Bat Case Report
Executive Summary BAT is a technology that sells financial software to individuals and organizations. BAT’s success had attracted a number of competitors. BAT differentiated itself by committing to free tech support for the life of the product. BAT started its call center operations in 1987 with 6 technicians which grew to over a 100 technicians by 2002. However, the call center has been under pressure in terms of long waiting times for customers.
Such poor service was beginning to take its toll on the company’s reputation.
We recommend that BAT should implement the Fast Track proposal in order to improve customer service and the company’s bottom line. We understand that free technical support is BAT’s value proposition and central to its business model, but we will show with our analysis why this is the best approach to follow. Qualitatively, 1. BAT will still maintain free support with Fast Track. Fast track will only create market segmentation.
Customers on top of the market pyramid who are readily willing to pay can be tapped. . Fast Track will convert the call center from a cost center into a profit center. With the revenue being generated out of Fast Track calls, BAT can staff the call center with more technicians to improve service levels for standard callers. Current Situation BOP Team 1 is consists of 8 customer service technicians and the arrival rate of customers is 22. 5 customers/hour.
The average time to deal with one customer is 18. 2 minutes. Therefore, the service rate capacity per technician is 3. 2967 customers/hour.
After running the Steady-State, Infinite Capacity Queues model, the average waiting time of customers is 0.
14979 hour, which equals to about 9 minutes and there will be in average 3. 37 customers waiting in the queue. Please refer to Appendix 1 for details. Since the arrival rate and the service capacity rate cannot be shortened, increasing number of technician is the only way to shorten the average waiting time down to less than 1 minute. We ran the model again by adding more technicians one by one, and we found that the average waiting time decrease down to about half minutes at 11 technicians.
Please refer to Appendix 2 for details.
Fast Track We considered different staffing plans and ran Queuing Macro for average wait time. We considered adding servers and keeping one queue, and other scenarios with dedicated Fast Track Servers. We ran Queuing Macro under five different staffing scenarios: (Please note that we have dedicated Fast track servers in Scenarios 4 and 5) Scenario No| No of Standard Servers| No of Fast Track Servers| 1| 8| 0| 2| 9| 0| 3| 10| 0| 4| 7| 1| 5| 7| 3| The following results were observed:
Refer to Appendix 3 for spreadsheet calculations. As observed in the data, Scenario 2 and 3 succeed in keeping Average waiting for track customers to less than 1 minute. Scenario 2 uses less number of resources.
Scenario 2 (9 technicians) is the best staffing level, without dedicated servers for Fast Track. Economics of Fast Track We’ve now established that Scenario 2 and 3 keep average wait time to less than 1 minute to help meet the Fast Track Guarantee. In Scenario2, The average server utilization is 75%, which is an adequate level.
The additional yearly net revenue that can be obtained ranges from $54,325 to $376,300 depending if 10% or 40% of customers become Fast Track customers. In Scenario 3, The average server utilization is 68%, which is not as good as in the previous scenario. The additional yearly net revenue that can be obtained is also less attractive, ranging from $1,325 to $323,300.
Also considering a scenario where we keep 11 technicians, The average server utilization decreases to 62%. The additional net revenue/loss that can be obtained per year is now not so attractive, ranging from a net loss of 51,675 to a net revenue of $270,300. Scenario 2 (9 Servers) offers the best revenue opportunities. Free Service for Fast customers waiting over 1 minute. We did some simulations to see what happens if BAT offers Fast Track service, charging $2 / minute, but giving the service for free if the customer waits over 1 minute. According to the “Queuing” macro, with 1 additional server there is a 30.
7% chance that any given customer (whether Fast Track or Standard) will wait more than 1 minute.
Considering that 10% of these customers are Fast Track individuals, we obtain an arrival rate of 30. 7% * 10% * 22. 5 customers/hr = 0. 69 customers / hr.
On the other hand, considering that 40% of customers are Fast Track individuals, we obtain an arrival rate of 30. 7% * 40% * 22. 5 customers/hr = 2. 7 customers / hr This means that, on average, the number of Fast Track customers who will wait over 1 minute ranges from 0. 69 / hr to 2.
7 / hr. In other words, roughly anywhere from 1 to 3 Fast Track customers per hour will be waived from the Fast Track fee.
As seen on Appendix “xxxxx” (Table 4), this represents a loss of annual revenue ranging between $2,197 and $8,786. However, despite declines in revenue, this fee-waiver option will surely improve customer’s experience and customer loyalty. Therefore, we recommend Scenario 2 (hiring 1 additional server) in order to implement Fast Track, charging $2 / minute and including the fee-waiver option if waiting time exceeds 1 minute.
Service Contracts vs Pay per call There are several aspects to consider when deciding if BAT should offer service contracts or just pay-per-call.
Firstly, offering charged technician support goes against BAT’s original value proposition, however, pay-per-call maintained free service option. Also, pay-per-call could differentiate itself from the industry norm. It is easier for customers to accept. BAT has been offering free technician service to support its product since the founding of the company.
Free technician support is part of BAT’s value proposition to customers. While charging pay-per-call service is already deviating from BAT’s core value, following the industry norm to offer service contracts could negatively impact the value proposition of BAT.
Secondly, offer service contracts require higher investment caused by increased volume of customer calls. With pay-per-call service, customer will only call technician support when they are encountering problems that are urgent and customer can not only solve by themselves in a timely fashion. And since the call is charged on the minute basis, customers are more likely to keep the call short. Whereas, with service contracts, customers could call technician support with any question, and tend to stay on the line longer that they actually need to.
There will be an increase of number of phone calls if BAT decides to offer service contracts. The increase of number of phone calls and prolonged time for each phone call will require BAT to invest heavily in terms of human resource and training. Overall, in terms of economic value and flexibility in operation, the Pay-per-call option is more preferable than service contracts. Pay-per-call requires less investment in human resource and training, also it has the flexibility to not charge customer, if their waiting time exceeds 1 minute.