When McKinsey & Company speaks about customer experience, businesses pay attention. They recently discussed how contact centers must prioritize achieving performance excellence by focusing on CX, cost optimization, and revenue maximization. CX encompasses all customer interactions with a business throughout their relationship, covering every touchpoint from initial product/service awareness to post-purchase support. Today’s competitive landscape places equal importance on the experience provided by a company alongside its product or service, and CX has become a crucial element in retaining customers and driving business growth. While 80 percent of firms believe they deliver superior customer service, only eight percent of customers agree. Failure to deliver a positive customer experience puts you at risk of losing customers, as Forbes reports that 96 percent of customers will switch due to bad service.

When it comes to measuring CX success, one metric that businesses often prioritize is First Contact Resolution (FCR). FCR serves as a key performance indicator in customer service, gauging the percentage of customer inquiries or issues that get resolved during the initial interaction with a customer support representative or through self-service channels. It plays a pivotal role in evaluating the efficiency and effectiveness of a company’s customer service operations. To be considered world-class, an FCR rate of 80 percent or higher is the benchmark, while a rate below 70 percent is deemed poor.

With an FCR rate below 70 percent, the financial repercussions can be severe, especially when you consider the potential loss of 96 percent of customers due to unsatisfactory service. In today’s digital workforce, the stakes have never been higher, emphasizing the importance of refining your customer service approach and prioritizing FCR enhancement. Let’s delve into the importance of FCR below.

The Importance of First Contact Resolution

In today’s self-service era, customers are inclined to resolve issues independently whenever possible. However, when faced with more complex problems that require external assistance, customers have high expectations for prompt and effective resolution. The data supports this trend, as Salesforce reveals that 83 percent of customers expect to solve complex problems by engaging with a single point of contact.

First contact resolution is a crucial metric for evaluating customer satisfaction in the realm of customer experience. It signifies the capability of a customer service representative to address and resolve a customer’s issue during the initial interaction, eliminating the need for multiple agent transfers, repetitive information sharing, or subsequent follow-ups. Customers value having their concerns resolved in the first call, and enhancing FCR can positively impact their perception of the service received. Notably, a 1:1 correlation exists between first contact resolution and customer satisfaction scores (CSAT). A one percent increase in FCR corresponds to a one percent increase in CSAT, underscoring the vital link between the two metrics.

Measuring FCR provides organizations with valuable insights into the effectiveness of issue resolution and areas for improvement. Higher FCR rates yield tremendous benefits for businesses, indicating that customer support is successfully addressing customer needs during the initial interaction without the need for transfers. This achievement has a multiplier effect. According to Forrester, companies that can quickly solve customer problems are 2.4 times more likely to retain those customers and 10 times more likely to receive customer recommendations when all inquiries are answered. Elevated FCR rates also improve agent morale, productivity, give a competitive edge, and reduce costs.

A high FCR rate is vital in delivering a positive customer experience and improving business performance, but what is the impact of low FCR rates and what’s causing it? 

The Cause of Low First Contact Resolution Rates

Curious about the implications of low FCR rates for your contact center? Well, the reality isn’t favorable. Many consumers find themselves contacting support agents multiple times before their issues are resolved. This frustration is amplified when customers are transferred to back-office departments using different communication platforms, which causes them to repeat their concerns. Such blind spots lead to customer dissatisfaction, as they anticipate efficient resolution by a single agent for complex matters. Unfortunately, this subpar customer service results in fewer referrals, decreased customer loyalty, and negative reviews and directly impacts revenue. However, the consequences don’t end there.

Low FCR rates are a clear sign of underlying inefficiencies in the customer support process. Businesses confronted with this issue must actively seek solutions to address it. However, before finding solutions, it is crucial to understand the root causes behind low FCR rates. So, let’s explore the primary factors contributing to it.

• Inadequate Agent Tools Resulting In Lack of Access to Data: One of the primary factors influencing first contact resolution is the lack of customer information and comprehensive product or service data. Data plays a vital role in running an effective contact center as it provides valuable insights into customer preferences, enabling the delivery of a superior experience. Without a centralized system connecting front-line agents with back-office subject matter experts, agents may find themselves navigating through multiple applications or systems to access the necessary information. These gaps can lead to errors, inconsistencies in customer interactions, and slower resolution of customer inquiries. Without a holistic view encompassing customer support requests, purchase history, and previous interactions, the result often involves transfers or the need for customers to make subsequent calls.

