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Can't cancel service? Blame 'perverse incentives'

The next time you find yourself on the phone with a pushy customer service representative trying to sell you something, remember this: There could be serious cash incentives motivating that hard sell you're getting. And I do mean serious.

One consultant I spoke to recently said that some call-center employees for a national internet service provider were making six-figure salaries, thanks to aggressive bonuses. While customers were infuriated after being deceived while trying to cancel their service, the phone reps were raking in the dough, sometimes doubling or tripling their salaries with incentives.

Benefits that encourage employees to lie for profit are called "perverse incentives." Call centers are awful places to work, so employers have developed elaborate incentive schemes to keep workers returning to the phone banks. In some cases, they are simple or silly -- pizza parties for the top selling groups or free game consoles. But in their most extreme, perverse incentives can encourage outright fraud.

For example, many cell phone reps get bonus points for persuading consumers to extend their contracts, so some will lie to callers, extend their contracts without their knowledge and collect the bonuses.

Many similarly poorly designed incentive programs also turn sour, said Matthew Katz, vice president of business consulting at Merced Systems, which helps firms set up productive incentive programs.

"If you pick the wrong behavior to motivate you can have a big negative impact," Katz said. "It can get ugly."

Companies keep their call center incentive programs close to the vest, and many call center consultants won't discuss them. But there are hints to be had on the Internet. One credit union which has its reps sell auto mechanical breakdown protection doles out $30 per sale, for example.

'Cancel the account...cancel the account...cancel the account'

Two years ago, an America Online customer who wanted to cancel his service revealed just how ugly it can get. He recorded a 5-minute segment of his customer service experience -- during which he says "cancel the account" two dozen times, but still can't close the deal -- and posted it online. The audio file was an Internet sensation, with thousands of customers piling on, leaving "me too" comments on the caller's Web site.

But AOL is far from the only firm that makes breaking up hard to do. Cable and satellite television companies also have well-earned reputations for not taking "no" for an answer. Katz said these companies almost certainly have a "perverse incentive" problem; the rep can earn big bucks by talking consumers into staying, so they sometimes use overly aggressive tactics. And sometimes, they just plain lie.

"We've heard ugly words or phrases like, 'courtesy disconnect,' and things like that," he said. In other words, phone reps sometimes intentionally hang up on callers. Other times, phones reps use their position of power (after all, they have your credit card number) to be domineering. During the AOL call, when the operator tries to read his sales pitch and the caller refuses to listen, the AOL rep plays the bully, saying, "If you want me to cancel your account, you're going to let me speak...you're going to listen to me."

The problem is not incentive programs, Katz said, but the metrics used to grant prizes and bonuses. It's easy to measure the number of customers who have been stopped from canceling their accounts; it's harder to measure true customer satisfaction.

Almost all call centers measure call quality now," he said. "But you have to have the right tools in place to track what people are doing."

Most calls recorded now

Some call centers look at call length, for example -- an agent that typically has very long calls or very short calls might be badgering consumers or simply hanging up on them, for example. That's often a signal to a manager that the agent's calls should be monitored directly. Meanwhile, software can be used to monitor the calls and listen for key phrases, like repetition of the words "cancel my account."

Other new software lets call centers literally recreate calls from the past. Thanks to the continually shrinking cost of storage space, and the rising costs of litigation, many call centers now save recordings of customer calls for up to a year. Software packages also allow companies to record the keystrokes a rep made while on the phone, giving them to ability to see and hear exactly what occurred during a call. And, to our point, that enables them to see if the phone rep defrauded a consumer in pursuit of a big bonus.

Scott M. Broetzmann, president and EO of Customer Care Measurement & Consulting in Alexandria, Va., says consumers should use the new technology to their advantage. He says that because many calls are recorded, especially calls involving financial transactions and contract-related calls, it's a good idea to repeat at the end of each call precisely what your understanding is, like this: "OK, I understand I have added a text message plan to my phone, but my contract end date has not changed, it remains May 2009. Is that right?"

If there is a dispute, a manager can in many cases access the call and listen to its contents. This avoids "he said, she said" arguments, which are rarely settled in the customer's favor.

When calling with a problem, consumers also can ask for a call to be replayed, although the company may not consent to that without a court order.

Still, Broetzmann said, the line between good, aggressive sales techniques and outright fraud can be fuzzy. For him, that line is crossed when a consumer is confused at the end of a call.

"Sometimes by the time you get to the end of the phone call a person doesn't really know what they've agreed to," he said. "Then you have to think about what's going on."

While some firms may tacitly endorse call center fraud, the majority actively fight it, Katz says. That's because customer representatives, who are often nomadic, are also defrauding their companies when they trick consumers. The rep gets a bonus, and the company gets a future customer service headache.

To solve its call center problems, America Online and many other firms now use "third party verification" firms to double-check its sales reps' work. Customers are transferred to a new agent after they agree to buy a new product or service. The record of third parties is spotty, however. Naturally, they get paid by the firm selling the product, so they have a perverse incentive, too.

Red Tape Wrestling Tips

How do you protect yourself from overly aggressive phone operators, who are fueled by big bonus programs?

1) We've already mentioned this one. Repeat your understanding of the conversation at the end of the call, knowing that the firm will likely keep the recording and it can be used during a dispute.

2) Be particularly wary at the end of the month, said Broetzmann, because many incentives are paid on a monthly basis. Sellers can become very aggressive during the last few days of an internal sales contest.

3) Make sure you are talking to the right person before launching into your story, said Katz. Many consumers explain their detailed version of events over and over again because they begin talking before they are connected to the right department. So always ask something like: Can you disconnect my account? Can you grant a refund?