Contact Rate: customer needs x costs to the company
Companies measure Contact Rate depending on Customer Service support and structure. Here´s one example - and why Product Managers should care about it
Hello, I’m Tiago Ferreira, Sr. Product Manager in Brazil with +6 years of experience crafting products. With The Next Movement, I want to share part of my product management experience with the whole world, but also talk about career more broadly, technology, good books, and - why not? - philosophy, music, culture, gossip, just like an open diary. If you enjoy reading my article, subscribe and share it with your friends 🤓
Talking to the customer is one of the most important things for the Product Manager or even the whole company. But, what the customer really wants to address?
Conducting discovery a lot of times I understood that, if the customer wants to talk to you, probably it is related to a complaint or a bigger problem he/she passed through.
Of course, the customer had a lot of touchpoints to do that: posting comments on app stores, writing for Reclame Aqui (in Brazil), screaming on social media… With digitization, a lot of companies have adapted to answer them, but in specific cases, the contact from the customer generates a cost, even in a B2B or B2C environment. That is what we classified as Contact Rate.
Companies saw Contact Rate as a cost because, to attend to users’ demands, the company needs to dedicate a support team - usually from Customer Service or even third-party companies.
Each contact from the customer encumber support team. Since time is money, it’s easy to correlate that user contacting equals time spent from customer service.
Example of Contact Rate
Suppose that you work for a retail company. The user bought your product, but it surpassed the promised data.
Feeling irritated, he will complain via phone or social media. To answer that user, the company needs to dedicate at least one professional.
This professional time is a cost. And you need to address that to understand Contact Rate.
You have to adapt to your company’s context to measure Contact Rate right.
I’ll share a recent example of a company I worked at.
It was a big retail company, with a B2B sector that connects its API to different companies that want to sell its catalog.
If the user bought a product from this partner, the retail company was responsible for shipping and delivering the product. But the final user will contact the partner to understand the product situation.
In this context, the partner could contact the retail. And each contact represents a cost, remember?
Since we’re talking about ratio, we need to have a percentage at the end.
In the B2B sector from the retail company, it was defined that Contact Rate had to measure the sector scalability. So, the ratio is defined by number of partners contacts divided by number of products sold.
The higher the Contact Rate, the worse for the company.
Imagine that we had a partner that sold 1.000 products in a given month. But, if that partner has contacted the CS team 100 times, then the retail company has a 10% of Contact Rate from this partner.
Consider that each contact costs $10. In this case, the retail company has $1.000 in total costs specifically from this partner.
Business impact
We could argue that, with the margin from the 1.000 products sold, the contact costs could be easily covered.
To deep dive in the costs, you can calculate the total cost from contacts and the profit from products sold.
In my example, the profit has to consider the average ticket from the partner ($1.000, for example), and a 3% margin (considering that retail companies usually have low margins).
So, $30.000 profit is 30 times the contact costs in this case. In this case, 10% of Contact Rate could be considered healthy.
But, when the partners sell more, of course, they’ll contact more.
Contact Rate is the best way to keep that metric in control because we need to understand if the number of contacts increases the same way as products sold.
If the general Contact Rate increases more and more, the B2B sector can’t expand its business to more partners. The cost could be so high, that the margin isn’t capable of covering contact costs.
But not every company measures Contact Rate the same way. It’s important to understand all the customer touchpoints, which teams are involved in attending them, and their impact on the profit of the company.
How does your company measure Contact Rate? Feel free to share in the comments section.