It’s 4:35pm at work on a sunny Friday afternoon. You’ve been on hold with customer service on the phone for the past 15 minutes trying to get an issue resolved. You tried to get the problem resolved on social media earlier in the day, but no one from the company replied to your Facebook post or tweet. Your family is home, packed and ready to leave for the cottage as soon as you get home from work. Now all you can do is wait for their customer representative to get back to you. In fact, can you remember the last time you contacted customer service about an issue and received a solution quickly without any hassle? Why does getting customer support have to be so hard?In a recent study by Ovum and LogMeIn, customers and call center managers were asked about customer service experiences and support channels. The infographic from LogMeIn highlights the results from the study. One takeaway didn’t surprise me: customers want quick answers and access to customer support agents. What did surprise me was the number of customers who stopped doing business with a company following a bad experience: 76 percent. That’s three out of four customers. That’s scary.While there’s a lot of frustrations voiced from customers in the study, contact center managers are listening. They’re working to improve access and offer additional customer support options: over 20 percent will invest in live chat in 2015.I’m a big fan of live chat, using it weekly to for customer support. It’s handy, fast, and I like getting a quick answer. Even better, I don’t have to invest a lot of time waiting for an answer. Check out more of the highlights from the infographic.Source: LogMeIn: Where Contact Centers are Missing the Mark with Customer Care. Where Contact Centers are Missing the Mark with Customer Care: Customer Loyalty is at RiskSeventy-six percent have stopped doing business with a company following a bad customer experience.Customers are frustrated by long wait times and lack of access to live agents.48 percent believe that the ability to reach the right representative has worsened over the last two years43 percent stated that automated telephony systems are annoyingBusinesses want to improve wait times and allow customers to connect quickly.76 percent of call centers are tracking customer satisfaction28 percent of contact center managers will prioritize response time improvements and invest in web and mobile toolsLive chat is becoming an important support channel for customers.The number of customers using live chat has doubled in two years, from 14 percent to 28 percentOver 20 percent of contact center managers will invest in live chat in 2015Many customers research information online before speaking to a contact center agent.If customers knew they could get a resolution to their issues on the first attempt, over 70 percent would choose a channel other than phone61 percent use the web to find information before calling a contact centerBut only 11 percent successfully resolve their issues using websites or FAQ pagesThis drops to just 5 percent that have resolved issues on social mediaUltimately customers want fast resolutions and access to agents.On average, customers expect a response within four minutes for chat and phone interactions64 percent want easier access to representativesAs long as customers get personalized assistance to pressing issues and resolutions, they will be satisfiedLive agent access could include interactions in any channel from chat to social media to phoneShare this:Click to share on Twitter (Opens in new window)Click to share on Facebook (Opens in new window)Click to print (Opens in new window)Like this:Like Loading…RelatedState of Multichannel Customer Service in 2015 [Infographic]What caught my attention when I discovered this customer service infographic was the heading in the top right section: Customer Service is not a Department. It’s Everyone’s Job. That’s what I’ve said for years. It’s not one person’s job; it’s the goal for everyone in the company to make sure…In “Business”How Customer Service Can Impact Your Business [Infographic]Providing good customer service to all of your customers is key to building your business. Customers who receive excellent service will improve the bottom line of your business by returning to you with repeat business. Four out of five people are more likely to work with a business after receiving…In “Business”Improve Customer Service With a Social Customer Care Policy [Infographic]Over the past several years, more companies have turned to social media to provide support for their customers. And it’s no surprise. Social media has become one of the first touchpoints for customers who no longer pick up a phone to contact customer support. I’ve done my share of asking…In “Social media”
