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ACCAN often hears stories from consumers spending hours waiting and trying to resolve problems with telcos (eg on the phone, in shops, or via chat windows). We know that all this time has a value to consumers but what is the cost?

A new report released today from ACCAN provides advice on how to estimate the cost of consumer wait time.

 

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Customers wait to be heard, explain their problem, wait again, then explain their problem again. We know that all this time waiting has a value to consumers but what is the cost?

ACCAN commissioned research by economic consultancy Synergies to provide advice on how customer wait times can be costed. Below is a summary of the report published today.

How do you estimate the cost of something that has no price?

Customer time – whether waiting to speak to an agent or waiting for a connection to be restored – does not have a price. This is because it’s not traded in a market like the time spent working. However, we know that customer time has a value so we can estimate a cost.

Getting a cost for goods that aren’t traded is called a “non-market valuation”. Economists use two methods to estimate this:

  • Revealed preference – these methods look at relationships between goods (or aspects of goods) that are traded, or priced, and goods that aren’t to work out how consumers may value the non-traded items. For example, broadband is sold at different prices with different inclusions (such as speed, data, or entertainment content). Revealed preference models look at how many consumers choose different packages and at what price to estimate how much customers value certain aspects, like speed; and

  • Stated preference – these methods ask consumers directly through surveys to get information about how they value different options. For example, asking a consumer which broadband package they prefer.

How are costs estimated in other sectors where there are no prices?

Our consultant, Synergies, looked at how customer time has been estimated in other sectors. They looked at transport, water, and waste management.

Synergies found most of these studies are in the transport sector, where the value of time is used to measure the benefits of public infrastructure spending. Specifically, the value of time is used to measure travel time reductions as a benefit of investing in different modes of transport or road design (e.g., the benefit of adding a lane to a highway or a new train system).

The way the average value of time is calculated in transport is well-accepted and relatively up-to-date. Travel time is valued at an average of $13.70/hour (2018 dollars).

Can we use the costs from other studies in telco?

The Australian Transport Assessment and Planning (ATAP) Guidelines contain best practice for estimating non-market value. This approach, and the costs that have been estimated in recent studies, can be applied to telco customer time forgone.

We believe that travelling in a car is a similar use of time as trying to resolve an issue with a telco. This is because in both scenarios there is a limited amount of multi-tasking that can be done. Thus, the time forgone driving a car or trying to resolve an issue with your telco is time you can’t dedicate fully on something else. The time is “forgone” or lost from more preferable activities.

To apply the transport costs to telco, the steps to resolve an issue with a telco are classified as either “waiting” or “progress”. The picture below illustrates the process showing either progress or waiting time. This is then used to classify the time spent for costing using the transport values.

 

Figure 1 Steps in resolving a telco service issue

Figure 1 - Steps in resolving a telco service issue

 Data source: Synergies illustration

The ATAP Guideline gives a cost for each hour an average person spends travelling. Then there are additional amounts that can be added to account for inconvenience in addition to the travel time. This allows for a range to be estimated depending on the circumstances of the journey.

Waiting is either between modes (waiting for a train after a feeder bus journey) or with congestion on a road (traffic stops so no progress is being made). A penalty value is added to the average time to account for waiting. Applying this to the telco scenario, waiting is for the initial contact with a service representative, or between transfers.

Transfers are when a transport journey requires different modes. The penalty value is added to the average time to account for the inconvenience of having to change from either a car or bus to a train or vice versa. It adds complexity to the journey. Applying to telco, transfers are when an initial (or subsequent) service representative cannot resolve the problem and the customer is transferred to another.

Crowded conditions are when passengers need to stand on public transport. This is an added aggravation and so a penalty is estimated to add to the average travel time. Applying to telco, crowded conditions are thought to be similarly frustrating as having to re-explain the problem.

We have applied this model to telco using the penalty values to construct ranges for each step in the process as shown in the table below.

Step in process trying to resolve telco issue Minimum travel equivalent Maximum travel equivalent 
Wait for customer service representative  Average travel time Average travel time + wait time penalty
Explain issue to customer service representative Average travel time Average travel time 
Transfer to another customer service representative Average travel time + wait time penalty Average travel time + transfer penalty
Explain issue to next customer service representative Average travel time + wait time penalty Average travel time + crowded conditions penalty

 

Using the figures from the report we calculate the following values:

Step in process Estimated cost (per hour) Estimated cost (per minute)  Maximum cost (per hour) Maximum cost (per minute)
Wait for customer service representative $13.67 $0.23 $19.14 $0.32
Explain issue to customer service representative $13.67 $0.23 $13.67 $0.23
Transfer to another customer service representative $19.14 $0.32 $20.51 $0.34
Explain issue to next customer service representative $19.14 $0.32 $22.56 $0.38

 

What is the cost to a customer to resolve a problem with their telco?

