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This report is a reprint from the June 4, 2001 Doculabs Market Focus Report It has been reproduced here as originally published.

The Self-Service Index Report

Why Web-Based Self-Service is the ROI Sweet-Spot of CRM

By James Watson, Gail Donnelly, and Joshua Shehab
First Quarter, 2001

• Executive Summary
• CRM and the ROI of Web-Based Self-Service
• The Self-Service Index
• Understanding the Index
• Financial Impact
• Conclusion
• Appendices
  • Appendix A: Addressing the High Cost of Customer Service
  • Appendix B: About RightNow Technologies
  • Appendix C: About Doculabs

Executive Summary

Executive decision-makers have become skeptical about investing in e-business technologies where the financial benefits are immeasurable. At the same time, companies have made customer relationship management (CRM) systems a major priority, despite potentially lengthy implementations. As such, organizations under pressure to maximize their bottom-line performance seek CRM systems that can rapidly yield tangible financial returns without placing additional workloads on already overburdened technology staffs.

To address these challenges, Doculabs performed a study of the financial impact of web-based self-service in comparison to other CRM channels. The study was based on data provided by RightNow Technologies, an Internet customer service provider, and compiled into the Self-Service Index effectiveness of self-service at handling customer service requests via the web.

Overall, Doculabs found that web-based customer self-service offers sizeable financial returns on investment. Based on results of over 3.7 million customer service requests made via the web to over 200 companies in the first quarter of 2001, the cumulative total quarterly savings exceeding $100 million was realized through automated web self-service. Based on these numbers the companies in the index saved on average more than $500,000 per quarter and $165,000 per month.

Web-based self-service solutions proved to be highly effective in delivering answers to customers without the intervention of call-center operators, at an estimated average total deployment cost of $1.17 per customer response compared to an estimated average call-center cost of $32.74 per response. The experience of these companies, which spanned 22 vertical markets, clearly indicates that web-based self-service provides a distinctively high ROI in the CRM market space. A highly automated, rapidly deployable web-based customer self-service solution can significantly and quantifiably reduce the cost of customer service operations while giving customers faster access to the information they require.

This study was based on data provided by RightNow Technologies, and will be updated quarterly. Doculabs intends to expand this study to include any web-based self-service vendors that are willing to participate on a quarterly basis.

CRM AND THE ROI OF WEB-BASED SELF-SERVICE

Today, customer relationship management (CRM) systems are a major focus of corporate IT spending because they directly impact top-line revenue growth and customer satisfaction. CRM can be deployed along several different channels, including sales force automation, call centers, e-mail, on-line chat, and web-based self-service. Determining which is the most cost effective is a perplexing task for many buying organizations. But due to the complexities of CRM and customer service, many organizations find it difficult to build a business case for CRM expenditures that is grounded in quantifiable cost savings.

With these challenges in mind, Doculabs conducted a study with the goal of determining the financial impact of using web-based self-service tools in comparison to other CRM technologies or channels. Doculabs acquired customer data from RightNow Technologies that detailed the number of successfully satisfied inquiries and the number of inquiries that required further escalation during the first quarter of 2001. Using this data, Doculabs was able to evaluate the cost-effectiveness of a web-based self-service approach to CRM, as well as tracking key trends in the web self-service market.

This section describes the Self-Service Index and explains what it means for organizations.

The Self-Service Index

The Self-Service Index is a measurement of a self-service solution's effectiveness at handling customer service requests over the web. The Self-Service Index is expressed in terms of the total number of inquiries ("Visits") and the percentage of those sessions that were satisfied without requiring a user to take further steps to find the information they were looking for ("Escalations").

Thus, the Self-Service Index is calculated using the following formula:

(Number of Visits - Number of Escalations) Number of Visits	= Self-Service Index

During First Quarter 2001, RightNow compiled data from 202 of its customers, which do business across 22 industries. This mix of customers was a subset of the total customer base, and included those companies that are using version 4.0 of RightNow's product. Companies were excluded based on other factors, such as companies with fewer than 100 sessions.

The following table shows the Self-Service Index for the first quarter of 2001.

Understanding the Index

The overall Self-Service Index for the 202 companies is 86.9 percent - which indicates that 86.9 percent of all web-based customer inquiries were handled over the web without the need for an escalation or the need to handle the inquiry through alternate channels.

