Service XRG The Economics of Support Knowledge Management

Service. XRG The Economics of Support Knowledge Management

About Service. XRG n n n ©Copyright 2006 Service. XRG Market research and business consulting firm dedicated to service industry issues We offer subscription based services, custom research and analysis and topical research reports Mission to help companies strengthen customer relationships and optimize financial performance through effective service strategies

About our Research n n ©Copyright 2006 Service. XRG A balanced perspective with views from users, vendors and partners Hundreds of surveys and interviews conducted annually Performance benchmarking, competitive analysis, trend analysis and demand drivers Coverage in North America, Europe and China

Knowledge Management Defined Service. XRG defines Knowledge Management as the process of capturing, enhancing and reusing the knowledge and expertise gained from creating, using, and supporting a product. The output from a Knowledge Management process will enable effective knowledge transfer to customers, partners and employees through self-service and assisted means. ©Copyright 2006 Service. XRG

Expected Benefits from Knowledge Management Not Important ©Copyright 2006 Service. XRG Very Important

The Economic Reality Measuring Tangible Benefit Goals External Knowledge Transfer Improve Customer Satisfaction Internal Knowledge Transfer Reduce Service Delivery Costs Case Deflection Increase Consistency of Response Reduce Staff Reduce Training Time Metrics Benefits Cost What is the measure of success for these goals? How do we quantify the impact of attaining these goals? How much do we spend to achieve these goals? Tangible Benefit KM Cost < KM Benefit ©Copyright 2006 Service. XRG

Knowledge Management Costs

Knowledge Management Costs n Knowledge Management Activities § Knowledge Creation § Knowledge Administration § Distribution n Technology & Infrastructure KM Activities + Technology = KM Cost ©Copyright 2006 Service. XRG

Allocation of Support Spending ©Copyright 2006 Service. XRG

Dedicated KM Staff KM Team as a % of Total Staff By Size of the Support Organization ♦ Industry Average 8. 4% Small Medium Size of the Support Department ©Copyright 2006 Service. XRG Large

The Cost of Dedicated KM Staff As a percent of the total support budget Cost of Dedicated KM Support Staff Support Spending ©Copyright 2006 Service. XRG

The Cost of KM Contributions As a percent of the total support budget Cost of Dedicated KM Support Staff Contribution Costs KM Cost = 17% of Support Spending ©Copyright 2006 Service. XRG

Knowledge Management Impact

Measurable Impact of KM n Revenue Impact § Retain profitable relationships n Efficiency § Increase service capacity n Prevention § Minimize need for live assistance Retention + Efficiency + Prevention = KM Benefit ©Copyright 2006 Service. XRG

Revenue Impact through Retention

The KM – Retention Connection n n Address service quality issues n ©Copyright 2006 Service. XRG Increase the value of the support relationship Enhance customer satisfaction

Factors that Influence Customer Satisfaction Timeliness Effectiveness n 89% of customers that received a solution at first contact were satisfied n 89% of customers that received a solution that completely resolved their issue were satisfied. n 69% of customers that received a solution in 5 or more days were dissatisfied n 81% of customers that received a partial or ineffective solution were dissatisfied. Source: 2006 User Perceptions of Support ©Copyright 2006 Service. XRG

Implications of a Satisfied Customer n Repurchase § 96% of satisfied customers plan to buy additional products, products § 72% of dissatisfied customers will not n Renew § 88% of satisfied customers plan to renew their support contract § 85% of dissatisfied customers will not n Refer § 99% of satisfied customers are willing to recommend you to others § 78% of customers with a negative experience will not ©Copyright 2006 Service. XRG

Retention Opportunity: Reduce Customer Attrition Renewal Rate = 90% Renewal Rate = 82. 4% Percent of Customers Under Contract ©Copyright 2006 Service. XRG

Retention Opportunity: Influence Contract Renewal Rate Increase = 1% Renewal Rate Increase = 2. 5% Renewal Rate Increase = 5% Increase in Revenue ©Copyright 2006 Service. XRG

Impact on Efficiency

The KM – Efficiency Connection n n Reduce repeat calls / duplicate cases n ©Copyright 2006 Service. XRG Increase first contact closure rate Reduced time to transfer knowledge (talk time)

First Contact Closure Rates First Contact Closure Rate Industry Average Service Delivery Channel ©Copyright 2006 Service. XRG

Service Delivery Costs vs. Time to Resolve ©Copyright 2006 Service. XRG

KM Impact on Efficiency Cost Reduction Opportunity Input KM Impact Result First Contact Close Rate 53% +25% 66% Net Efficiency Increase ©Copyright 2006 Service. XRG How Efficiency Immediate access to the right answer 16. 8%

Impact on Efficiency Cost Reduction Opportunity First Contact Close Rate Input KM Impact Result 53% +25% 66% ©Copyright 2006 Service. XRG Immediate access to the right answer Provide access to information to prevent need for live assistance Deflection Net Efficiency Increase How Efficiency 16. 8%

Deflection Defined Users that Intend to Seek Live Assistance No Further Action Required Users that are Entitled to Request Live Assistance Successful Self-Service Transactions Intent * Entitlement * Success * No Further Action ©Copyright 2006 Service. XRG

Deflection Reported Rates ©Copyright 2006 Service. XRG

Impact on Efficiency Cost Reduction Opportunity First Contact Close Rate Input KM Impact Result 53% +25% 66% ©Copyright 2006 Service. XRG Efficiency Immediate access to the right answer 16. 8% Provide access to information to prevent need for live assistance Deflection Net Efficiency Increase How 23. 4% 40. 2%

The Economics of Knowledge Management

KM Cost / Benefit KM Benefit Potential Impact The Role of KM Revenue Impact 1. 9% to 9. 7% Increase Value of Knowledge Management and/or impact on customer satisfaction results in increase in renewal rate Efficiency 16. 8% increase in case handling capacity Increase in first call resolution, reduction of repeat calls, and shorter talk time Prevention 23. 4% increase in case handling capacity Proactively pushing and/or providing customer access to relevant content KM Cost Potential Cost Description Cost 6. 5% of support spending FTE Dedicated KM Staff Efficiency 10. 5% of Support spending Allocation of support staff time to Knowledge Management activities 17% of support spending = 40% increase in support efficiency + revenue potential ©Copyright 2006 Service. XRG

Measure, Measure n n Measurement is difficult but necessary n Building the cost/benefit analysis is only the first step n ©Copyright 2006 Service. XRG KM benefits must be expressed as increased capacity or true reduction in costs Optimization of KM effectiveness is critical to achieve maximum benefit

Optimization the Key to Maximum KM ROI n n Allocate KM resources to the highest value topics n Set and achieve KM service levels n ©Copyright 2006 Service. XRG Monitor the gap between topic coverage and topic demand Track adoption use and effectiveness of content