How Do I Calculate… Cost per Call?

In this article we’re going to look at how to measure the cost of receiving calls as well as the appropriate context for evaluating that cost.

Cost per call (CPC) is a way of understanding how the contact centre budget is divided between the incoming contacts. When looking at CPC it’s important to understand that it doesn’t describe the total amount of expenditure but how expenditure relates to the workload.

This makes a world of difference, and it’s also the reason that this figure is so often misunderstood. It helps to remember that cost is not the only variable in CPC – volume is also very important.

Here’s a simple example:

In this example, total cost rises between Month 1 and Month 2, but because call volume also rises, the CPC goes down instead of up.

Between Month 2 and Month 3 call volume declines, but now the total cost is steady, so CPC increases again.

This hypothetical situation should hopefully make it clear why lowering cost-per-call is not the focus of this article – it’s simply not a reasonable objective. When managers talk about lowering costs, what they’re really talking about lowering the total cost of doing business.

How to Calculate Cost Per Call

The fundamental calculation for CPC isn’t complex. You take the fully loaded cost of your contact centre for a given period and divide that between the number of contacts in the same period.

The difficulty is that this data won’t necessarily be at your fingertips. You’ll need to find the right people within your business to provide costs for the following:

• Wages, national insurance (in the UK) benefits and bonuses
• Management
• HR and recruiting
• Building costs, maintenance and power
• Rent
• Software licensing
• Hardware rental
• Overheads

In short, anything that is part of the operational budget relating to running the contact centre. Depending on the structure of the business, there might be numerous stakeholders who need to contribute data to this calculation. There may also be areas where the division between separate areas of the business is not 100% clear.

Charles Adams

We spoke to Charles Adams, Customer Services Operations Manager for the Ordnance Survey, who said: “In an old-school call centre that just takes hundreds of the same types of calls, throw all costs into the equation – especially when you’re outsourcing and you really need to see the true cost.

“However, these days a lot of call centres are actually ‘contact centres’, handling an array of channels, and sometimes balancing resource by multitasking.

“In these set-ups it is increasingly hard to apply the same equation or logic. In those cases we put all ‘non-directly associated’ costs in a separate bucket.” 

We also need to know which calls we are talking about. What that means is, are we measuring the number of resolved calls as measured by a CRM or other database?

It actually makes more sense to base this calculation on the number of calls offered by the ACD, minus the calls that abandon. Doing this means that calls which are transferred are not counted twice, which would artificially lower the CPC.

[This poll was sourced from our survey: How Contact Centres Are Delivering Exceptional Customer Service (2016 Edition)]

There is no official benchmarking data for CPC, but in our webinar study we found the average reported figure was £3.64.

The formula to calculate cost per call is:

Total Operational Expenditure ÷ (Calls Offered − Calls Abandoned) = Cost per Call

This cost per call equation can also look like this:

Why Is Cost-per-Call Useful?

Given that CPC doesn’t really reflect expenditure, the obvious question might be ‘what is it good for?’

There are several ways a contact centre might choose to use their CPC data.

Understand the Cost of Customer Experience

First, a per-call cost makes it easier to discuss the impact and value of the contact centre on customer experience, especially when talking to other departments.

In 2016 Deloitte reported that customer experience was considered a key area for competition by 62% of boards, and this is reflective of a broad shift in attitudes. The result for the contact centre is often an increase in flexibility and funding, as well as prestige.

Having a detailed understanding of the underlying cost of interactions makes it much simpler to bring the contact centre into discussions, often led by other customer-facing areas of the business, on customer experience.

Nick Bhugeloo

Call centre operations consultant Nick Bhugeloo advises, “Look at the investment you put in to generate the calls – say £50,000 in marketing – and then look at the number of calls that result.

“At the end, how many calls have converted into a sale? That then gives you your cost. It’s more about the effectiveness of your marketing.

“If you have a marketing campaign and the number of inbound calls goes up, your cost per call goes down – but does that really reflect what’s happening in your operation?

“The first thing to deliver is the customer experience – pick up the phone when someone is dialling.”

See Costs Generated by Other Departments

You can also present the CPC of complaints and queries generated by other departments to help them understand their impact. Studying this data in cash terms is likely to be more impactful then agent minutes might be.

Presenting this kind of data accomplishes two main goals. First, it reminds the wider business that the contact centre is not totally responsible for their own costs. Second, it highlights the largest areas of cost that those departments generate in customer contacts.

You can read more about driving the Voice of the Customer into business here.

Calculate the Cost of Separate Call Types

There can also be a direct benefit for the contact centre. As call-cost analysis becomes more granular, it will identify the kinds of calls that are using the most resources, identifying expensive contact types that might need to be revisited.

