. Complaint levels to Ofcom's own contact centre increased from about 150
complaints a month in 2005, to an average of about 270 complaints a month since
June 2006. However, this change may be partly explained by increased consumer
awareness regarding silent calls.
Concern
within the call centre industry regarding the Ofcom regulations predominantly
centres around reduced productivity. Indeed, the Ofcom rules mean that call
centres have to reset their diallers to make fewer calls for a given number of
agents. Thus companies are concerned productivity will fall as the time gap
between an agent completing a call and picking up another call will increase.
However, ways in which to avoid this include; hiring more agents, improving
processes and negotiating techniques in order to shorten call durations,
extending opening hours, and improving performance and agent productivity
through the use of technology. The last option is deemed the easiest option, in
turn facilitating software development opportunities.
Furthermore,
the regulations are believed to have had an effect on companies using
predictive diallers (which are considered one of the best methods of outbound
calling), as they have been charged for upgrades required for their systems to
meet the new regulations, particularly in relation to CLI presentation. These
rules are expected to have a negative impact on the call centre industry, as
customers are increasingly aware of the regulations and are therefore likely to
be unwilling to take calls from companies that do not comply. However, some
industry players believe opportunities exist for companies to differentiate
themselves from their peers. Indeed, the regulations are considered an
opportunity for both in-house and outsourced call centres to improve the
customer experience. For example, companies can inform customers they are
approaching their credit limits or provide other such informational services,
which can also present cross selling opportunities. Therefore, customers are
expected to react more favourably to companies operating in an ethical manner.
Call
centre companies have also faced growing costs of employment, as a result of
the increasingly stringent EU enforced employment legislation. In particular,
the rights of part time workers and the low paid have been increased, resulting
in a greater financial burden for companies such as call centres, who are often
reliant on the use of part time workers and whose wage levels are relatively
low. Furthermore, as the call centre market continues to expand, this
competition is forcing centres to improve working conditions and pay in order
to attract and maintain staff.
A
further factor that has encouraged market development in recent years is the
increasing focus on cost control. The recession of the early 1990s resulted in
office-based functions re-evaluating their activities and productivity. This in
turn led to the outsourcing of many activities, including sales and marketing
to lower cost bases such as call centres. These centres allowed the average
working day to be extended at only marginal cost and offered enhanced
productivity levels.
This
trend was also accompanied by a general business move towards direct selling
and marketing and away from brand-based advertising, partly due to the
increased “noise” as a result of the fragmentation of the traditional
advertising channels. Combined with a trend towards offering greater
customisation of products, call centres provided an attractive communication
channel between the customer and supplier.
Trade
sources also identify a long term cultural change in the UK population which
has become more open to a so-called “teleculture” which accepts the use of the
telephone as a sales medium. This is in clear contrast to the view of the
telephone in the 1980s. MBD believe that this change has been characterised by
and reinforced by the growth in mobile telephone ownership.
The
existence of call centres has also changed the nature of competition in many
areas. Call centres have effectively lowered the market entry costs in many
sectors, facilitating market diversification strategies. For example, call centres
were central to the diversification of grocery and other retailers, such as
Marks & Spencer, into financial services.