Air New Zealand will defer aircraft deliveries worth $NZ750 million and introduce further cost-cutting initiatives as it adjusts to a lower growth environment in the immediate future.But passengers will see a new service to Seoul later this year, and frequencies to Taipei and Chicago boosted to up to five a week.There will also progressive introduction of an enhanced Business Premier product on long-haul routes later in 2019 and a more spacious long-haul economy offering from mid-2020.And the airline will offer free wi-fi on all capable international aircraft immediately“I want to be clear that although there will be changes to our business, Air New Zealand has always and will always keep the customer at the core of everything we do,’’ chief executive Christopher Luxon said.“ As such we have some exciting developments in the customer space to announce in the coming weeks and months, and we remain unequivocally committed to creating an exceptional travel experience that is the envy of airlines around the world.”The changes were announced as part of a business review announced when the Kiwi carrier revised its profit guidance for fiscal 2019 and designed to boost earnings despite lower growth prospects.READ: Fuel costs see Air New Zealand profit fall 34 percent.The airline is still planning network growth but says it will now average 3 to 5 percent over the next three years instead of the 5 to 7 percent it originally expected.Key foci will be ensuring aircraft are directed on profitable routes and ensuring growth stimulates tourism to, from and within New Zealand by tapping into new markets and increasing frequencies on others.This includes the launch of new direct service from Auckland to Seoul from November 2019, the increased frequency on Auckland-Taipei from the same month and on Auckland-Chicago services from December.The airline will fly three times a week to Seoul’s Incheon airport from November 23 andf up to five times a week during the peak December to mid-February peak holiday period.The new service will be operated by Boeing 787-9 Dreamliner aircraft with a flight time of around 12 hours northbound and just over 11 hours southbound.Services to Taipei will increase from three a week to up to to five during the Northern Winter flying season from December while Chicago wil move to up to five services a week over the New Zealand summer peak.Air New Zealand will also change the timing of Auckland-Hong Kong to free up an aircraft from late October.Luxon said the airline was putting extra effort into lifting the performance on routes not meeting their potential while directing assets to those performing ahead of expectations.“Our number one priority is optimizing our network mix to maximize profitable growth,’’ he said.“Therefore, it is terrific to be able to announce today that we will be increasing frequency into Taipei and Chicago.“I’m also excited to announce that we will start flying from Auckland to Seoul up to five days a week from late November 2019.”The airline will also continue to invest in product, starting with an enhanced version of its existing Business Premier seat towards the end of calendar 2019 with the rollout due to be complete by December 2020.“We have undertaken considerable customer research and testing over the past 12 months to come up with enhancements to the existing award-winning seat as well as a new food, beverage and service offering that reflects the essence of who we are as a nation,’’ Luxon said.“We are confident our Business Premier customers will love their Air New Zealand experience more than ever.”Ongoing is an $NZ50m upgrade of nine lounges across the next two years as part of a previously disclosed program.The aircraft deferrals will see the deliveries of three A321neo aircraft destined for the airline’s domestic network set back by a year and an A320neo earmarked for trans -Tasman services delayed by two years.Capital expenditure in the 2020-2023 financial years will be decreased by deferring by at least four years the delivery of two long-haul aircraft as part of a fleet replacement program to replace the airline’s B777-200 fleet.However, the airline plans no change for the delivery date of its 14th Boeing 787-9 Dreamliner, which will be leased from October 2019.A two-year cost reduction program designed to deliver more than $NZ60 million annually will benefit from the end of disruptions due to Rolls-Royce engine problems as well as reduction of about 5 percent in overheads.This will be in addition to an annual cost saving of $NZ50m a year that has enabled Air New Zealand to largely offset inflation over the past three years.“Our confidence in Air New Zealand’s long-term strategy, customer proposition and financial performance remains strong,’’ Luxon said.“The steps we are taking today will provide a strong foundation for future earnings growth.”
