In-House vs Outsourcing Customer Service – Which Fits Your Business Best?

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Customer service remains the keystone of the business–customer relationship. A glance at the reviews on PissedConsumer.com reveals that the most common complaint that concerns consumers is failures or let downs in this department.

Nearly 68% of US companies are now outsourcing their services. With the key role that customer service plays, a serious consideration for businesses is whether to keep the customer service operation in-house or to outsource it to a third-party team. In weighing up the pros and cons of each, it’s crucial to carefully explore what both options offer and only then commit to the way forward that best suits the needs of your business.

Here I want to look into what sets in-house and outsourcing customer service apart, underline the pros and cons of outsourcing and in-house options, and offer some of my pointers on how to go about picking the most suitable customer service solutions for your business.

In-House Customer Service

Keeping your customer service wing in-house will see existing employees or new hires trained from the ground-up by the company to deal with all tasks that fall under the responsibility of customer service, and offers these notable advantages:

  • Direct oversight. Keeping your customer service operation in-house enables you to main clear control over the customer service process, shortening the communication chain and making it easier to ensure all conduct and practice is on message. 
  • More flexibility. As they are already an established component of the business as a whole and can hence easily communicate with other departments, in-house CS teams can promptly adapt to the changing requirements and priorities of your customers.
  • In-depth product knowledge. An in-house CS agent will have a greater understanding of the product and have the specifics to hand, meaning your customer gets informed support with minimal delay.
  • Continuity and brand. In-house CS agents will be drilled into the values and message of the business, enabling consistency in communication that is accurate and representative of your company.

Yet, keeping everything under one roof can also have its drawbacks:

  • Initial costs. Training an in-house CS team can be expensive, and there is also the need to consider the outlay necessary for recruitment, infrastructure, etc.
  • Scalability issues. An in-house customer service setup will limit how responsive a business can be to changing market conditions, for example, increasing or reducing the size of the CS team in response to seasonal demand. 
  • Holding on to talent. Retaining exceptional CS agents can prove difficult if there is no progression framework. A high staff turnover can disrupt the effectiveness of the CS team and impact customer satisfaction.
  • Resource consuming. The demands of having your CS team in-house place a significant time and work burden on the management team. Time which would be better spent on pursuing the core activities of the business.

Customer Service Outsourcing

The alternative to in-house is outsourcing customer service to a third-party company that specializes in dealing with some or all customer inquiries and complaints. Again, this approach has its benefits:

  • Cost. Customer service outsourcing can be cost-wise, as it overcomes the otherwise necessary recruitment, training and infrastructure outlay. 
  • Flexibility. Outsourcing enables prompt responsiveness to changes in demand and scaling needs
  • Ready expertise. Specialist outsourced CS providers will already be knowledgeable and adept at tackling the demands made of a customer service role, saving your business the trouble of gaining experience through trial and error.
  • Free-up resources. By outsourcing customer service your business can lift a burden from management and other internal resources, giving them the freedom to focus on strategy and other essential demands.

The drawbacks, by and large, represent the opposite of the strengths of going in-house:

  • Diminished control. Outsourcing customer service to a third party will result in less direct control over the details and delivery of your customer service. 
  • Quality control. The standards set by your own company may not be matched by an outsourced entity. Such quality control issues may undermine brand image and impact customer satisfaction. 
  • Cultural and language obstacles. Outsourcing to, for example, a call centre based in a foreign country could lead to misunderstandings and a limited ability to comprehend or empathize with a customer’s situation. 
  • Privacy and security. Outsourcing will require sharing of sensitive customer information and therefore need the careful coordination of data security standards and methods.

How to Choose the Best Customer Service Strategy for Your Business

As there is no clear cut one size fits all option here, choosing the most effective customer service strategy for you depends on several considerations, including the nature of your business, your goals, and the needs and expectations of your customers.

When looking at in-house and outsourcing customer service solutions, it pays to be very careful when evaluating the particular needs and priorities of your business and to foresee how each of these will be served by either option.

The obvious considerations will be your budget, level of control, scalability, security and specialization. It could be that the knowledge required to effectively understand the business may take time and education, and therefore not necessarily be suitable for an external team – so consider these facets and also any unique parameters specific to your operations and market.

In-house vs Outsourcing: Summing Up

In-house customer service gives you the advantage of direct oversight and control, flexibility, and in-depth knowledge of the company and product, however, this approach can have significant initial costs and bring various staffing complications.

Outsourced customer service can clarify and reduce costs and facilitate quick access to experienced specialists, but could bring forth a burden of diminished oversight, quality control concerns, and data security issues.

Michael Podolsky
Co-founder and CEO of PissedConsumer.com, a review and reputation management platform. Having 20 years of experience on Wall Street, I’ve become an independent entrepreneur and am now actively involved in entrepreneurship, technology development, search optimization, leadership, customer service, and consumer advocacy.

2 COMMENTS

  1. Thanks for this Michael, really informative!

    I’d add that effective communication guidelines are a must-have for both in-house and outsourced customer service teams to ensure consistency in tone, messaging, and branding.

    Ideally, teams should have access to a comprehensive knowledge base and be trained on handling different types of customer enquiries and how to deal with them. Especially as tempers are so short these days!

    This is especially true for businesses in the hospitality industry like hotels, restaurants, and cafes, where personal service and connection with customers are an essential ingredient for success.

    What do you think are some ways businesses can achieve the balance between persoanlised service and efficiency?

  2. Hello Dawn, thank you for your insightful comment. I totally agree with you. The key to success is maintaining a positive relationship with your customers.

    Balancing personalized service and efficiency is an ongoing process that requires constant monitoring, training, and adaptation to evolving customer expectations. Collecting sufficient data on how satisfied your customers are through surveys or CRM tools, tracking online reviews, and asking for customer feedback can help understand if the customer service strategy you’re currently using is the right one. I always recommend businesses to look at the negative reviews and complaints as they are your signal to losing that balance. It’s important to have a well-set line of communication that allows your team to timely detect inefficiencies and determine whether it’s time to use the personalized approach to resolve a consumer issue.

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