Cd Call Centre

Call centres have fast become one of the most important channels for organisations and their customers to interact. There are around 4,000 call centres in the UK today, employing over 400,000 people. The direct sell insurance industry is increasingly sing call centres to access and service its market.

The C­Direct­Insurance Company has its call centre in Newcastle, England. The company itself is just 6 years old and specialises in selling automobile insurance policies direct to customers.

The process

Advertising and promotion initiatives attract customers' interest and generate enquiries to the CD Call Centre. These lead to the provision of quotations for personal car insurance. In order to provide the quotation, CD operators need to collect the customer's personal and vehicle related data (in total 17 items) and input them to the computer. The process is as follows:

Customers call the CD­Call Centre (the focus of this case) by a free phone telephone number and submit the required information. This is entered directly into a computer terminal during the call, their questions answered, and quotation provided within 1­ 2 minutes.

Customers can pay by credit card and receive immediate insurance cover. Customers receive their personal insurance offer confirmed in writing by mail, about 2­3 days after initial contact.

Mr Small, the Operations Manager, is responsible for all operations in the Call Centre.

The Call Centre employs 105 people in three shifts over a core day between the hours

of 0800 and 2000. The resources for the Call Centre are:

* its facilities - for example the buildings and the staff's workspace/workstations

* the equipment - for example, computers/systems

* the People who use them.

Car insurance is compulsory in the UK, so customers are price sensitive and tend to Shop -around to compare the company's offer with those of competitors. Only about

17% of CD's offers are converted into policies.

The operations management strategies of scheduling, capacity and quality management were reactive rather than proactive; for example, poor forecasting of demand resulted in excess manpower being underutilised. Staff were inflexible and showed little sympathy or understanding to frustrated and angry customers.

The interfaces with support functions such as Marketing or Information Systems Department tended to be confrontational rather than supportive. Fortunately, in the early days, competition was not very tough and Mr Small had no special performance targets or formal control mechanisms - he was literally his own boss.

The policy change

After five years of high growth, over the last twelve months sales have only grown by 3% and the company is beginning to struggle with diminishing profits. The main reasons for the slow­down have been identified:

* New Entrants: 15 companies in the last 2 years, producing a wave of "direct­insurance­start­ups". These companies have targeted the same customer segment as CD, the market for which has remained stagnant.

* Customers are more price sensitive and new entrants offer extremely low prices.

* Substitute Products are unchanged - customers still require car insurance.

The new situation has forced management to review business policy options to provide a competitive advantage. Research has shown that for direct selling insurance products, the key market drivers are to:

* Offer a wider range of insurance products, so minimising the need for customers to deal with many suppliers.

* Offer low prices

* Provide excellent service.

A recent internal report showed that the CD Call Centre still had potential to improve service levels and cost efficiency. The decision was therefore taken to extend the product range and improve service by addressing:

Product flexibility

CD will respond to customer's demand by launching a new product - household insurance - and deliver it via the Call Centre, alongside car insurance. Household insurance is often requested by customers and they have been in the past disappointed not to source it from CD. Furthermore, the product margin for household insurance is high, thanks to low average claims. Since only a few competitors currently offer household insurance, management believed they could generate an above average profit margin in the first year after launch.

Responsiveness

In order to make the new product successful, it will also be necessary to fulfil customer expectations for 'time' response. Consequently, operations management will need to ensure quick access to the Call Centre and efficient treatment of customers for both products.

Quality

Improve customer service - at least to match competitors' standards. Internal analysis has shown that the auto insurance "lapse rate" (customers not renewing their policies) - which is an indicator of customer satisfaction - was above the market average. To avoid this trap with the new product, significant improvements in service delivery of all CD's activities is needed (including settlement of claims, which is not part of the Call Centre's responsibilities).

Cost

Ensure price decrease of insurance premiums by reducing

internal costs. All possibilities for further cost reduction must be

exploited to permit a price level lower than the top five price leaders.

By launching this policy change, senior management believe a successful implementation will lead to higher customer satisfaction and consequently to profitable growth.

Influences on the operations

The change in business policy will have an impact