On the other hand, understanding the cost of call types might highlight where the really useful investments could be made. For example, a business might want to spend more time on retention activities, and the costing information could help them to achieve that.

You also need to know what the cost of handling your communications is if you want to outsource any part of it.

How Can Cost per Call Be More Granular?

It will be easier to act on CPC data if that data can be categorised more effectively based on the contact types that are commonly received.

Cost per Contact

Perhaps the most obvious way to categorise contact types is to separate the costs over different channels. However, in most cases this is not easy to achieve.

In a contact centre that uses multiple contact channels, but where agents only handle one channel each, the calculation might be straightforward. Simply sum the total costs of the centre, and subtract costs that are not related to that activity. For example, the cost of responding to emails does not need to include the costs of the telephony infrastructure.

The problem is, very few centres have agents performing just one contact type at a time, and it’s almost impossible to totally distinguish the costs from one another.

Nick Bhugeloo says “It’s really hard to separate the cost of contacts in different channels. I’ve done this based on volume – say you have 3,000 calls in a month, and 5,000 email and you’re doing 600 tweets – you put all of this together, and then you average the time and divide the volume by time, to get the cost per contact.

“Or you do it all separately. But while a contact on the telephone will take 7 minutes, an email exchange could take 3 minutes or 20 minutes. It’s impossible to have a totally accurate reflection of the facts.”

Cost per Working Minute

One alternative is to look at the cost of conducting a single minute of call handling. The calculation for this is roughly the same as for the regular CPC, but rather than dividing total cost by number of contacts, divide it by number of minutes.

What’s the benefit? Well, for contact centres with some variability in call length, the average CPC might not be very representative. Cost per Working Minute (CpWM), however, does not depend on AHT, so can be applied evenly to every call.

Some Key Considerations for Cost per Call

New Technology Might Increase CPC

There is at least one way that strategies aimed at lowering total costs for the business can actually increase the CPC figure in an unexpected way.

The adoption of cloud services can save money overall, but it also moves expenditure from Capex into Opex. As a result, the operational budget for the contact centre will be higher, driving up the cost-per-call.

Longer Calls May Cost More Proportionally

Another granular breakdown of costs looks at the length of individual calls, and whether ten minutes spent on a single call costs more than ten minutes spent on five calls that were each two minutes long.

The argument for this is that productivity is measured by how many customer queries are resolved in total, so solving five calls is five times more productive than solving one. Longer calls also contribute to longer queue times.

This covers a lot of variability between businesses, which also place very different values on calls of varying lengths. The average two-minute call is likely to be low value, like a password renewal. The average long call is likely to be high value, like a service renewal.

Inbound calls follow a Poisson distribution (see above), meaning that while calls above and below AHT represent equal volume, there are more separate short calls.

CPC Is Not a Good Moving Target

There is a strong temptation to measure costs moment to moment, in order to measure the impact of different initiatives.

But because CPC depends on more than one variable, it does not make a good moving target. However far-reaching a business initiative is, costs move slowly. Consider a contact centre that changes supplier for all hardware and saves 20%. How long will it be before the business is actually any cheaper to run?

Because of this, businesses should measure CPC quarterly, or perhaps monthly at most.

Nick Bhugeloo adds that “Finding out a month-on-month cost per call isn’t relevant, but finding out what drives the fluctuations is.

“Let’s say that your cost-per-call for one month was £25, and the next month it’s £35. What does that mean to you in isolation? It might be that in month two you’ve doubled the profits.

“You have to look at this number back to front, but it’s always out of date because you measure it over time.” 

Lowering Costs Will Not Necessarily Lower CPC

There are a few ways that contact centres try to lower their total running costs, and these can impact CPC in a variety of ways. As we’ve already discussed, moving to affordable cloud-based services can lower a business’s costs, but it is also likely to raise Cost Per Call.

Similarly, contact centres often aim to reduce costs by eliminating unnecessary contacts. Through better self-service, through automation and through increased FCR, they are able to ensure that consumers can resolve their issues without using the phone services that cost the most money.

Of course, one short-term side effect of reducing the number of calls is that the same total running costs will now be divided by a smaller number of contacts. This will drive Cost Per Call up significantly.

Nick Bhugeloo says that “This is not a measurement to get too hung up on – if your general strategy is to bring down costs. You don’t need to be looking at cost-per-call, you need to be looking at how you implement certain strategies within your contact centre.

“Basically, reduce your call volume. If you don’t get that many calls, you don’t need the same level of resource to handle them.” 

Do you have any other key considerations for CPC?

If so, please share them, along with your thoughts on this article, in an email to Call Centre Helper.

Author: Megan Jones
Reviewed by: Jo Robinson