At some point in your retail loss prevention career, if you haven’t done so already, you will be called upon to help make procurement decisions on new technology, such as electronic article surveillance (EAS) or video surveillance. While you may be most interested in the features, functions, and benefits of the technologies, your CFO will be more interested in the oft-used cliché, “bang for the buck.” So, how do you calculate ROI in retail?This post explains the financial concepts required to conduct a cost vs. benefit analysis, as well as a full-fledged return-on-investment (ROI) analysis. It will also provide insight into the process by which your CFO decides the following key questions:What type of analysis (simple or complex) should be used?What are the costs and benefits associated with this project?How long will it take before the costs are recovered?Will the project turn a profit? If so, how much?How does the profitability of this project rank against all others?What Is ROI Analysis?Simply stated, an ROI analysis determines the amount and rate (percentage) of anticipated or earned profit, if any, from an investment. A pro forma analysis is conducted in the planning stages of a project using cost and benefits estimates. The idea is to calculate an expected or anticipated return based on well-reasoned assumptions. ROI analysis is also used after a project’s implementation in order to calculate the actual return and to see whether or not the investment met financial expectations.- Sponsor – There are basic and comprehensive analytical methods. The basic methods simply calculate a time horizon for cost recovery (payback) in months or years, or a simple return on investment percentage (what percentage of the cost will be, or has been, recovered). Payback ignores the concept of the time value of money, meaning a dollar that you have in your hands today is worth more than the promise or expectation that you will receive a dollar in the future. Payback also ignores any costs or benefits beyond the first year. Because of these limitations, we will not employ a payback calculation in this analysis.The more sophisticated and accurate calculations, often called discounted cash flow methods, try to encompass the following items and concepts:All fixed and variable costs and benefits, no matter when they occur,ROI measured against a prescribed time horizon, such as a five-year depreciation schedule,Taxes, opportunity costs, and the time value of money, andROI results compared to a benchmark or “hurdle” rate (a rate of return below which the project will be rejected).Net Present Value. Discounted cash flow analysis is a method of valuing a project using the concepts of the time value of money. All future cash flows (incoming [benefit] and outgoing [cost]) are estimated and discounted at a required rate of return to give their present value. The sum of all discounted cash flows covering the time horizon is the net present value (NPV). A zero NPV means the project repays the original investment and covers the required rate of return—essentially a breakeven. A positive NPV indicates a profit (over the required return), and a negative NPV indicates a loss. In capital budgeting, the discount rate used is called the “hurdle rate” and is usually equal to the incremental cost of capital. The ROI on a project must exceed the hurdle in order to be judged worthy of an investment. When choosing among a number of investments, the CFO looks for the highest NPV.Internal Rate of Return (IRR) is the rate promised by the project over its useful life. It is sometimes referred to as “yield on project.” The IRR is the discount rate that will cause the NPV of a project to be zero. Once the IRR has been calculated, it is compared to the company’s required (minimum acceptable) rate of return. If the IRR is equal to or greater than the required rate of return, then the project is acceptable. If not, it is rejected. Often, a retailer’s cost of capital is used as the required rate of return. The logic is that if a project cannot provide a return at least as large as the cost of the investment, then it is unprofitable.Both NPV and IRR are readily available formulas in spreadsheet programs. There is no need to calculate them by hand.Why Is ROI Analysis Important?First, an accurate return-on-investment analysis prohibits unprofitable decisions. A well-reasoned, thoroughly researched financial justification tends to inhibit emotional decisions, and promotes “buy-in” for the project, and helps the loss prevention department make a professional case to senior management for accepting and implementing new technology for retail stores.Quantifying Costs and BenefitsProper ROI analyses start with a thorough compilation of all costs and benefits that could possibly be associated with the proposed project. While each project may be different, the costs can be divided into three categories—investment, one-time