Incorporating a call center system into your business is a great way to field incoming calls from customers and prospects. These systems allow you to manage calls quickly and easily, routing them to the correct parties in a timely manner. Find a service provider that offers the best value for your business by assessing different sets of costs and features.
What is a business phone system?
Business phone systems help you manage both incoming and outgoing calls. These calling networks support targeted call routing and customer service lines, ensuring your team and customers connect with the right person at the right time. Most business phone systems offer multiple lines, conference calling features, interactive voice response (IVR) menus, and hold music or messages.
The right business phone system can make your business appear more polished and professional to callers. It can also streamline your internal calling operations and make your sales team more efficient at reaching out to prospects. When choosing a business phone system, though, it is important to understand how to calculate costs. This guide will break down the various pricing models and fees that go into the overall cost of a business phone system.
Capital expenses
Capital expenses refer to the upfront cost of implementing and maintaining a call center system. They depend largely on the hosting method you choose – i.e., a cloud-based or on-premises solution. Look for a system with low overhead and few maintenance requirements.
On-premises (self-managed)
If you choose a system that will be installed on your own servers and computers, you'll have to pay for the initial hardware and any additional storage required for expansion. You'll need lots of storage capacity if you're going to use functions such as call recording or workstation recording. You'll also need staff to look after the running of the system. This might be one or two people for a small operation, up to a whole team of IT professionals for a large call center.
You will also have to account for the cost of the software. Buying all this in advance could be very costly, but on-premises is the preferred solution for businesses that want total control of the operation. Paying for a system on a contract basis over time usually entitles you to some technical support from the vendor. After all, vendors don't want to lose your business if you're having problems they could easily fix.
Cloud hosting
Choosing a system that runs in the cloud will cut down on your capital expenses, as there will be no need to buy or lease servers or hard drives. Generally, cloud-based phone systems are managed and maintained by the vendor's own IT staff, reducing your need for in-house technical support. Cloud hosting is an optimal choice for a small business on a budget, typically costing a fraction of the upfront costs an on-premises solution requires. Most cloud-based phone systems are available for a monthly subscription fee, which many small businesses find more manageable than the immense expense of setting up servers and hiring the staff to maintain an on-premises solution.
Call center costs and subscription fees
Monthly or annual subscription fees vary by vendor, but these are meaningless unless you factor in the total costs of operating the system. Usually, a software company charges on a per-operator basis, making it more expensive for larger call centers. If you expand, the subscription rate will increase with each additional operator.
Subscription fees are not the only regular expense. You also need to consider the cost of outbound services. Your subscription agreement might lock you into a high cost for outbound calling, which can greatly inflate the nominal monthly rate.
"Some call center subscriptions have monthly subscription plans, like $50 to $100 per month with a minute plan or pay-as-you-go plan," said Ben Reynolds, CEO and founder of Sure Dividend.
Atta Ur Rehman, outreach consultant at Printex Graphics, also recognizes that subscription fees vary, but he said the typical costs range from 75 cents to $1.15 per minute.
"Prices usually decrease when buying more minutes," Rehman said. "Companies that need the most basic coverage can expect around $900 to $1,100 per month for 1,000 minutes."
Joseph Ansanelli, CEO and co-founder of Gladly, offered up some more specific call center subscription fees:
- A full-service agent help desk or ticketing system often cost about $150 to $300 a month per seat.
- Voice integration partner services typically cost $50 to $100 a month per seat.
- Channel-specific vendors, such as email and live chat solutions, typically cost $30 to $50 a month per seat.
- Customer platforms, such as CRM and order management systems, tend to cost about $150 a month per seat.
Outbound calling fees
These days, VoIP (Voice over Internet Protocol) services provide the most cost-effective solutions for call centers, because outbound calling plans are so much cheaper than regular business landline rates. The great freedom of a self-managed system is that you can choose from the large number of VoIP service companies to get a competitive price.
With a hosted system, you pay not only a monthly fee per operator, but a per-minute or per-30-second rate for outbound calls, and usually, you have no choice as to the outbound call center provider. Discounts are normally available for higher call volumes.
Another option, especially if you go the self-managed route, is to sign up for an unlimited calling plan. These plans allow unlimited outbound calls, usually within certain areas or countries, for a monthly fee per operator. Whether this works out to be a better value than paying for individual calls will depend on the number and average duration of calls your operators make.
Inbound calling fees
While some of these costs vary in certain circumstances, like the COVID-19 pandemic, there are standard costs associated with inbound calling.
"You've got all the standard costs that it takes to get a person in place, up to and including hardware, software, physical equipment, people, training, all the things that go with HR, salaries, benefits, hiring costs, firing costs, transition costs, and everything in between," said Jeff Kahne, Ph.D., principal at Firefly Consulting.
Kahne added that businesses can now push calls to operators' homes with some services. "Voice over IP (VoIP) is fast, and you don't have the same problems we used to have with running business phones to a home. You have a little bit of reduction in the cost of the physical plant, but all the human costs, maintenance costs, software and equipment costs."
Ansanelli said that phone calls and emails can cost two to three times more than modern digital channels like live chat, social platforms and self-service. "That's because modern digital channels are asynchronous. Customers don't expect you to respond right away, and that allows agents to serve multiple customers concurrently."
