Call Centres: Offshoring vs Onshoring - UK

Issues in the Market

Scope of the report

Market in Brief

Call centres form a key part of the financial services distribution mix

A variety of pros and cons are associated with offshore call centres

There has been a notable drift offshore, although the tide may have turned

Mintel’s research findings: Users and uses of call centres

Mintel’s research findings: What frustrates callers

Mintel’s research findings: Attitudes to overseas call centres

Background

The telephone has revolutionised financial services distribution

A number of factors have facilitated this rapid development

Penetration of telephones has now reached saturation point

Figure 1: Proportion of households with a telephone, UK, 1970-2006

Mobile phone penetration has risen rapidly in the last few years

Figure 2: Proportion of households with a mobile phone, UK, 1997-2006

Use of new technology is further changing the face of distribution

Rising Internet penetration will boost online financial services

Figure 3: British Internet penetration at home/work/place of study or elsewhere, 2001-06

An increase in broadband connections will also be significant

Figure 4: Internet connections by type, UK, 2001-06 Q1

This growth is likely to spawn multimedia contact centres

Technological advancements have facilitated call centre growth

Increasing prominence of CRM has also been a boost to call centres

The Size of the Call Centre Market

Defining what constitutes a call centre can be difficult

The UK call centre market continues to grow

Figure 5: Growth in UK call centres, by numbers of centres and agent places, 2002-06

Financial services accounts for around a third of all agent places

Figure 6: Segmentation of UK call centre agent places, by market sector, 2002-06

More than a quarter of UK call centres are based in the South East

Figure 7: Location of call centres in the UK, 2006

Offshore outsourcing has been a notable trend in recent years

The Rationale for Offshoring

Mintel’s Call Centres Industry Survey

Call centre location needs to be aligned with strategic goals

Potential cost savings are usually the key driving force

Trade comments relating to potential cost savings:

Availability of highly skilled workers has been another advantage

Offshore call centres can also aid operational flexibility

Trade comment relating to operational flexibility:

But surveys point to growing antipathy to offshore centres

Security issues are also a cause of consumer concern

Trade comments relating to consumer aversion to offshore call centres:

Identifying the Onshore and Offshore Providers

The call centre industry has witnessed a steady drift offshore

Many financial providers have established offshore operations

Many providers have retained exclusively UK operations…

…and the tide may be turning in favour of onshore centres

There is a notable split between the onshore and offshore brigades

Figure 8: Selected financial services providers split according to location of call centre roles, February 2007

Case Studies

Aviva plc

Barclays plc

Esure

Nationwide

The Consumer - Users and Uses of Call Centres

Survey background

Around 20 million consumers use the phone for their finances

Figure 9: Channels used to manage day-to-day finances, November 2006

Implications

Consumers have adopted a multi-channel approach

Figure 10: Channel usage combinations, November 2006

Implications

ABs are prolific users of the phone for managing their finances

Figure 11: Channels used to manage day-to-day finances, by gender, age, socio-economic group, lifestage and Special Groups, November 2006

Implications

High earners are keen to utilise both the phone and Internet

Figure 12: Channels used to manage day-to-day finances, by working status, income, TV region and ACORN group, November 2006

Implications

Internet users and broadsheet readers are keen on remote channels

Figure 13: Channels used to manage day-to-day finances, by technology usage, newspaper readership, commercial TV viewing and supermarket usage, November 2006

The phone is now used for a wide variety of financial tasks

Figure 14: Financial tasks conducted via the telephone, November 2006

Implications

Men are more likely than women to buy products via the phone

Figure 15: Financial tasks conducted via the telephone, by gender, November 2006

Implications

The 35-44s use the phone for a wide range of financial tasks

Figure 16: Financial tasks conducted via the telephone, by age group, November 2006

Implications

ABs are the most likely to arrange products via the phone

Figure 17: Financial tasks conducted via the telephone, by socio-economic group, November 2006

Implications

A fifth of phone users carry out five or more financial tasks

Figure 18: Number of financial tasks conducted via the telephone, November 2006

Implications

35-44-year-old phone users perform the most tasks

Figure 19: Number of financial tasks conducted via the telephone, by gender, age and socio-economic group, November 2006

A general enquiry is the most common activity for the single-task group

Figure 20: Repertoire of financial tasks conducted via the telephone, November 2006

The Consumer - What Frustrates Callers

Time spent on hold is the most common source of frustration

Figure 21: Consumers' frustrations when using financial call centres, November 2006