preparation, and other.The main investment is the cost of any hardware or software licensing fees. These costs will most likely be depreciated (hardware) or amortized (software) over a fixed time horizon established in our generally accepted accounting principles (GAAP).One-time preparation costs include sales taxes, freight charges, and the cost of site preparation and installation. These costs are added to the total investment for depreciation/amortization purposes.Other costs include such things as the labor required to operate or manage the project, maintenance, IT expenses, or any other incidental expenses. These costs may be one-time or annual, fixed or variable. Generally, they are not included in the investment, but are “expensed,” meaning they are accounted for in full when they are incurred.A “hard” cost, such as the cost of the EAS tags or other retail theft prevention system, is objective and easily acknowledged and quantified. All hard costs and benefits should be included in the ROI analysis. “Soft” costs/benefits are those that are more subjective estimates rather than precise calculations. For example, an anticipated improvement in labor productivity may not be as easily acknowledged and quantified. The most accurate ROI analyses rely upon “hard” costs as exclusively as possible and only include “soft” costs where the circumstances can be clearly understood and agreed upon by the project participants.Measuring the Major BenefitsThe “R” in ROI means return. A return is a tangible benefit, most often measured over time, which offsets some or all of the project’s costs. Each project has its own list of potential benefits. The most common benefit types in projects that implement new technology for retail stores are:Reduction in inventory shortage,Labor savings,Additional sales, andProductivity improvementA reduction in inventory shortage is usually the largest and most important potential benefit from loss prevention investments. If you think about it, we are making investments in security programs with the intention that shortage will be reduced from current levels, or that the countermeasures will keep shortage from rising to unprofitable levels. Shortage reduction and control is loss prevention’s raison d’être. We must be able to accurately estimate the impact that the project will have, or has had on shortage.The shortage performance graph below plots the inventory shortage results in a retail apparel store that had experienced a significant increase in shoplifting. After installing EAS, the results were measured after the first year, and future results were estimated over the balance of a five-year time horizon (years +2 through +5). In this example, EAS is the only countermeasure that was used, so any change in shortage can be directly attributed to its deterrent qualities. The horizontal (X) axis measures time, in years, and the vertical (Y) axis measures shortage as a percentage of sales. Under this scenario, shortage had been rising and the crisis point (year 0) was reached when shortage reached 5 percent of sales. EAS was installed at the end that fiscal year (year 0) directly after the annual inventory was taken. At the end of the first fiscal year of EAS usage (year +1), shortage dropped by 50 percent to 2.5 percent of sales. Management assumed that shortage would remain at the lower level over the rest of the time horizon.The dollar value of the reduction in shortage over the five-year time horizon is the financial benefit that will be entered into ROI calculation for the project. Assume that the store’s annual sales are $1 million. Assume further that shortage would have stayed at its crisis point of 5 percent (dotted red line) had EAS not been installed. Without EAS, annual shortage would be $50,000. Since the EAS installation, annual shortage dropped to 2.5 percent ($25,000), and with proper management, would remain at that lower level over the subsequent four years. So, the financial benefit gained by the use of EAS is the difference (at cost) between the shortage at the crisis point before the installation (5 percent) and the average rate of shortage after the installation (2.5 percent)—a savings of $25,000 at retail per year.To arrive at the cost of shortage, we must multiply by the cost of goods sold (COGS), in this case 55 percent. By “costing out” the change in shortage, we are treating it (accounting-wise) the same as we treat the cost of the EAS equipment, making the results “apples to apples.” This calculation will be shown later in the real-world example.Additional sales may be generated in other ways. If an EAS investment reduces shortage by 50 percent, there will be more merchandise available for sale than there was before EAS was installed. Will some of these items be sold? Without a doubt. The questions are:Can the amount of incremental sales be accurately