Failure demand: the customer contacts you pay for twice

Key takeaways

Failure demand is customer contact caused by something the business failed to do or failed to do right. Chasing a late delivery, querying a confusing invoice and asking again after no reply are all failure demand. It is the cheapest cost to remove in customer service, because the best outcome is that the contact never happens.

• Failure demand: contact caused by a failure to do something right.
• Value demand: contact from people who want what you sell.
• Tag 200 contacts by cause to find your share.
• Removing a contact saves more than handling it cheaply.

What is failure demand?

Failure demand is demand placed on an organisation by its own failure to do something, or to do something right, for the customer. The term comes from John Seddon, the occupational psychologist behind the Vanguard Method. Its opposite is value demand: the contacts a business exists to serve, such as orders, bookings and genuine questions.

• How BPO can help businesses reduce operational costs
• First contact resolution explained

What does failure demand look like?

Failure demand looks like customers doing your chasing for you. It appears whenever something was late, unclear, wrong or unanswered. It is easy to miss because it arrives through the same inbox as real enquiries and is counted as workload.

• Where is my order, engineer or refund?
• I do not understand this invoice.
• I emailed last week and heard nothing.
• You sent the wrong item or the wrong document.
• Your website says one thing and your email another.

• Cost drivers: what really moves your operating costs
• Slow response to enquiries: what it costs and the fix

How do you measure it?

Measure it by tagging a sample of contacts by cause. Take 200 recent emails, calls or chats and ask of each: would this person have contacted us if we had done everything right first time? Sort the failure contacts by reason. Five or six causes will usually account for most of them.

• 1. Pull 200 recent contacts across all channels.
• 2. Mark each as value or failure demand.
• 3. Group the failure contacts by cause.
• 4. Rank causes by number of contacts.
• 5. Assign each top cause to whoever can fix it.

• Cost baseline: measure today's cost before you change it
• Cost reduction KPIs: the numbers that prove savings are real

What does it cost?

Failure demand costs the handling time of every avoidable contact, plus the goodwill lost. In an illustrative business handling 2,000 contacts a month at £2.50 each, a failure share of 35% is 700 contacts and £1,750 a month, or £21,000 a year. Halving it saves £10,500 a year and makes customers happier.

Compare that with making all 2,000 contacts 20% cheaper to handle, which saves £12,000 and leaves every cause in place. The two are not alternatives. But the first should come before the second.

• Cost per contact: compare in-house and outsourced support
• How to reduce customer service costs without slower replies

How do you remove it?

Remove it at the cause, which is usually outside the support team. Late delivery queries are fixed with proactive updates. Invoice queries are fixed by a clearer invoice. Repeat chasers are fixed by replying sooner. Each fix belongs to the part of the business that created the contact.

• Self-service on your website: let customers help themselves
• Right first time rate: the quality number that cuts cost
• Customer service macros: faster replies at lower cost

Should you outsource failure demand?

Outsourcing failure demand makes it cheaper to handle but does not reduce it, and it can hide it. If the provider is paid per contact, nobody in the arrangement gains from contacts falling. Ask for contacts to be tagged by cause and reported weekly, so the team that handles the problem also tells you where it came from.

• outsourced customer support for UK SMEs
• Gainshare in outsourcing: pay a provider to cut your costs

What does this look like in practice?

A pattern we see in e-commerce and trades alike: a large share of the inbox asks when something will happen. The business answers each one politely and promptly, and counts that as good service. Sending the date before the customer has to ask removes the contact and the anxiety behind it.

• See client work
• BPO Solutions for UK businesses

Failure demand checklist

Run this once a quarter.

• Sample 200 contacts across channels.
• Tag each as value or failure.
• Rank the failure causes.
• Give each top cause an owner outside support.
• Fix one cause and re-sample after 30 days.
• Report the failure share alongside volume.

• How to cut costs without hurting customer service
• Operational cost reduction checklist: 20 checks

Next step

Send us a rough idea of your monthly contacts and the questions you hear most. We will help you separate value from failure demand and work out what the avoidable part is costing.