Consumer backlash offsets offshoring

May 12 2004 by Brian Amble Print This Article

Companies that offshore their call centre operations to India and elsewhere risk loosing a significant proportion of their customers as new research shows three-quarters of people feel negatively about companies who route their enquiries abroad.

Only days after a study by the Department of Trade and Industry (DTI) found that a "significant minority" of UK consumers had already moved or planned to move their custom away from firms that had switched work overseas, customer-relations analysts ContactBabel have published figures suggesting that one out seven Britons disliked offshoring so much they have changed their supplier.

Insurance and telecoms companies have bourn the brunt of this consumer anger, with Scottish customers the most likely to have changed their supplier over the issue.

ContactBabel's survey of 1,008 people also found that customers who were put through to offshore call centres were four times more likely to change their service provider than those who were not.

Four out of ten people also said they were less interested in sales calls coming from abroad than from the UK.

ContactBabel has found that workers in British call centres answer 25 per cent more calls per hour than employees in India and resolve 17 per cent more of these calls first time.

ContactBabel pointed out that a typical high street bank would save £9.26m a year in operating costs by replacing 1,000 UK agents with the same number in India. But, if only an extra 0.343 per cent of customers defected in protest, the bank's revenues would be reduced by the same amount.

Last year, 1.09 per cent of UK banking customers changed banks as a direct result of customer service offshoring, the report said.

Steve Babel, principal research analyst at ContactBabel, said that while huge top-line financial savings could be made by using Indian workers, businesses should be wary of the cost of alienating customers.

"Too many companies are using offshore contact centres in an unimaginative and cost-obsessed way, which is alienating their customers," he said. " Offshore centres are a piece of the jigsaw, not the whole puzzle."

Last year, Australian-owned Myers Credit Cards pulled out of its outsourcing contracts in India after a customer backlash over levels of service.

UK on-line retailer Shop Direct, formerly known as GUS home shopping, has also pulled out of India after opening a call centre in Bangalore in March 2002. The company said that the level of customer service provided by the Indian centre was not up to standard.

Other firms have also woken up to the potential effects of this growing consumer backlash. Last week, the Alliance and Leicester bank said it had decided against offshoring call centre jobs, while the Nationwide building society announced in January that it would be expanding its call centres in the UK.

And although around 30 UK firms have shifted more than 50,000 jobs to India over the past two years, others, like the Co-operative Bank are unequivocal that they will not send jobs abroad in future and see their position as a competitive advantage.

"I believe passionately that when a customer contacts us, by whatever means, they should be dealing with one of our staff, trained and managed by us and with a dedicated focus on our customers' needs and our products and services,Ē said the Co-operative Bank's CEO, Sheila Macdonald, earlier this year.

As Steve Babel pointed out, companies that continue to offshore risk a considerable numbers of their customers defecting to UK-based competitors, something that he says "has made a definite and growing dent in profits - exactly the opposite to what these companies are trying to achieve through offshoring".