Small Markets with Big Potential: Do They Still Exist?
1 Mar, 2005
By: Rhonda ProctorIn the past 15 years, site selection in the contact center industry has certainly had its ups and downs. Historically speaking, it was the technological advancements of the nineties that gave birth to the mass expansion of contact centers beyond the major metropolitan markets to secondary and tertiary markets. The expansion opened new markets with high-quality, low-cost labor and significantly reduced corporate real estate costs. This summed up a sweet deal for expanding companies. Then along came offshore outsourcing, which lowered costs once again, leading companies to seriously examine—and some to even expand overseas, abandoning some facilities in metro and rural areas of the United States.
So now the industry sits, technologically advanced, value-engineered, profit-driven and, in some cases, with commercial vacancy rates at all-time highs, struggling to keep jobs within our borders. The question then becomes: Are there still small U.S. markets with big potential, or will contact centers with expansion plans be forced to look at offshoring as the most logical choice to reduce costs and improve operational efficiencies?
Small Market Appeal
“Non-metro areas can comprise outstanding locations for contact centers,” says Dennis Donovan, Director of Global Site Selection with Wadley-Donovan, who has extensive experience in contact center expansion. He characterizes a small community as one that is frequently under 50,000 in population, has less direct labor market competition and lower payroll costs, but also notes that, “a thorough analytical process must be followed to ensure that the proposed center will flourish in the finally selected area.” He emphasizes that one proviso for non-metro areas is that there is little margin for error relative to the labor market dynamics, “but even the best location can turn disadvantageous if other similar companies move to the area. Your best protection is to establish the center as a preferred place of employment from day one.”
Market saturation is precisely why some of the larger and mid-market locations have grown less attractive to many contact centers. When too many contact centers locate in a particular area because of the attractiveness of the market and other factors, the labor pool becomes depleted, making it difficult to hire people and remain the employer of choice.
“Take Wilmington, North Carolina, for example,” says Jim Trobaugh, founding partner, Senior Vice President of the CBRE Richard Ellis’ Call Center Solutions Group, and one of the nation’s foremost authorities on contact center site selection. “Most people see it as ‘hurricane alley’. I have a major contact center located there that used to only go to big markets, and they love that market. And because of its smaller size, no other center would ever follow them in—it’s just too hard to get to there. They are the first contact center in the market, and the market’s geography is a deterrent to others. It gives them a real competitive edge.”
Although Wilmington’s population exceeds 75,000, and is not among the smallest markets Trobaugh and his team evaluate, it had factors that made it positioned among the tertiary communities for contact center site selection. Trobaugh’s firm tracks 3,362 U.S. cities with populations of 10,000 or more as potential candidates for new contact center sites. He says they look at them all. He also underscores that it is very difficult to come up with a “short list” of the best small locations in the United States today. Why? “Because it’s based completely on the factors that company is looking for,” Trobaugh says.
“There’s Streator, Illinois—it’s great for Hilton, and the community gave them an overwhelming reception. Or Walgreens in Muscle Shoals, Alabama—they love it there. In that market, people will put on a suit and drive over 60 miles just to drop off an application; you just don’t see that in the major metro areas. But it has to be a win-win— sometimes the community and the company are not a match,” he explains. “There are a lot of great opportunities in these smaller markets—and corporate America needs to get comfortable with it. They need to understand that in small markets, they can go in and create their own opportunity.”
“But there can be a ‘double-edged sword’ with a small town,” says Jay Elshaug, an independent consultant who has worked with organizations in North Dakota and Tennessee to establish contact centers in rural markets, in locations as small as 3,000 people. “You have to really understand small towns,” he says. “You can’t be the big company and go in and bully them around. Everyone knows everyone else there. Everyone knows the new manager, and that person’s reputation goes with you. People [in the community] will say, ‘You don’t want to go to work for that company because so-and-so is running it,’ and that really matters.” The bottom line is doing your homework, first.
Creating Opportunities
The pervasive success factor among all consultants, economic development professionals, contact centers and communities is creating a “win” for all parties involved. Gerry Barber, Vice President of Call Center Industry Advisory Council (CIAC), who has opened multiple centers in tertiary markets for retail and financial services companies, believes that the fundamentals today are the same as they were 10 years ago. “We always asked, ‘How can we maintain a win-win for the community?’ To do that we would often use available space, people and time to make it valuable for all,” he recalls.
Barber talks of one center he opened in Clarksville, Tenn., which housed family members of military personnel serving with the 101st Airborne Division of Ft. Campbell, Ky., in a geographic area where white-collar jobs were hard to find. These people applied quickly for the available contact center positions, and ultimately many were a perfect fit. “Because we had bank branches located there, we got creative and used their extra space,” he said. “It was a win-win for brick and mortar folks—who got their spaced used, as well as for the community. We brought a team of 24 people and provided jobs to people who no longer had to drive to Nashville to work. It was great.”
Create a win-win opportunity is exactly what Elshaug did for the state of Tennessee’s Department of Human Services this past year as he established three centers staffed with case counselors in small markets across the state. The Tennessee Department of Human Services had traditionally located case counseling units in urban markets, but found that it had become costly and time-consuming to bring staff up to speed. “They began looking to rural communities to bring opportunities to those communities that don’t always have these types of jobs,” Elshaug recalls, adding, “The real strong driver is labor, from two perspectives—availability and labor quality. The goal was to select communities with high unemployment that were economically depressed, but strategically placed near colleges to pull from the labor pool and draw the right kind of people.”
The labor pool of 70 full-time equivalent staff (FTEs) was drawn exclusively from each of the three Tennessee markets, including: McKenzie, population 5,000; Clarksville, population 103,000; and Morristown, population 24,000. Their customer satisfaction levels are high and turnover is low.
Jeannie Gustafson is the Executive Director of the Champaign County Economic Development Corporation in Champaign, Ill., a community about 150 miles south of Chicago, that boasts being home to the number one ranked University of Illinois basketball team. “There are a lot of reasons that make our community a very attractive site: the labor pool with the University of Illinois and Parkland Community College; commuting availability with the award-winning Champaign-Urbana Mass Transit District; and, our relationship with Realtors is key,” Gustafson says.
The county area has a population of 186,000 people comprising 22 cities, townships and communities, and is known for its world-class technological resources, superb location and transportation benefits. The county announced the opening of two new centers in 2005: the Illinois Fraternal Order of Police and a new ground-up facility of Colwell Systems, each employing 200 people. Other call centers in the area are Amdocs, Americall, Cingular, Health Alliance, Hobbico, Horizon Hobby and the only Animal Poison Control Center in North America, staffed by 25 full-time veterinarians, five of whom are board-certified toxicologists. “It’s great,” says Gustafson, “the call centers are coming to us.”
Impact of Outsourcing
While most people agree that outsourcing is here to stay, the consultants and practitioners interviewed here don’t believe that it poses a threat to contact center expansion in small markets. “Third-party guys will continue to go overseas….but it’s not always right for the rest,” remarks Trobaugh. “People will always do it. Most will try to be smart and not put things into one basket. We don’t look overseas; we keep it here in the U.S., and the small market is an alternative if all other factors are right. City officials are great and it’s a whole different culture. They roll out red carpet for you and make you feel good.”
On the topic of his clients going overseas for their contact centers, Elshaug says, “It’s never been an option for my clients. It just wasn’t in their best interests.”