Virtual call center
When using a virtual call center, your employees don't need to work in a designated building. Agents can work remotely or answer calls from their homes. We've seen a lot of this in 2020, and some businesses might make this their permanent way of operating call centers moving forward if they see a drastic reduction in their costs.
In-house call center
This is when all your employees and call center service operations are handled within the company. All agents are trained and employed within your business, which can be very expensive.
According to Glassdoor, a customer service representative can be paid up to $36,000 a year. You also need to factor in the costs of training and the tools you'll need – the phone system itself, office supplies, and anything else your team will need to complete their call center activities.
According to CloudTask, the total expense of salaries and benefits for an average in-house call center can be up to $141,284 a year. Hiring costs run around $20,645, while office space can cost about $48,000, and software and hardware can run up to $3,600. These costs can vary by region.
Outsourced call center services
Hiring an outside contact center to manage your call service activities can take a load off your staff's shoulders, but it has a significant impact on how much you spend for call center services. There are two basic types of outsourced inbound call center services:
- With a shared service, several representatives from the call center company are assigned to answer calls on behalf of several businesses besides yours. You pay a per-minute cost, ranging from about 70 cents to $1, for shared agents. This is best for small businesses with a low call volume.
- With a dedicated service, a group of representatives from the call center manages calls for your business exclusively. You are usually charged on an hourly basis for dedicated agents, which can cost upward of $25 per hour. This is the best option if you have a consistently high flow of calls or special considerations that require agents to be intimately familiar with your business.
According to Eng Tan, CEO of Simplr, the average handle time (AHT) of a call center's work for you is calculated by adding the total talk time (or online chat time) to the total hold time and after-call work (often listed on your bill as "agent work time"). This sum is then divided by the total number of calls.
Total talk time + total hold time + total after-call tasks ÷ total number of calls = AHT
"Typically, call centers charge by the labor hour," Tan added. "The problem with this is that companies must pay for both productive talk time as well as unproductive downtime."
Not every call center charges you for the time agents spend working on your account when they're off the phone. When researching providers, see if they charge for "agent work time."
Another factor that can significantly inflate the cost is incremental billing. For example, with a call center that rounds up to the nearest minute for every call, you'll pay a lot more in the long run than if you'd paid for the exact time the agents spent on the phone. Billing in 12- or six-second increments is pretty standard. To pay for the exact time a call takes, look for a service with second-to-second billing.
Additional factors that affect costs
There are key features that can boost the service quality of your answering service. Call center pricing doesn't only depend on whether you need outbound or inbound call services, but also on elements like reporting options, customer care, social media resources and live chat options. When searching for a call center service or software, you might want to look for a program that also offers lead generation, and you should make sure it can meet the demands of your business's monthly call volume.
The geographical region of the call center is another factor in your overall costs.
"Location plays a role in contact center costs in two main ways: across labor wages and telephony," Ansanelli said. "For labor, some companies choose to operate out of regions with lower wages, and hourly costs can vary from $5 to $25 per hour. Staffing in international locales may require additional training and coaching, but the cost difference can make it worthwhile."
Location can also impact long-distance fees on traditional carriers. Using VoIP technology on a tested, secure and scalable carrier can significantly drive down your monthly usage fees.
"With cloud-based contact center solutions, location has become less relevant, as agents can work from anywhere – in [an] office or at home, onshore or abroad," Ansanelli said.
Tips to reduce call center costs
These are some ways you can save money when working with a call center service.
1. Reduce call volume and length.
Kahne suggests moving customers to self-service options like your website, automated systems and chatbots to lower call volume and length. However, he added, you should weigh this against customer satisfaction metrics like your Net Promoter Score. You'll also need to determine how many of your calls you want answered at what speed.
"For example, if you're currently answering 80% of your calls in 30 seconds, one way to cut costs is to go to 80% in 40, 50 or 60 seconds," Kahne said. "That lowers the number of seated agents required for a period of time."
2. Leverage on-demand staffing.
Tan said that on-demand staffing is the best way to reduce call center costs, because then you'll only pay for the work performed and issues resolved. The most expensive time intervals to support customers are low-volume hours and when unexpected call volume occurs, according to Tan, because this might make overtime pay necessary.
"When volume is higher than forecasted, the on-demand staffing model allows for an influx of volume to be handled without incurring additional overtime charges or penalties," Tan added.
3. Properly train your agents.
This might seem like a no-brainer, but thoroughly trained agents are likely to resolve issues more quickly and have fewer repeat calls. If call centers don't invest in employee training, management would need to hire more people to handle the same tasks, according to Yaniv Masjedi, telecommunications expert and CMO at Nextiva.
4. Eliminate duplicate tickets.
Ansanelli said that ticket duplication is a big issue with most ticket-based customer service platforms.
"If a customer sends an email, then follows up with a call about the same issue, that creates two tickets that are fielded by two agents," he said. "Implementing a customer-based platform eliminates this issue and can reduce inbound volume by 30% or more."
[To learn more about your options, browse our guide to the best call center services.]
Jennifer Post contributed to the reporting and writing in this article.