Pricing Models

A BPO is a business; its goal is to sell time and talent to other companies to generate profit. But how exactly does the money exchange hands?

A pricing model encompasses the terms in which a Client pays the BPO for its services handling interactions.

There are several pricing models, but we will review the three most common ones.

Hourly Rate

This is the most used model of pricing, in which The Client pays a fixed price for every hour an agent works. It is a very safe and predictable way for the BPO to generate revenue.

Let's see a quick example:

• TechGiant pays AwesomeService BPO $28.00 for every hour agent John is logged in.
• From that $28, the BPO will: 
• Pay John his salary (e.g., $15), 
• Pay for the building, the electricity, and taxes.
• Pay the salaries of the rest of the employees (operational leaders and other departments).
• Keep the rest as profit.

Transaction Rate

In this model, the Client pays only for the work done, not the time spent. You could think of the client paying only for the interactions that were handled.

Let's see a quick example:

• TechGiant pays AwesomeService BPO $5.00 for every call answered and $2.00 for every email reply.
• On a regular day, the account receives around 100 calls and 30 emails. That is $560 per day:
• $500 (100 calls x $5)
• $60 (30 emails x $2)
• From those $560, the BPO will:
• Pay all agents needed to handle the interactions.
• Pay for the building, the electricity, and taxes.
• Pay the salaries of the rest of the employees (operational leaders and other departments).
• Keep the rest as profit.

In this particular context, if the interaction volume drops, the BPO loses money because they still have to pay the agents' salaries while waiting for calls.

Performance / Commission Base

This model is more common in Sales and Collections contexts, in which the client pays depending on the actual performance results of the account.

Let's see a quick example:

• TechGiant pays AwesomeService BPO a very low hourly rate (or zero), but pays $50 for every new device protection plan sold.
• On a regular day, 100 contacts are received, and 30 plans are sold (30% of Conversion Rate). That is $150 per day:
• $50 x 30 sales.
• From those $150, the BPO will:
• Pay all agents needed to handle the interactions.
• Pay for the building, the electricity, and taxes.
• Pay the salaries of the rest of the employees (operational leaders and other departments).
• Keep the rest as profit.

This type of contract is risky but can also yield high earnings. If the agents are bad at selling, the BPO will have to assume several costs to keep the operation running while losing money.