While the index is high across all 22 industries, it is especially high in certain vertical segments. For example, the data from the manufacturing industry reflects that only 489 assists were needed across 22,784 total visits, resulting in a Self-Service Index of 97.85 percent. Thus, the Self-Service Index indicates that nearly all of the approximately 23,000 customer inquiries made to manufacturers were satisfied without a phone call, e-mail, or other form of contact.

Over time, the changes in the index should reveal some interesting trends. For example, it makes sense that the index will increase over time in all industries, as the knowledge base becomes more robust and users are able to find more and more of what they are looking for - which, in turn, will reduce call center volumes. In addition, we may see patterns emerge that enable us to draw relationships within the Self-Service Index. Finally, we may begin to see trends in certain verticals across broader industry categories.

FINANCIAL IMPACT

Over time, the Self-Service Index will be a powerful tool in measuring the quality of a users web self-service experience, which will ultimately give companies a measure of savings for quality customer service over the web.

Just how dramatic are the cost savings of handling requests via web self-service vs. other mechanisms? Industry estimates show that web self-service is by far the most cost-effective method of customer service. For example, according to Forrester Research, costs average $32.74 per transaction for phone-based service, and average $1.17 per visit for web self-service. The following table shows Forrester's industry estimates for a number of different channels.

A web self-service approach is the most economical, because it is an autonomous system that requires no training for end-users and little intervention for companies. With such a huge difference in cost between call centers ($32.74 a transaction) and web self-service ($1.17 a visit), even small shifts can yield huge cost savings.

As seen in Table 1, the total index was based on 3.7 million visits. If those visits were phone calls, organizations would have incurred additional costs of approximately $104 million. Consequently, the estimated savings were over $100 million in first quarter, resulting in an average estimated company savings of more than $500,000 per quarter and $165,000 per month.

In walking through an example, companies that received 1 million customer inquiries (visits) would incur estimated costs of $32.74 million to service those inquiries via phone. If 50 percent of those inquiries used the web self-service knowledge base instead of the phone, the organizations would incur costs of $16.37 million for the phone requests and $585,000 for the web self-service requests (using industry estimates). This is a total of $16.955 million - a savings of more than 48 percent ($15.785 million).

Using this same example and cost assumptions, if organizations were able to handle 90 percent of these 1 million inquiries successfully via web self-service, the total estimated costs shrinks to $4.327 million ($3.274 million for phone requests, $1.053 million for web requests) - a savings of nearly 87 percent ($28.413 million). Of course, as volumes increase, potential savings can increase as well.

The following graphic depicts the estimated savings that can be realized by offloading 50 percent and 90 percent of customer inquiries to a web self-service model.

Besides simply offloading increasing call volume to web-based self-service applications, organizations can maximize their savings by increasing their Self-Service Indices - increasing the percentage of inquiries that their self-service applications are able to handle without escalation to more expensive mechanisms. The more traffic that the company can drive toward the web, the fewer inquiries it must handle via phone - which makes cost savings more and more significant as traffic increases.

For example, companies that handle 250,000 inquiries via phone would incur costs of $8.185 million (using the industry estimates in Table 2). By using web-based self-service with a Self-Service Index of 80 percent, companies would realize cost savings of $6.314 million (a savings of more than 77 percent). If the Self-Service Index is increased to 90 percent efficiency, savings increase to more than $7.1 million (nearly 87 percent).

Similarly, organizations handling 1 million inquiries with a Self-Service Index of 80 percent can realize cost savings of $25.256 million compared with handling all inquiries via phone (a savings of more than 77 percent). If the Self-Service Index is increased to 90 percent efficiency, savings increase to $28.413 million (nearly 87 percent).

The following figure illustrates the relationship between call volume, the Self-Service Index, and potential cost savings.

Conclusion

The Self-Service Index is proof of the success of the web self-service technology, and a way to track how many people have gone to the site and what percentage required additional assistance. This data provides invaluable feedback for customer service departments, and makes a strong case for leveraging web self-service as a cost-effective part of any multi-channel customer service strategy. For organizations that must justify their technology spending with a business case for cost savings or productivity increases, web-based self-service solutions, such as the one offered by RightNow Technologies, make great sense - which is validated by the Self-Service Index.

As mentioned, the Self-Service Index will prove even more valuable over time as comparisons and relationships can be tracked on a quarter-over-quarter basis. As Doculabs continues to review and publish the results of the Self-Service Index on a quarterly schedule, we fully expect to be able to draw significant insights into the dynamics of customer service and web-based self-service across a wide range of industries. Doculabs intends to expand this study to include any web self-service vendors willing to participate on a quarterly basis.

