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™
TABLE OF CONTENTS
Executive Summary .............................................................................................................................................................. 2
Disclosures........................................................................................................................................................................ 3
TEI Framework And Methodology ...................................................................................................................................... 4
Analysis ................................................................................................................................................................................. 5
Interview Highlights ......................................................................................................................................................... 5
Costs ................................................................................................................................................................................. 6
Benefits ............................................................................................................................................................................. 8
Flexibility........................................................................................................................................................................ 12
Risk ................................................................................................................................................................................. 12
Financial Summary ............................................................................................................................................................. 14
The Tealeaf Customer Service Optimization Suite: Overview .......................................................................................... 15
Appendix A: Composite Organization Description ........................................................................................................... 16
Appendix B: Total Economic Impact™ Overview ............................................................................................................ 16
Appendix C: Glossary ......................................................................................................................................................... 17
© 2011, Forrester Research, Inc. All rights reserved. Unauthorized reproduction is strictly prohibited. Information is based on best available resources.
Opinions reflect judgment at the time and are subject to change. Forrester®, Technographics®, Forrester Wave, RoleView, TechRadar, and Total
Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. For additional
information, go to www.forrester.com.
Page 1
Tealeaf commissioned Forrester Consulting to examine the total economic impact and potential return on investment
(ROI) enterprises may realize by deploying the Tealeaf Customer Service Optimization (CSO) Suite. The purpose of
this study is to provide readers with a framework to evaluate the potential financial impact of the Tealeaf CSO Suite on
their organizations.
Forrester conducted interviews with five existing customers and subsequent financial analysis found that a composite
organization based on these companies experienced the risk-adjusted ROI, costs, and benefits shown in Table 1. See
Appendix A for a description of the composite organization.
Benefits. The composite organization experienced the following benefits that represent those experienced by the
interviewed companies:
o
Reduction in call center average handle times. By arming call center representatives with the Tealeaf
CSO Suite, callers don’t have to explain what they did on the site, and handle times decrease by 30
seconds on average.
o
Reduced escalation costs. As call center representatives are able to view online usability issues through
replaying a caller’s session using Tealeaf CSO Suite, the CSR is able to understand and solve the
caller’s issue on the same call. CSRs can reduce a number of calls each month that would otherwise
have been escalated to a supervisor for problem resolution.
o
Incremental revenue from increased conversion rate. By using the Tealeaf CSO Suite, customer
service representatives (CSRs) enabled callers to complete their transaction when otherwise they would
have abandoned the transaction. This captures additional revenue and is attributable to the composite
organization’s use of the CSO Suite.
Costs. The composite organization incurred the following costs:
o
Page 2
Software license and maintenance costs. Software license and maintenance fees make up the bulk of
the investment in the Tealeaf CSO Suite. CSO Suite licenses are sold per seat at a list price of $1,000
per seat. This license allows the composite organization to leverage its investment in the core Tealeaf
Customer Behavior Analysis (CBA) Suite.
o
Professional services and training fees. The composite organization has found that Tealeaf
professional services can improve implementation and effectively train customer service staff to get the
most from the solution.
$350,000
$300,000
$250,000
$200,000
Total cost
$150,000
Total benefit
$100,000
Payback
$50,000
$0
Initial
Year 1
Year 2
Year 3
($50,000)
($100,000)
The reader should be aware of the following:
The study is commissioned by Tealeaf and delivered by the Forrester Consulting group.
Forrester makes no assumptions as to the potential ROI that other organizations will receive. Forrester strongly
advises that readers should use their own estimates within the framework provided in the report to determine the
appropriateness of an investment in the Tealeaf CSO Suite.
Tealeaf reviewed and provided feedback to Forrester, but Forrester maintains editorial control over the study and
its findings and does not accept changes to the study that contradict Forrester’s findings or obscure the meaning
of the study.
The customer names for the interviews were provided by Tealeaf.
Page 3
From the information provided in the interviews, Forrester has constructed a Total Economic Impact™ (TEI)
framework for those organizations considering implementing the Tealeaf CSO Suite. The objective of the framework is
to identify the cost, benefit, flexibility, and risk factors that affect the investment decision.
Forrester took a multistep approach to evaluate the impact that the Tealeaf CSO Suite can have on an organization (see
Figure 2). Specifically, Forrester:
Interviewed Tealeaf marketing, sales, and services personnel and Forrester analysts to gather data relative to the
Tealeaf CSO Suite and the marketplace for it.
