Channel Shift — Where’s the Savings?

Those of you who work in a Local Authority will no doubt be aware of the numbers that SOCITM provided on the cost of transactions (£8.21 for Face to face, £2.59 Phone, £0.09 Web) that have helped drive a number of digital transformation business cases. In its most basic form, moving customers from a face to face transaction to an online transaction will save you £8.12 per transaction and is therefore a huge driver in reducing service costs.

In reality however it’s slightly more complicated than this based on the demographic of your customers. In order to understand where the potential savings are we can look to Pareto’s Principle to determine where the highest service costs lie and therefore where and what we need to target. Using a hypothetical council with rounded numbers to make the maths as simple as possible we can see quite clearly where the focus needs to be.

Imagine a Local Authority that has 100,000 households within its boundary. We can apply the Pareto Principle to break this into those households who contact the council a lot (High Need) and those who don’t (Low Need). We can then use the same principle to break these into Online and Face to Face Users. This can be shown as the first image below.

This gives us 64,000 low need users, happy to transact online. 16,000 Low need but wanting Face to Face services, 16,000 High Need online households and 4,000 High Need Face to Face customers.

Now looking at the costs of providing these households we can use the same Pareto Principle. So again using a hypothetical annual budget of £100m we can break these down into a similar diagram shown as the second image below.

What we’re now seeing is that although the largest group by far was the Low Need Online group, we can see that the cost per Household is only £62.50 per year (4% of the annual budget). Where we get to the High Need Face to Face households, we’re looking at £16,000 per household and an overall cost of £64m (64% of the annual budget).

When looking at the cost per household from this perspective it becomes clear that just looking to provide online services will result in some savings but it doesn’t target the largest area of spend. When talking about channel shift to online services I often hear and see business models that talk about tier shift to catch and deal with enquiries at the earliest opportunity and lumps all of the above groups into the same model. Ultimately what you need to be looking at is multiple models of delivery one of which will need to be ‘not’ online (face to face or phone) depending on the demographic of your users.

What this means is though is that you need to understand your users, their contact across the whole council and the reasons why they connect in the way they do and how often and therefore which group they sit in. In order to do this you need good data. One of the reasons we advocate the platform approach to services is to ensure that councils have access to this data and have a joined up view of customer transactions. Key to this would also be ensuring that all contact comes through the contact centre and is logged in a CRM and doesn’t bypass this step and go direct to the service.

Once you have an understanding of your customers and the groups they fall in, you can start to plan around the services you need to provide to them. Taking myself as an example, I haven’t contacted my council since the day I moved into my property three years ago. I pay my council tax monthly by bank transfer which although is an effort for me, the fact my council wants me to download a direct debit mandate and print and post to them means I’m happy to continue paying as I do (and shows how stubborn I can be). I could call, but I don’t really want to or they could make my life easy and allow me to apply for a Direct Debit online.

I recently took out an American Express Credit Card and downloaded the app and set up a DD within about 2 minutes. If only all council services were this good. What my council should be doing though is identifying that I’m in the Low Need Online category for this service and ensuring I stay in this category and don’t have a reason to move to a Face to Face or Phone transaction. Moving to providers such as Asperato and GoCardless would help resolve this quickly and easily. Looking at new service providers with modern ways of working will help give customers the experience they desire. It’s also imperative that you understand that customers may fall into different groups for different services. You need to be asking yourselves what can be done to keep online customers transacting online and avoid unnecessary contact?

With the Low Need Face to Face group there is a need to understand why these customers are avoiding the online experience. What services are they touching the most? How can we ensure that they can transact online? Do you need to implement better marketing, provide online user sessions, are the forms they need and follow up responses available via online services? With 16% of households falling into this category and a potential hypothetical saving of £12m to be realised its worth understanding the make-up of this group and how you can help enable the move to online. Creating simple easy to use forms with a company like 123 FormBuilder can help provide this quickly and easily. These can be simple unauthenticated forms initially with a plan to move to a fully integrated authenticated experience for users and staff in the long run to provide these services.

Likewise, having an understanding of the demographic make up of the Low Need Face to Face group would also help identify the changes you need to make in order for this group to transition towards the Low Need Online category. What is blocking this. Is it personal preference, the difficulty of moving to online, a lack of skills or something similar? Are they constantly chasing updates, how many services are they touching? What can you then do to change this. You might not be able to shift all to online but again if you could move 80% of these then the knock on effect and savings are still substantial.

In transitioning this group to the Low Need Online category what you are effectively doing is building capacity within your teams to focus their effort on the 20% of households that have a High Need.

Again splitting this group on 80:20, we have 16,000 household who are High Need but happy to transact online, (at the same cost as the Low Need Face to Face group) and as such the capacity that you build can spend more time here understanding why there is a High Need and therefore what can be fixed to move this group towards a Low Need Online category. Again looking at data and statistics we will be able to understand why these are High Need. Are they chasing enquiries because you don’t provide automatic updates; are the services they contact you about most not online yet? What can you do to move them into a Low Need category. Again using the data you hold across all services may provide insights into why this group is High Need and you can plan to change service provision to reduce their Need. The technology in all likelihood exists to help do this.

The final category is the High Need Face to Face category. This has the lowest number of Households, but costs you the most to service. Again, with the built up capacity and utilising the data held across the authority wisely authorities can invest the time and effort required to ensure that they are delivering the right services at the right time. The council should be looking at opportunities to move this group from High Need Face to Face to High Need Online and then to Low Need Face to Face. Obviously this will not be possible for every household in these groups, but at a saving of £15,000 per household it needs the proper time and investment everyone in these groups as this is where the key savings will be delivered from.

Again, referring back to my previous blog, only when really start to understand the data we hold across the council will we understand which group your residents sit in. Just looking at siloed departmental data doesn’t provide the necessary insight into the complete cost of that household nor the full interactions that they have with you and therefore you don’t have the necessary information to plan around digital transformation.

With the implementation of a CRM and MyAccount councils can easily begin to build a picture of residents, how they transact and the cost to deliver services to each household. With a single view of each household understanding which services are most impacted by each household type and then providing an integrated MyAccount function to understand those who are happy to transact online and those who aren’t then categorising households into one of the four categories is achievable, and therefore creating plans on how to move households from category to category can be established.

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