On-Demand Pricing Vs. Traditional Hourly Pricing

I’ve been reading a lot lately about “on-demand pricing” in the outsourcing world and people keep asking me what it is. On-demand pricing basically means that you pay for what you use, usually at a bit of a premium with some kind of minimum. The concept is by paying a little more per transaction, you will ultimately save money by not having to constantly over-estimate your needs and pay for the wastage. Does that make sense? No? Let’s try an example:

My friend Mike throws business lunches at a trendy restaurant every Wednesday as a tool for attracting potential clients. He invites 40 people to the lunch every week, but really has no idea how many will show up. Sometimes as few as 15 come, but sometimes all 40 show up and a few times the 40 brought friends. The restaurant’s pricing options are:

1. The restaurant would cater a party of 40 for $35 per person with one weeks notice.
2. Guests can order off the menu which works out to an average of about $42 per person but Mike has to guarantee a minimum bill of $450.

Mike found that option 2, paying $7 more per person, was actually cheaper than constantly catering for 40 and throwing out the excess food. Even better, if 43 showed up, he didn’t have to worry about being short on chicken.

In the contact center outsourcing business we call this on-demand pricing. In a traditional contact center pricing model, you pay by agent per hour. This works out well if you get a large volume of contacts (phone calls, chats, e-mails) in a very predictable time frame. With on-demand pricing your usage can fluctuate up and down a little more comfortably. The outsourcer will charge you incrementally (for example 24-7INtouch has packages with per minute pricing) and you will end up paying a little more total for each call, but will save money overall if you need a bit more flexibility. So how do you know if on-demand or traditional hourly pricing is the way to go for your project? Here are a couple of small tips:

Traditional Hourly Pricing	On-Demand Pricing
Contacts come in during regular business hours	24 hour service is required
Contacts are steady and very predictable	Contacts can come in large spikes
Very large volume of contacts (more than 10,000 per month)	A smaller or unknown volume of contacts (small-medium sized businesses)
Volume of contacts is established and fairly stable	Volume of contacts may require some quick unanticipated scalability up or down

The best way to know which model will suit your project is to talk to a professional at an outsource contact center who can help you look at your campaign from both angles to make the best decision.

-Jeff Fettes

Comments

[Brad French]

For most businesses it makes sense to utilize on demand pricing. In my contact centre all of our accounts are based on a per transaction / per minute rate in order to ensure fairness to the client. (Pay for what you use)

In certain situations, clients have requested that we staff certain seats for there account only but this can only be done when call volume can be forecasted with great accuracy. If not, as you stated, the customer will end up over paying if call volume is low.

Brad French
President
Alliance Wireless Communications

[On Demand Contact Center]

I'm a fan of UCN's On Demand Contact Center Solutions.

[On Demand Contact Center]

Here is the UCN site: http://www.ucn.net