Interviewed five organizations currently using the Tealeaf CSO Suite to obtain data with respect to costs,
benefits, and risks.
Designed a composite organization based on characteristics of the interviewed organizations (see Appendix A).
Constructed a financial model representative of the interviews using the TEI methodology. The financial model
is populated with the cost and benefit data obtained from the interviews as applied to the composite organization.
Perform due
diligence
Conduct
customer
interviews
Design composite
organization
Construct financial
model using TEI
framework
Write case
study
Forrester employed four fundamental elements of TEI in modeling the Tealeaf CSO Suite’s service:
1.
Costs.
2.
Benefits to the entire organization.
3.
Flexibility.
4.
Risk.
Given the increasing sophistication that enterprises have regarding ROI analyses related to IT investments, Forrester’s
TEI methodology serves the purpose of providing a complete picture of the total economic impact of purchase
decisions. Please see Appendix B for additional information on the TEI methodology.
Page 4
A total of five interviews were conducted for this study, involving representatives from the following Tealeaf
customers:
1.
A travel agency.
2.
A furniture retailer with stores and an online presence.
3.
A provider of sales and settlement solutions for the travel and hospitality industry.
4.
A financial services company.
5.
A full-service regional bank.
The companies interviewed had the Tealeaf CSO Suite in place for at least three months. The interviews with these
companies uncovered the following points:
The Tealeaf CSO Suite extends the benefits of Tealeaf CBA Suite to bring additional value to the
organization. All interviewed customers indicated that Tealeaf CSO Suite brings incremental benefits to their
organization in addition to the value received from Tealeaf CBA Suite. The financial model for CBA Suite was
previously presented in The Total Economic Impact™ Of The Tealeaf Customer Behavior Analysis Suite (based
on interviews with four different customers). Many customers purchase the CBA Suite first and, with its success,
purchase CSO Suite to move issue resolution closer to the customer. “After two weeks of using CBA Suite, the
product was paying for itself. Something was blocking conversions on the site, and [cx]Impact showed us the
problem so we could fix it. We then wanted [cx]Reveal as we found out that the customer is incapable of telling
you what is wrong, but they are not lying.”
The Tealeaf CSO Suite empowers CSRs to solve problems the first time. Providing the Tealeaf CSO Suite to
CSRs enables them to understand the caller’s issues and resolve it on the first call. “Generally, all issues are
resolved with Tealeaf. You go from having no idea what the caller is talking about to seeing everything.”
The Tealeaf CSO Suite reduces average handle times. The CSRs praised the ability of Tealeaf to replay
customer sessions, allowing them to see and explain common issues that arise on important web tasks.
“Customers were having trouble pulling statements; now, the agents can see where the customer is on the site and
give them additional information so they can access their statement.” “Customers are stating that something is
not working (like forgetting their password); the rep can see where the customer is typing the information and
direct them to the correct place.” One company indicated that average handle times decreased by 8% (22
seconds) per online-related call in which Tealeaf was used, as the agents are able to address usability issues
faster. One agent indicates: “Tealeaf is wonderful. I’ve had several customers claim that [transactions] weren’t
made when they were requested. I’ve been able to see the replay and tell them that they weren’t on the correct
screen.”
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The Tealeaf CSO Suite integrates easily into CRM applications. Tealeaf can easily integrate into existing
CRM applications. “Integration into in-house CRM is simple — it took about 10 minutes to drop in an iframe.
Now, based on an email address, the CSR can go right to the replay.”
Based on the interviews with the five existing customers provided by Tealeaf, Forrester constructed a TEI framework, a
composite company, and an associated ROI analysis that illustrates the areas financially affected. The composite
organization that Forrester synthesized from these results represents a business-to-consumer retail organization that
employs 35 CSRs to handle inbound calls, emails, and chats. See Appendix A for more details on the composite
organization.
Table 2 provides the model assumptions that Forrester used in this analysis.
The discount rate used in the PV and NPV calculations is 10%, and time horizon used for the financial modeling is
three years. Organizations typically use discount rates between 8% and 16% based on their current environment.
Readers are urged to consult with their respective company’s finance department to determine the most appropriate
discount rate to use within their own organizations.
This section describes the overall costs to initially implement, roll out, and maintain the Tealeaf CSO Suite, based on
the characteristics of the composite organization. These costs include licensing and maintenance fees and professional
services fees that include implementation, training, and best practices for usage. Note that the costs listed are reflective
of Tealeaf list pricing. Further, the assumption is made that the composite organization has already purchased CX
Extended Edition as part of its implementation of CBA Suite.