Appendices

Appendix A: Addressing the High Cost of Customer Service

Organizations need to have a common view of their customers across multiple channels of customer interaction in order to compete and provide personalized customer service experiences. Traditionally, the call center was the primary centralization point of contact for most customer service operations. Call centers are labor-intensive and potentially expensive environments that are challenged today to provide their customer service representatives (CSRs) with access to the information they need to quickly service incoming requests.

Today, call centers are quickly becoming "virtual contact centers" that handle interaction through both traditional and non-traditional channels of communication. The complexities of providing CSRs and customers with access to customer-centric information is made more complex as organizations expand their supported communication mechanisms to include non-traditional channels.

The following figure shows the multiple constituencies and channels that call centers must address as they try to adopt a more customer-centric approach to their operations.

The CRM Solution

In general, CRM application areas can be categorized into three primary segments: customer service, sales, and marketing. The following figure shows these primary segments within the CRM market.

Of the CRM segments, customer service is often the primary focus for many organizations as they seek to reduce the burden on their costly call centers. Organizations also tried turning to e-mail response management systems to manage the volume of e-mail inquiries, but such systems themselves proved costly, requiring a significant level of training.

Web Self-Service

Web self-service is emerging as a viable mechanism for delivering customer service within the context of broader CRM strategies and solutions. Web self-service is a concept that puts a robust, searchable knowledge base onto a web site, giving users the capability to search for answers, ask questions, and escalate issues - all without the use of call centers or sending e-mail inquiries. The system tracks the relationships between customer inquiries and the information needed to satisfy them, enabling it to "learn" how to automatically answer questions.

By combining this approach with a set of pre-determined data, information contained within the knowledge base is dynamic. Unlike call centers, web self-service systems do not require highly trained customer service representatives (CSRs) that may need to be retrained when new information is made available.

Appendix B: About RightNow Technologies

RightNow Technologies, founded in 1995, is privately held and employs approximately 300 people. The company offers RightNow Web, an Internet customer service solution that includes self-service, e-mail management, live chat, incident tracking, and customer satisfaction measurement. RightNow boasts over 1,000 customers and delivers information across multiple channels. These channels are driven by an integrated, self-learning knowledge base.

Following the application service provider (ASP) model, RightNow hosts a company's knowledge center and provides users with web-based access. The service can be functional within days, requiring little administrative effort. RightNow Web is also offered as an in-house software product for organizations willing to maintain it in their own environments.

The following figure shows a typical customer self-service interface hosted by RightNow. The web self-service system allows users to browse for information, search for answers to questions, and save searches when satisfying their information needs - all without waiting in a call queue.

As part of the RightNow Web service, RightNow tracks user information for its customers. Using this information, as well as the service's robust reporting functionality, RightNow customers can determine how information is being used and better gauge the relevance of the information. In addition, RightNow's customers can identify the number of customer inquiries that were successfully satisfied, as well as the number that required additional help from a CSR. Thus, customers can maximize the system's ability to quickly give their customers the information they seek, without having to place a call to the call center.

For more information about RightNow, visit their web site - http://www.rightnow.com.

Appendix C: About Doculabs

Doculabs is an independent industry analyst firm specializing in e-business technologies. We are guided by the principle that both end-users and vendors benefit from impartial feedback about product strengths and limitations to make both strategic and tactical business decisions. Founded in Chicago in 1993, Doculabs was one of the first industry analyst firms to ground its research, end-user and vendor advisory services in unbiased, reality-based product assessment results.

We use our benchmark methodology, combined with trend and market analysis, to help our clients make the right technology investment decisions and to help vendors attack new market opportunities. Doculabs' core research methodology builds a truly credible information bridge between end-user business needs and vendor product development.

Doculabs has a growing staff of analysts dedicated to research, advisory services, and market analyses. We specialize in emerging technology solutions that drive e-business, including technologies for e-content, e-commerce, e-fulfillment and delivery, and e-business infrastructure components.

Doculabs' analysts are regular speakers at industry conferences, and continue to author numerous articles in industry journals such as Information Week, Network Computing, PC Week, Windows NT, KM World, KM Magazine, and Group Computing, to name a few.

Doculabs' service offerings include advisory and consulting services, assessment services, and publications (reports and annual subscriptions). Because Doculabs does not resell products, we remain completely objective in our research and our recommendations.

For more information about Doculabs, visit our web site - http://www.doculabs.com.

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