Implications

The 45-54s and ABs are the most frustrated call centre users

Figure 22: Consumers' frustrations when using financial call centres, by gender, age and socio-economic group, November 2006

Sales messages are most likely to annoy the ABC1 55+ group

Figure 23: Consumers' frustrations when using financial call centres, by gender, age and socio-economic group, November 2006

Implications

Communication problems are more likely to irritate high earners

Figure 24: Consumers' frustrations when using financial call centres, by lifestage, working status, income and TV region, November 2006

Third age consumers harbour many call centre frustrations

Figure 25: Consumers' frustrations when using financial call centres, by lifestage, working status, income and TV region, November 2006

The Consumer - Attitudes to Overseas Call Centres

Most consumers would rather not use overseas call centres

Figure 26: ‘I would rather not speak to someone in a call centre which is based overseas’ , November 2006

Implications

Over-45s, C2s and women are more likely to criticise offshore agents

Figure 27: ‘I would rather not speak to someone in a call centre which is based overseas’, by gender, age, socio-economic group and lifestage, November 2006

Urban Prosperity group is the most tolerant of overseas agents

Figure 28: ‘I would rather not speak to someone in a call centre which is based overseas’, by TV region, ACORN group and newspaper readership, November 2006

The potential for account misunderstandings is a major concern

Figure 29: ‘I would worry that an overseas-based call centre could lead to a misunderstanding with my account’, November 2006

Implications

This fear of a mix-up permeates the entire consumer base

Figure 30: ‘I would worry that an overseas-based call centre could lead to a misunderstanding with my account’, by gender, age, socio-economic group and lifestage, November 2006

Scottish consumers are most likely to fear a potential error

Figure 31: ‘I would worry that an overseas-based call centre could lead to a misunderstanding with my account’, by TV region, ACORN group and newspaper readership, November 2006

Security fears also make consumers wary of overseas call centres

Figure 32: ‘I would worry that my information is less secure with providers who use overseas call centres’, November 2006

Implications

Older consumers are more likely to feel anxious about security

Figure 33: ‘I would worry that my information is less secure with providers who use overseas call centres’, by gender, age, socio-economic group and lifestage, November 2006

Consumers in Anglia/Midlands tend to worry about security

Figure 34: ‘I would worry that my information is less secure with providers who use overseas call centres’, by TV region, ACORN group and newspaper readership, November 2006

Most people prefer companies that only have UK call centres

Figure 35: ‘I would rather deal with companies that only have call centres based in the UK’, November 2006

Implications

Support for UK call centres is strong across all segments

Figure 36: ‘I would rather deal with companies that only have call centres based in the UK’, by gender, age, socio-economic group and lifestage, November 2006

There was strong support in Yorkshire/North East and Scotland

Figure 37: ‘I would rather deal with companies that only have call centres based in the UK’, by TV region, ACORN group and newspaper readership, November 2006

Cheaper products would only win over a minority of consumers

Figure 38: ‘I would be happy for my provider to use an overseas call centre if it meant I received cheaper products and better rates’, November 2006

Implications

Young adults may be swayed by the lure of better rates

Figure 39: ‘I would be happy for my provider to use an overseas call centre if it meant I received cheaper products and better rates’, by gender, age, socio-economic group and lifestage, November 2006

A majority in the Urban Prosperity group would take cheaper products

Figure 40: ‘I would be happy for my provider to use an overseas call centre if it meant I received cheaper products and better rates’, by TV region, ACORN group and newspaper readership, November 2006

Better service standards could provide the key to success

Figure 41: ‘I do not mind where a call centre is based as long as I receive a good service’, November 2006

Implications

ABs typically care more about service than call centre location

Figure 42: ‘I do not mind where a call centre is based as long as I receive a good service’, by gender, age, socio-economic group and lifestage, November 2006

Most broadsheet readers could be won over by good service

Figure 43: ‘I do not mind where a call centre is based as long as I receive a good service’, by TV region, ACORN group and newspaper readership, November 2006

Dissecting the sample according to attitudes to call centres

Figure 44: Typologies based upon attitudes to overseas call centres, by gender, age, socio-economic group and TV region, November 2006

The Future - Offshore or Onshore?

What does Mintel’s research tell us?

The offshore brigade should not necessarily lose heart

But onshore providers appear to have a clear opportunity to exploit