We have applied the framework to an example of a consumer resolving an everyday problem of a delayed internet connection.

  • Ann (not her real name) orders a broadband connection from a telco’s website. The confirmation email says that it will take between 10 and 20 business days to connect;

  • After 23 business days she called the telco to inquire about its progress;

  • Once connected, she selected an option from the menu, then waited for an operator to pick up: total time was 4 minutes;

  • Ann explained the problem to the operator, the operator explained another operator would need to assist: total time was 5 minutes;

  • She waited to be connected to the next operator: total time was about a minute;

  • She explained problem to a second operator and the operator was able to help: total time was 20 minutes.

 

The total time on the phone was 30 minutes. The model uses a range of values to estimate cost, which recognises that individual consumer experiences will vary. When we apply those values as shown in the table below, the estimated cost range for that service interaction is between $8.75 and $10.28.

Step in process Minutes taken Estimated cost Estimated max cost
Wait for first contact 4 $0.91 $1.28
Explain issue to operator 5 $1.14 $1.14
On hold while transfer to next operator 1 $0.32 $0.34
Speak to second operator 20 $6.38 $7.52
Total 30 $8.75 $10.28

 

How can the report findings be applied more generally?

We have used the values from the report to estimate what the potential costs are to consumers generally. We have used the following assumptions:

  • Number of calls: in 2017-18 the ACMA reported that five telcos received over 88 million customer service enquiries, 80 per cent of which were made by phone1. We multiplied these figures to estimate the number of calls customers make to telcos.
  • Number of conversations: the same report also included call abandonment rates – how often customers hang up before the call is answered. The average rate was 4.9% to 15.3%. We used the top of the range to arrive at a conservative estimate of how many conversations customers are having with telcos.
  • Length of conversations: in 2015 the ACMA released research on the estimation of benefits from its reconnecting the customer work. It included an assumption that customers spend an average of 3.4 hours trying to resolve complaints2. Since this is total time, we have used findings from ACCAN’s Can You Hear Me? research to estimate the number of calls to resolve a problem – which found that an average 2.6 contacts were required for resolution3.


These figures can be used to develop an estimate of total hours customers spent on the phone trying to resolve an issue with telcos. The steps of the calculation are set out in the table below.

 

Description   Value
Number of enquiries made to telco A 88,000,000
Proportion of enquiries made to telcos via telephone B 80%
Estimated number of phone enquiries A x B = C 70,400,000
     
Call abandonment rate  D 15%
Estimated number of calls to resolve C x (1-D) = E  59,840,000
     
Average time spent trying to resolve  F 3.4 hours
Average number of calls to resolve G 2.6
Total hours spent per call F / G = H 1.3
     
Total hours spent by consumers on calls E x H = I 78,252,308
Average value of customer time J $13.67
Total estimated cost of resolving problem on phone with telco I x J  $1,069,709,046

 

What are the broader impacts of estimating the costs of customers’ time resolving problems with telcos?

When customers spend time trying to resolve problems with their telco it has an opportunity cost. That is, the customer is forgoing another activity in order to speak with the telco to resolve the problem. This may result in lost time or productivity at work, or reduced personal time – both of which have an impact on the customer. More broadly, there is an impact on the efficient functioning of the market.

Efficient markets depend on engaged and confident consumers. Consumers need to feel confident making decisions about choosing telcos and plans, and resolving problems. If consumers find these difficult, frustrating or overwhelming they may avoid doing it – what is known as disengaging from the market. Disengaged consumers means that providers can increase prices or lower quality without the competitive pressure of inquiring and switching consumers.

Thus, the value of the time consumers spend trying to resolve problems provides an important consideration for policy makers. Minimising this time will promote the efficient functioning of the market by supporting customers to engage in the competitive process rather than avoid or ignore it.

 

1 https://www.acma.gov.au/theACMA/customer-service-from-australias-largest-telcos

2 https://www.acma.gov.au/-/media/Economics-Advisory/Research/PDF/Reconnecting-the-Customer_estimation-of-benefits-pdf.pdf?la=en

3 https://accan.org.au/our-work/research/1523-can-you-hear-me-ranking-the-customer-service-of-australia-s-phone-and-internet-companies

 

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