estimated?How are incremental sales valued in the ROI analysis?Thanks to the work of retailers and academic researchers, studies have shown that there is an inverse relationship between item-level shortage and sales. In other words, statistics show that when shortage in certain items decreases, sales in those items increase. The range of the sales increase is wide, and at this point this type of benefit has to be considered “semi-soft,” meaning that while there is empirical proof that incremental sales occur, the estimate is still subjective, unless the retailer has conducted its own study. For this reason, an estimate of the impact of incremental sales will not be used in the real-world example analysis below.Calculating the financial benefit of an incremental sale, however, is straightforward. Doing so requires an additional piece of information—the “gross margin” percentage of the items in question. Suppose the EAS project results in provable incremental sales of $50,000 per year at retail, and the gross margin percentage of those items is 19 percent. To calculate the gross margin impact of the incremental sales, multiply them by the gross margin percentage ($50,000 x 19% = $9,500). This gross margin impact is the financial benefit that would be included in the ROI analysis.Labor savings can be included when an investment in technology results in a reduction in labor hours. Labor savings is a “hard” benefit that is calculated by multiplying a wage rate by the number of hours saved in the project. Typically, if labor hours are reduced, then employee benefits are reduced, as well. Often called a “benefits component,” it is usually expressed as a percentage of the base wage rate. Ask your human resources department for the rate.If the benefit component rate is 18 percent, and the hourly base wage rate is $10.00, then the benefit component is $1.80 per hour, and the “fully burdened” wage rate is $10.00 + $1.80 = $11.80. If the investment saves 120 hours of labor per year, then the labor savings benefitin the ROI analysis is $11.80 x 120 or $1,416 per year.Productivity improvement comes in many forms, but is not easily quantified. Suppose that an investment in video surveillance equipment allowed loss prevention agents to apprehend 15 percent more shoplifters per year than previously. Suppose further that the average value of each bust was $75.00, at retail, in recovered merchandise, and the number of annual cases had been 80 per year. A 15 percent increase in productivity allows the agent to work about twelve more cases, and results in an additional recovery of $900 at retail per year. Multiplying the amount of the recovery by the COGS of the items (55 percent) provides a benefit of $495 to the ROI analysis.How Do You Calculate ROI in Retail? A Real-World ExampleThe following simple real-world example will supply the data necessary to explain the analytical concepts discussed above.Suppose the management of the apparel chain mentioned above is trying to decide between installing EAS or video surveillance in a high-shortage store. The choice is between a simple EAS pedestal system with plastic tags and detachers versus an array of video domes interconnected to a monitor/switcher/recorder…nothing fancy. Suppose that the chain already used both countermeasures, and EAS has been proven to reduce inventory shortage by 50 percent and video by 35 percent. Assume, as we did above, that the store’s shortage is 5 percent of sales, and annual sales will be $1 million per year for each of the five years. The COGS for the protected items is 55 percent. The various costs have been identified and quantified in the chart:Shortage Reduction Benefit Calculation. In the EAS example, management expects shortage to decrease by 50 percent from 5.0 to 2.5 percent of sales and remain at the reduced level for the five-year time horizon of the project. The annual sales for the store is $1 million and the COGS for the protected items is 55 percent, so the annual ROI benefit from the estimated reduction in shortage is $13,750 per year.In the video surveillance example, management expects shortage to decrease by 35 percent from 5.0 to 3.25 percent of sales and remain at the reduced level for the five-year time horizon of the project. The annual sales and COGS are the same, so the annual ROI benefit from the estimated reduction in shortage is $9,625 per year.Choosing the Most Profitable Investment. Let’s calculate NPV and IRR for the competing technologies in our real-world example to answer the CFO’s questions from the opening paragraph:Will either countermeasure be profitable?Which one is more profitable?How long will it take to recover the investment?EAS—The annual benefit (at cost) from shortage reduction using the EAS technology is $13,750. From that we must account for all of the costs, beginning with the initial