Software licensing and maintenance fees are the bulk of the costs associated with the use of Tealeaf CSO Suite. Tealeaf
provided standard list pricing for an implementation by the composite organization that includes the cxReveal product,
which is licensed on a per-seat (per CSR) basis.
Page 6
The composite organization used Tealeaf to set up the application and provide initial training to the customer service
organization. It initially purchased services that included implementation, product user training, and best practice
training for a total of five days and $10,000 ($2,000 per day). Although implementation into existing CRM applications
is normally straightforward and customer service agents easily understand how to use the product, the composite
organization feels that the use of Tealeaf professional service allows it to maximize the learning curve.
The total cost for the composite organization to implement the Tealeaf CSO Suite is illustrated in Table 5.
Page 7
The next component of this analysis examines the potential benefits associated with an organization investing in the
Tealeaf solution. Interviewed customers identified several distinct benefit areas where they were able to realize tangible
value as a direct result of using the Tealeaf CSO Suite (in addition to the value received from the Tealeaf CBA Suite).
These include:
A decrease in average handle times of 8% or about 30 seconds.
A 50% reduction in web-related calls that escalate to a supervisor.
An increase in the revenue resulting from additional completed orders.
This section illustrates the possible ways to quantify the impact of these benefits for the composite organization and is
based on information collected during the interview process. Readers are advised to use their own estimates to generate
a potential return for their organizations.
The main benefit identified by interviewed customers is the improvement in the average handle time by the CSRs. By
providing the agent with the ability to replay the customer session without needing to ask a series of diagnostic
questions, the problem is more efficiently handled. “It is so simple and intuitive. Usability is so relevant to the
customer, and you don’t want to guess and interpret what the caller is trying to explain.” One company reported a
decrease of 22 seconds in online-related transaction handled via the phone and using Tealeaf. Other companies reported
increased efficiencies and handling of calls. “We get the biggest visibility into the user. We could finally see what the
user is doing, instead of telling them to print the screen and fax it to me.”
The composite organization employs 35 CSRs (agents) who handle inbound calls, emails, and chats. The agents handle
10 calls per hour, of which 50% concern website usability issues. For 80% of those calls, the agent uses Tealeaf to
Page 8
diagnose the issue. With a decrease in average handle times of 30 seconds per call, productivity savings accrue to the
organization, as shown in Table 6.
Prior to Tealeaf, the composite organization escalated 0.25% of calls per month to a supervisor. The supervisor then
had to diagnose and troubleshoot the issue and either forward it to the web team for action or provide an answer back to
the client (either directly or indirectly). With the implementation of Tealeaf CSO Suite, those escalations are reduced
by 50%.
Page 9
The Tealeaf CSO solution enables the composite organization to not only resolve calls faster but also to convert orders
that would otherwise be abandoned. This is modeled in Table 8 by using 0.5% as the number of calls converted to an
order.
Page 10
Table 9 summarizes the total benefits (non-risk-adjusted) associated with the Tealeaf CSO Suite solution.
Page 11
Flexibility, as defined by TEI, represents an investment in additional capacity or capability that could be turned into
business benefit for some future additional investment. This provides an organization with the “right” or the ability to
engage in future initiatives but not the obligation to do so. There are multiple scenarios in which a customer might
choose to implement the Tealeaf CSO Suite and later realize additional uses and business opportunities. The value of
flexibility is unique to each organization, and the willingness to measure its value varies from company to company
(see Appendix B for additional information regarding the flexibility calculation).
Forrester defines two types of risk associated with this analysis: implementation risk and impact risk. “Implementation
risk” is the risk that a proposed investment in the Tealeaf CSO Suite may deviate from the original or expected
requirements, resulting in higher costs than anticipated. “Impact risk” refers to the risk that the business or technology
needs of the organization may not be met by the investment in the Tealeaf CSO Suite, resulting in lower overall total
benefits. The greater the uncertainty, the wider the potential range of outcomes for cost and benefit estimates.
Quantitatively capturing investment and impact risk by directly adjusting the financial estimates results in more
meaningful and accurate estimates and a more accurate projection of the ROI. In general, risks affect costs by raising
the original estimates, and they affect benefits by reducing the original estimates. The risk-adjusted numbers should be
taken as “realistic” expectations, as they represent the expected values considering risk.
