Inflating Cost or Service? How to survive the margin squeeze

Inflating Cost or Service? How to survive the margin squeeze

Now more than ever, a focus on cost optimisation and reduction has to be at the heart of an operations function’s strategy.

The perfect storm of wage inflation, skills shortages in the market and global inflationary pressures resulting in prices rising almost everywhere mean that doing more with the same or less is as important as it has ever been before. To maintain margins as costs increase do you pass it on to the consumer? Most are likely to pass it on as salary bases need to be contained. After all, with inflation hitting lofty heights of near 10%, there is an expectation, verging on resigned acceptance, that prices will increase.

This needn’t be the only path. There is an opportunity to gain a competitive advantage and maintain margins when everyone else’s are being squeezed. To do this requires a laser focus on three important activities:

• Servicing customers in the most efficient way, which means:

1. o embracing digital capability (and encouraging your customers and suppliers to do the same)
2. o Adhering to a mantra of ‘right first time’ in order to prevent costly re-work,
3. o Having a tenacious focus on the removal of all ‘process waste’ (those activities that aren’t adding value) and ensuring that ‘the customer’ is at the heart of everything (yes it’s 2022 and that still seems innovative for some companies!).

Also, phone your own contact centre and experience the interactive voice response for yourself (and listen to the hold music!)…it might be eye-opening…or ear deafening! Are you getting customers to the right person and the right help quickly and efficiently?

• Being compliant and operationally robust

1. o The cost of breaches, non-compliance with regulation and risk events resulting in operational losses will hurt more than it ever has done before. But they are usually avoidable.
2. o Having resilience embedded in your operations process, leveraging technology capability where it is available and proactively mitigating risk by having a strong ‘managed and assessed’ control environment is crucial to keeping the cost base low.

• Simplifying your proposition

1. o Remove any product features that are complex or difficult to administer (where it is quick and easy to do so)
2. o close off dormant products, really understand where value is derived from.
3. o Be clear about each product’s roadmap.
4. o Encourage or even incentivise channels that are efficient and optimal and ensure all customer interactions (written and verbal) are simple to understand – with calls to action clearly signposted.
5. o Don’t create failure demand unnecessarily through poor product design or a poor service model.

Currently, anything a business can do to break the link between volume growth and FTE growth has to be pursued, to help manage costs effectively.

This difficult environment calls for the ability to scale, to do more with the same or even less than they had before. Attrition is on the rise, recruitment costs more and takes longer than ever before and upskilling people quickly is no mean feat. We are encouraging our own clients to empower their teams to drive efficiency and create capacity. The results will speak for themselves….

At Simplify we can help with all aspects of servicing; from optimising operations, to delivering digital and regulatory change and so much more. Get in touch with us today and we can help you break the link.