investment in EAS system, tags, and detachers, a total of $9,200. One-time preparation costs are $1,250. Both of these items must be depreciated. Annual costs include tagging and tag removal labor ($4,800) and tag replacement ($100). In years two through five there is an additional expense of $200 for maintenance. In addition, the impact of taxes (39%) and the cost of capital (8%) must be included. The results of these calculations are:Video Surveillance—The annual benefit (at cost) from shortage reduction using video technology is $9,625. From that we must account for all of the costs, beginning with the initial investment of $3,000 in the video domes, monitors, switchers, and recording device. One-time preparation costs are $1,010. Both of these items must be depreciated. Annual costs include system management labor ($6,000). In years two through five there is an additional expense of $100 for maintenance. In addition, the impact of taxes (39%) and the cost of capital (8%) must be included. The results of these calculations are:The Verdict Is EAS. Both countermeasures are profitable because the NPV calculations are greater than zero. The IRR calculations suggest that both generate a significant return over and above the 8 percent cost of capital used as the discount rate. Note, however, that the NPV for EAS ($15,400) is almost triple that of video ($5,900), and the IRR for EAS (65.08%) is almost 10 percentage points higher than that of video (55.12%).Based on these metrics, EAS is the countermeasure of choice. There are a couple of reasons. First, the assumed shortage reduction for EAS (50%) exceeded that of video (35%). Second, the annual costs for video in years two through five are higher.This article was originally published in 2010 and was updated February 19, 2018. Stay UpdatedGet critical information for loss prevention professionals, security and retail management delivered right to your inbox. Sign up now
SOUTH BEND, IN – NOVEMBER 12: Head coach Mike Brey of the Notre Dame Fighting Irish watches the action on the floor against the Monmouth Hawks at Purcel Pavilion on November 12, 2012 in South Bend, Indiana. Notre Dame defeated Monmouth 84-57. (Photo by Michael Hickey/Getty Images)Notre Dame closed out the regular season with an 89-75 win over NC State at home. After the game, head coach Mike Brey was in a celebratory mood. Brey asked the team’s two seniors, Austin Burgett and Zach Auguste, to give him a flying hip bump in the locker room. Brey didn’t get much hang time, but Auguste still almost knocked him over. INSIDE THE LOCKER ROOMTHE JUMP – SENIOR STYLESorry, Matt Gregory, but our Z.A. & Burg had to get a chance. pic.twitter.com/dvZgBeD4Oj— Notre Dame MBB (@NDmbb) March 5, 2016Always good to see a coach having fun with his players. If UNC beats Duke later on today, the Fighting Irish will clinch the No. 4 seed in the upcoming ACC Tournament and an automatic double-bye into the quarterfinals.
The Canadian PressA 16-year-old youth has been charged in a southern Alberta highway shooting that left a German tourist with a serious brain injury.RCMP Cpl. Curtis Peters said the teen, who is from the Stoney Nakoda First Nation but can’t be named because of his age, is facing 14 charges, including attempted murder and possession of a prohibited firearm.“Investigators have located and seized the vehicle and the firearm which are both believed to have been involved in this offence,” Peters said Tuesday.Police wouldn’t discuss a possible motive and would only say that they don’t believe there was any conflict prior to the single shot being fired.The 60-year-old tourist was driving in a black Dodge Durango with his family near Morley, Alta., on Aug. 2, when the shooting happened.Police have said the suspect vehicle was passing the Durango when a shot was fired from the passenger window and into the tourist’s SUV.The Durango crashed into the ditch after the shooting near the Goodstoney Rodeo Centre on Stoney Nakoda land. Three family members who were passengers weren’t seriously injured.The driver survived, but police said he has a long road to recovery.The injured man was flown back to Germany where surgeons removed the bullet.“That bullet will be sent here to Canada where it will undergo forensic testing to compare it to the firearm which has been recovered,” Peters said.The German consulate has said the man can’t talk or move his right side as a result of the injury. He has a lot of physiotherapy and rehabilitation ahead of him to regain some quality of life, Peters said.“This has been a life-changing event for him.”Although Peters said there were others in the car with the accused, no other charges are pending and police are not searching for any other suspects.“We believe this was an isolated incident.”The accused was scheduled to appear in provincial court in Cochrane, Alta., on Tuesday.