The following implementation risk that affects costs is identified as part of this analysis:
The cost of professional services and the duration of training may be higher than originally anticipated for other
organizations. The amount of professional services and training needed will vary by organization.
The following impact risks that affect benefits are identified as part of the analysis:
Adoption risk is a risk that can greatly affect benefits. That is, one interviewed company indicated that nobody in
the business was given ownership of the software suite, resulting in only the basic benefits early in its use.
However, when a business analyst was assigned full time to using and exploiting Tealeaf features, significantly
greater benefits began to accumulate. Further, other companies reported that benefits also grew faster once
ownership moved from IT to an eBusiness group as part of a strategic focus on site conversion and optimization.
Interviewees all indicated that the basic features of Tealeaf are fairly simple to master, but they relied on Tealeaf
professional services and training to maximize their benefits. Failure to invest in professional services and
training may impact benefits.
Table 10 shows the values used to adjust for risk and uncertainty in the cost and benefit estimates. The TEI model uses
a triangular distribution method to calculate risk-adjusted values. To construct the distribution, it is necessary to first
estimate the low, most likely, and high values that could occur within the current environment. The risk-adjusted value
is the mean of the distribution of those points. Readers are urged to apply their own risk ranges based on their own
degree of confidence in the cost and benefit estimates.
Page 12
Page 13
The financial results calculated in the Costs and Benefits sections can be used to determine the ROI, net present value
(NPV), and payback period for the organization’s investment in the Tealeaf CSO Suite, as shown in Table 11 below.
Table 12 below shows the risk-adjusted ROI, NPV, and payback period values that are determined by applying the
risk-adjustment values (the mean) from Table 10 to the cost and benefit numbers in Tables 5 and 9.
Page 14
According to Tealeaf, with online competitors just a click away, companies must distinguish themselves through
superior customer service. Of course, this is far easier said than done. For example, how do you ensure a smooth
transition when a customer moves from an online channel to an offline channel? In order to provide your customers
with valuable assistance in support of their online activities, Tealeaf offers its Customer Service Optimization Suite,
which includes cxReveal.
Customer service optimization is about bridging the divide between contact centers and the day-to-day operations of
the website and mobile channel, so representatives are fully equipped to respond effectively to the needs of the
multichannel customer. With the visual evidence Tealeaf provides, agents have the full context to understand why a
given user did or did not complete a process successfully on the site. Armed with this information, customer service
teams can improve efficiency, increase first-call resolution rates, reduce costly escalations, and increase conversion
rates.
Significantly, Tealeaf provides a common language and natural feedback loop between groups that have traditionally
operated separately. Now the Web, call center, and even sales and marketing teams can work together to improve
customer acquisition, increase upsell and cross-sell effectiveness, power order recovery efforts, and improve customer
satisfaction and retention. Improvement in the online channels can deflect future calls into the call center.
Increase customer service effectiveness by providing agents with instant access to online customer sessions.
Increase customer service efficiency by providing agents with visibility into the online and mobile channels.
Preserve records of online customer interactions to quickly and accurately resolve customer disputes.
Service the multichannel customer by connecting the dots between online and offline channels.
Tealeaf cxReveal. Tealeaf cxReveal empowers customer service teams with instant access to both live and
historical customer activities on a website from any existing CRM console. This unprecedented visibility helps
organizations decrease average handle time, increase first-call resolution rates, reduce unnecessary escalations,
and improve customer retention.
Tealeaf cxVerify. Tealeaf cxVerify preserves a complete and permanent archived record of any or all customer
interactions on a website for effective customer dispute resolution. Many organizations also leverage cxVerify
for fraud investigations, as well as for audit and compliance requirements. cxVerify is an optional add-on in the
CSO Suite.
Page 15
For this TEI study, Forrester has created a composite organization to illustrate the quantifiable costs and benefits of
implementing the Tealeaf Customer Service Optimization (CSO) Suite. The composite company is intended to
represent a business-to-consumer retail organization and is based on characteristics of the interviewed customers.
The composite company staffs its call center with 35 call center representatives to handle customer calls, emails, and
online chats. Hearing about the success of Tealeaf Customer Behavior Analysis (CBA) Suite from the vice president of
eBusiness in replaying customer sessions and improving the customer experience, the vice president of call center
operations implements Tealeaf CSO Suite to: 1) enable call center staff to easily understand customer issues and
resolve them quickly; 2) reduce calls that are escalated to supervisors; and 3) convert additional orders to sales. The
vice president understands that the call center is a vital aspect of the company’s multichannel experience strategy.