• Lack of Sufficient Agent Training: The impact of inadequate training on agent performance cannot be understated, as it directly affects their ability to handle complex calls, significantly reducing FCR rates. This situation often leads to a vicious cycle of attempting to train agents before they leave the business. The complexity of the product or service offered by an organization further amplifies this challenge. Insufficient training contributes to a decline in service quality and an unsatisfactory customer experience, with agents resorting to reading scripts and providing generic answers that fail to address the customer’s issue, leading to frequent transfers between agents. This detrimental cycle hinders a company’s ability to consistently deliver high-quality customer service, leading to diminished customer satisfaction and retention rates. Additionally, poor training contributes to a high turnover rate among agents. According to PR Newswire, 47 percent of managers identify high agent turnover and absenteeism as their most significant challenges when operating a contact center.

• Lack of Context: The absence of context can significantly impact CX and FCR rates. When there is a lack of clarity regarding the customer’s journey and interactions with the brand across various touchpoints and channels, effectively routing them to the most suitable service agent becomes challenging. This can lead to customer frustrations as they are transferred between representatives who may not possess the required knowledge or expertise to address their specific issues. Agents struggle to provide personalized and efficient resolutions without a comprehensive understanding of prior engagements, including the customer’s preferred communication methods and past interactions. As a result, customers may feel undervalued and misunderstood, eroding their trust in the brand. Failing to incorporate context into customer interactions jeopardizes meeting customer expectations and anticipating their needs, ultimately resulting in dissatisfied customers and potential loss of business.

• Complexity of the Call & Ineffective Routing System: Every call is unique, but the complexity of a call will directly impact the likelihood of transfers or subsequent calls. When customer inquiries or issues are more complex, agents need more time and effort to address them effectively, especially when they lack context. This can result in longer resolution times or customers contacting the support center multiple times. Additionally, challenging calls often necessitate involvement from multiple departments, further complicating the process and increasing the risk of errors. The effectiveness of your call routing system also influences FCR. Systems like interactive voice response (IVR) direct callers to the appropriate destinations. They consider factors such as caller needs, product knowledge, spoken language, and location to ensure customers reach the most suitable agent without unnecessary transfers. However, a poorly implemented IVR system can create bottlenecks and barriers, impeding the seamless resolution of customer inquiries and diminishing the chances of achieving “world-class” FCR rates.

Now that we’ve established the significance of first contact resolution and what’s causing low rates, it’s time to examine the financial impact it’s having on your business.  

Low First Contact Resolution and the Financial Impact on Your Business

Every customer interaction, whether conducted over the phone, through email, or via chat, carries a cost for the business. The longer it takes to resolve an issue, the higher the incurred cost becomes. In situations where customer service agents cannot effectively address customer concerns, valuable opportunities for suggesting upselling or cross-selling options are missed, resulting in potential revenue loss for both the customer and the business. Remarkably, data indicates that poor customer service costs range from $75 billion to $1.6 trillion annually, signifying a significant impact even on the largest contact centers.

One thing you must bear in mind is that the cost of a poor customer experience due to low first contact resolution is more than lost sales or angry customers — it affects employee morale, company reputation, and even long-term viability.  

Let’s take a deeper dive into what makes up this high cost of poor customer service. 

Increased Operating Costs

In these uncertain economic times, businesses striving to cut costs must evaluate their contact center’s first contact resolution rate. A low FCR rate can lead to increased operating expenses as additional resources are required to address unresolved customer issues from initial interactions. This creates a ripple effect of extended call times, lengthier queue periods, and increased customer wait times, negatively impacting customer satisfaction. Improving FCR becomes crucial for maintaining cost efficiency and enhancing overall customer experience.

Resolving customers’ issues during their initial interaction with customer support eliminates the need for subsequent follow-up contacts. This reduction in customer contacts directly decreases the overall workload and resources necessary for managing customer support operations. It also enables agents to dedicate their attention to more complex tasks or those that demand greater empathy. One statistic reveals that a 15 percent enhancement in first contact resolution results in a significant 57 percent decrease in repeat call numbers, highlighting the value of prioritizing FCR to streamline operations and enhance customer satisfaction.

