Customer Service: In-house vs. Outsourced
Introduction
Every DTC brand understands the power of a seamless customer experience. From the moment a visitor lands on your website to the after-sales support, each touchpoint is an opportunity to impress, retain, and grow. But as your business scales, so does the challenge of managing these interactions. If you're a business owner or an executive in charge of customer care, at some point you may be faced with a number of questions: should you keep recruiting people for your Customer Service department? How many customer service representatives (CSRs) is too many? What alternatives do I have?
In this article, we'll help you weigh the pros and cons of handling customer service on your own vs. partnering with an outsourcing provider. Of course, some business processes are best kept in-house, while others could be made more efficient (and free up company resources) by relying on professional outsourcing solutions. Our goal is to assist you in making sense of some key considerations around this question so you feel confident in making a business decision.
Financial Considerations
Let's get right down to it: here is a simplified comparison of the costs associated with each option. We'll use annual averages and a single CSR for this table, although we should naturally expect some variance.
| Cost Factor | In-house | Outsourcing |
|---|---|---|
| Base Wages | $35,000 | $31,700 |
| Additional Costs | $10,500 | $0 |
| Overheads | $5,000 | $0 |
| Total | $50,500 | $31,700 |
Let's break down these costs to get a better picture:
Base Wages
The compensation a single agent receives. If you, like most of our clients, are a US company, this is a reasonable entry level base rate. If you decided to outsource, an immediate added benefit would be access to global rates. Our offshore and nearshore packages, for example, offer a welcome improvement over this rate average.
Additional Costs
This is where the outsourcing difference is most noticeable. There are many tasks that need to go into a well executed customer support strategy. Key activities like training, quality assurance, workforce management, and customer service management need to be done by somebody. If you're running an in-house team, you are probably either doing this yourself or already have some structure in place to take care of this. In the first case, your time and energy are being channeled away from high level strategy and business growth. In the second case, an internal team will prove difficult to scale up and down with volume fluctuations, which means your team will be going from overloaded to sparsely occupied, as demand for your product changes with seasonality.
All of this means financial inefficiencies and reduced organizational agility. In the table above, we provide an estimate for the additional cost per person, but that does not reflect the non-financial necessities associated with maintaining an entire internal department. For example, you, as a decision-making executive, have to keep track of how things are going and make sure that everything is running smoothly. That takes brain space, cognitive bandwidth that could probably be put to better use looking for growth opportunities, improving your value proposition, or nurturing business relationships.
Overheads
Additional personnel come with additional requirements. Be it equipment, extra office space, increased utility costs or software subscriptions, there are many hidden items that don't usually come to mind when making the in-house vs outsourcing comparison. They will, however, show up in your bottom line and may tilt the scales towards outsourcing if put together with a desire to create an agile and nimble organization.
Operational and Strategic Advantages of Outsourcing
We have briefly discussed two main distinctions of outsourced Customer Service over its internally-handled relative: Outsourcing is cheaper and means less work for you and your team. However, we also want to touch on a few additional factors to help drive the point home.
Eliminate Staffing Issues
Our considerations on additional costs above didn't mention all the work that goes into finding the right people, letting go of the wrong people, or managing absenteeism and the many issues that arise from managing additional teams. To be clear, we are not saying outsourcing makes HR redundant (in fact, human resources is one department we do recommend keeping in-house), but that their work will be made more efficient by keeping this one department off their plate.
Scaling and Flexibility
We've already briefly touched on this above, but we do want to emphasize this point because it may feel safer to have a large team at hand, but is it efficient use of company resources? Outsourcing comes with the ability to scale up or down as demand requires. In one of our previous case studies, we share our approach to seasonality. One can easily see how a temporary workforce increase of 30 or 50% is more efficiently addressed by outsourcing, rather than stacking the entire recruiting, training, managing, and dismissing process on top of a peak season that is already overloaded as it is.
Language Options
If your company serves a global customer base, you will likely encounter the need to offer multilingual support. This can pose an additional challenge, given the additional skill set required to evaluate language proficiency and cultural familiarity. Again, outsourcing to the rescue! Why not leverage the built-in capabilities of an external firm specialized in doing just that: making sure candidates are qualified according to your particular specifications?
Access to Contemporary Technology and Processes
The SaaS industry is big and growing at breakneck speed. In 2022, according to McKinsey, the global SaaS market was worth about $3 trillion and estimated to grow to $10 trillion by 2030. That's a lot of software! Of course, not all of it has to do with CS/CX, but still: researching options, filtering for relevance according to your company's use cases, making sure integrations work well with the rest of your tech stack, adjusting to new workflows and interfaces... that's a big task. Let's not even go into making sense of the flourishing AI ecosystem and keeping track of who's doing what. If you have a tech-savvy team with lots of time on their hands, great, but if not, just explaining to the rest of leadership what a new piece of software does can get really tricky. You've likely met with a similar experience at some point. Long story short, best keep out of this minefield and leave software choices and best practices to people who have already gone to great lengths to help you avoid wasting time figuring this all out.
Reporting and Tracking
Don't just take our word for it. Hear it from our satisfied clients: at Aventus, we take a proactive approach to KPI tracking. We're agile when it comes to responding to time-sensitive situations, that's a given, but we'll also flag opportunities for improvement and bring up to your attention any issues we see evolving in unfavorable directions. Our clients see large improvements on metrics across the board: from the usual CSAT and NPS to retention and ultimately revenue, the impact of intangibles such as agents nurturing relationships with customers is reflected throughout C-suite dashboards.
Focus on Core Business
Let's end this list of strategic advantages by coming back to the central point of the argument: outsourcing Customer Service allows you to optimize company resources. There are only so many hours of the day when real progress is made. We want to help you maximize your use of these hours by taking this bundle of tasks off your plate. Outsourced Customer Service affords you the bandwidth to focus on areas where you will have the most impact for the growth of your business and improvement of your value proposition. Leave the firefighting to us, you'll notice the difference.
Conclusion
When making the in-house vs outsourcing comparison, it's easy to think only in terms of wages only, or overlook/underestimate the importance of many of these factors. With this article, we hope to bring a more comprehensive perspective to the table so that, if you're considering outsourcing, you're able to make an informed decision. If you're not convinced, or if you want to talk about the specifics of your case, we'll be more than happy to hear about you! Schedule a call today and we'll get in touch with you in no time. Thanks for reading!