Prior to the implementation of Tealeaf CSO Suite, callers to the call center would attempt to explain usability issues
they experienced on the organization’s site. Call center agents would attempt to diagnose the issues but often had to
spend time with the customer to get basic information like what the customer was trying to do, what information was
entered, where they were on the site, which browser version was used, and what error occurred. Calls were elongated in
collecting the information, and unresolved calls were escalated to the supervisor for further action.
Total Economic Impact is a methodology developed by Forrester Research that enhances a company’s technology
decision-making processes and assists vendors in communicating the value proposition of their products and services to
clients. The TEI methodology helps companies demonstrate, justify, and realize the tangible value of IT initiatives to
both senior management and other key business stakeholders.
The TEI methodology consists of four components to evaluate investment value: benefits, costs, risks, and flexibility.
Benefits represent the value delivered to the user organization — IT and/or business units — by the proposed product
or project. Often product or project justification exercises focus just on IT cost and cost reduction, leaving little room to
analyze the effect of the technology on the entire organization. The TEI methodology and the resulting financial model
place equal weight on the measure of benefits and the measure of costs, allowing for a full examination of the effect of
the technology on the entire organization. Calculation of benefit estimates involves a clear dialogue with the user
organization to understand the specific value that is created. In addition, Forrester also requires that there be a clear line
of accountability established between the measurement and justification of benefit estimates after the project has been
completed. This ensures that benefit estimates tie back directly to the bottom line.
Costs represent the investment necessary to capture the value, or benefits, of the proposed project. IT or the business
units may incur costs in the forms of fully burdened labor, subcontractors, or materials. Costs consider all the
investments and expenses necessary to deliver the proposed value. In addition, the cost category within TEI captures
Page 16
any incremental costs over the existing environment for ongoing costs associated with the solution. All costs must be
tied to the benefits that are created.
Risk measures the uncertainty of benefit and cost estimates contained within the investment. Uncertainty is measured in
two ways: 1) the likelihood that the cost and benefit estimates will meet the original projections, and 2) the likelihood
that the estimates will be measured and tracked over time. TEI applies a probability density function known as
“triangular distribution” to the values entered. At a minimum, three values are calculated to estimate the underlying
range around each cost and benefit.
Within the TEI methodology, direct benefits represent one part of the investment value. While direct benefits can
typically be the primary way to justify a project, Forrester believes that organizations should be able to measure the
strategic value of an investment. Flexibility represents the value that can be obtained for some future additional
investment building on top of the initial investment already made. For instance, an investment in an enterprise wide
upgrade of an office productivity suite can potentially increase standardization (to increase efficiency) and reduce
licensing costs. However, an embedded collaboration feature may translate to greater worker productivity if activated.
The collaboration can only be used with additional investment in training at some future point in time. However,
having the ability to capture that benefit has a present value that can be estimated. The flexibility component of TEI
captures that value.
Discount rate: The interest rate used in cash flow analysis to take into account the time value of money. Although the
Federal Reserve Bank sets a discount rate, companies often set a discount rate based on their business and investment
environment. Forrester assumes a yearly discount rate of 10% for this analysis. Organizations typically use discount
rates between 8% and 16% based on their current environment. Readers are urged to consult their respective
organization to determine the most appropriate discount rate to use in their own environment.
Net present value (NPV): The present or current value of (discounted) future net cash flows given an interest rate (the
discount rate). A positive project NPV normally indicates that the investment should be made, unless other projects
have higher NPVs.
Present value (PV): The present or current value of (discounted) cost and benefit estimates given at an interest rate
(the discount rate). The PV of costs and benefits feed into the total net present value of cash flows.
Payback period: The breakeven point for an investment. The point in time at which net benefits (benefits minus costs)
equal initial investment or cost.
Return on investment (ROI): A measure of a project’s expected return in percentage terms. ROI is calculated by
dividing net benefits (benefits minus costs) by costs.
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The following is a note on the cash flow tables used in this study (see the example table below). The initial investment
column contains costs incurred at “time 0” or at the beginning of Year 1. Those costs are not discounted. All other cash
flows in Years 1 through 3 are discounted using the discount rate (shown in Framework Assumptions section) at the
end of the year. Present value (PV) calculations are calculated for each total cost and benefit estimate. Net present value
(NPV) calculations are not calculated until the summary tables and are the sum of the initial investment and the
discounted cash flows in each year.
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