Even minor improvements in first contact resolution (FCR) can yield significant reductions in operating costs. For example, a contact center with 500 agents, each handling 100 calls per day, operating for 20 days per month, and with a 70 percent FCR rate results in 50,000 calls and operating costs of $250,000 per day (at a cost of $5.00 per call). However, a mere one percent increase in the FCR rate can translate to a monthly recovery of $15,000 and an annual recovery of $180,000! Now, envision the impact of achieving a 20 or 50 percent increase in FCR. Even minor first contact resolution improvements can lead to substantial financial benefits for the contact center.

Increased Customer Churn

Low FCR rates can increase customer churn, which represents the rate at which customers sever ties with a business within a specific timeframe. When customers experience swift and efficient issue resolution during their initial interaction with customer support, their loyalty to your company is more likely to remain intact. However, if customers must contact customer support multiple times, encounter numerous transfers, or endure prolonged waiting periods, frustration may arise and cause them to give their business to a competitor. This phenomenon is supported by data revealing that 80 percent of customers who switched to a competitor would have stayed if their issue had been resolved during their first contact. It underscores the importance of prioritizing FCR to foster customer retention and prevent customer churn.

Brand Damage

Low FCR rates not only result in increased operating costs and customer churn but can also harm your brand’s reputation, which may have taken decades to establish. Customers who must contact customer support multiple times to resolve an issue or go through multiple transfers will become frustrated and disappointed, leading to a negative perception of your brand. This negative experience may cause customers to question your company’s competency and share their experience with others, potentially damaging your brand’s reputation and further reducing sales opportunities.

Poor Employee Experience (EX)

Low first contact resolution rates not only affect customer satisfaction but also have a significant impact on your employees. Customer service teams often face the wrath of frustrated customers, leading to increased stress levels and burnout. Dealing with angry customers and repetitive issues can result in dissatisfaction among the customer support staff, leading to high turnover rates and incurring additional costs for recruitment and training. As mentioned earlier, a survey revealed that nearly half of the managers consider high agent turnover the most significant challenge for contact centers.

To make matters worse, when employees are constantly occupied with resolving recurring issues, they have less time to dedicate to more complex tasks or those that require a higher level of empathy. This results in a backlog of work and potential missed sales opportunities. As a result, employee satisfaction and productivity suffer, ultimately impacting your business’s financial performance. Low FCR rates and frustrated customers initiate a detrimental cycle that incurs not only financial costs but also depletes valuable human resources.

Lower Repeat Sales Opportunities

Customer service experiences are pivotal in shaping customer purchasing behaviors and brand loyalty. Data from Salesforce reveals that 94 percent of customers are more likely to make repeat purchases following a positive customer service encounter. With the growing influence of social media and online reviews, businesses face heightened expectations to deliver exceptional experiences. As previously mentioned, low FCR rates can hinder opportunities for upselling or cross-selling, resulting in missed sales and revenue. Data from Zippia demonstrates the consequences of subpar customer service, with 78 percent of customers abandoning a purchase due to a negative experience and 60 percent ceasing to engage with a once-beloved brand after multiple disappointing encounters.

A Modern Approach to Improving First Contact Resolution  

Are you facing challenges in your contact center and actively seeking ways to enhance your bottom line? What if there was something that could lower operating costs, reduce customer churn, and enhance sales opportunities, all while improving customer satisfaction and employee experience? It may sound too good to be true, but luckily, such a solution does exist. By providing agents with context and a deeper understanding of customer issues, they can deliver personalized and effective service, resulting in an elevated customer experience.

By downloading our free eBook, A Modern Approach to First Contact Resolution, you gain access and valuable insights into the secrets modern contact centers are using to improve their FCR rates and cut costs without the need for additional staff. It answers all of your questions, and it breaks down how a powerful combination of Unified Communications as a Service (UCaaS) and Contact Center as a Service (CCaaS) can provide faster access to information, connect subject matter experts in the back office to agents in real time, streamline communication channels, and improve efficiency, allowing customer service representatives to resolve issues quickly and effectively. Our eBook will guide you through the process of integrating these technologies and creating a seamless customer experience. Don’t miss out on this opportunity to elevate your customer service.