It’s your company’s big budget meeting this quarter. You fumble the PowerPoint clicker briefly before successfully advancing the slide, proudly announcing:
“Our customer service ROI is 50 percent!”
The financial controller lifts your arm like a victorious title fighter as applause breaks out around the boardroom table. Finally, your moment of glory. But then the COO says:
“Perfect. We’ll spend this $10,000 on new headsets for the support team this quarter, and Bam! $5,000 profit.”
Of course not, because not every investment in customer service is going to produce that same return rate. “Investing in customer service” might mean hiring staff, buying tools, doing training, improving rough edges in the product, or even adding new support channels.
You would expect each of those to have differing return rates and differing timelines for returns.
Does that mean we have to throw in the towel and instead defend customer service investment as an article of faith? Not at all — in fact, the answer is to do more ROI measuring, not less!
Here an ROI, there an ROI, everywhere an ROI
Instead of coming up with the one true ROI figure that is so broad it’s unusable, break it down into smaller, more measurable elements and report on those. To do that you’ll need to know three things:
- Which customer behaviors you want to affect
- What customer service can measure and change
- The ROI hypotheses you wish to test
Know which behaviors you want to affect
In part one of this series, we grouped customer service returns into three buckets: customers spending more with you (upgrade income), staying longer (retention), and spreading the word about you (expansion). With those things in mind, you can take the following steps:
1. Think about your own business.
What actions would you need your customers to take in order to create income in those buckets? Write down as many as you can. For example, at Help Scout that might include:
2. Identify customer behaviors.
Look for the behaviors you think your customer service team has the biggest impact on.
3. Rewrite those behaviors.
Create active statements by completing this sentence: When we give our customers consistently high quality service, they will...
- Keep their monthly subscription with us instead of canceling it.
- Purchase more items from our store than customers who have never contacted support.
- Share their great experiences with their friends or networks, leading to new customers.
It doesn’t need to be “every single time,” just enough that your team can genuinely change the frequency of those behaviors by offering great service over time. If you’re looking for some inspiration, check out this list of customer loyalty statistics from 2016.
All of this leaves you with two questions:
- How does your support team encourage more of those customer behaviors in a cost-effective way?
- What metrics can you use to tell when it is working?
Know what you can measure and change
There’s no benefit to tying your team’s success to factors out of their control. Useful numbers to know include the following:
- Net Promoter Score (NPS) — how likely your customers are to recommend you (generating expansion income)?
- Customer Satisfaction (CSAT) — are you giving customers a level of service that will prevent them having to look for alternatives?
- Cost per contact — how much it costs the company to answer each customer (broken down by channel)
- Cost per conversation — estimate this by multiplying the cost per contact by the average number of interactions in each conversation
- Customer lifetime value — how much a typical customer spends over their entire period as your customer
- Retention rates — the percentage of your active customers last month that are still active this month
- Contact rates — the percentage of active customers who need to contact support (about any issue) in a typical month
- Contact rates by area — break down your contact rate by product area (e.g., even if your overall contact rate is 20%, you may find the average is being pulled up by too many billing issues)
Your help desk reporting will provide some of these, and your business team can likely give you others. Find a helpful business analyst or growth specialist and ask them to walk you through the company numbers. Identify the metrics which a) correlate well with customer and business growth and b) your team can reasonably have impact on.
In some cases, you may be able to show close correlations between support activities and return on investment. For example:
- Customers who contact support in their first month end up staying X% longer than customers who do not have support interactions.
- When our first response time is consistently below two hours, our customer satisfaction rates rise above 94%, and our retention rate shows an increase in those months.
- The customers we work with give us 1.2 points higher NPS ratings on average, compared to customers who have not contacted support.
Indirect returns from customer support
Customer support is so much more than robotically answering direct questions from customers. Getting the most value from investing in customer service means using the support team as an incredible source of information on customers.
Every customer interaction is an opportunity to learn something about your customers — how they think about your products, what language they use, what they think of your competition, how they find you, and so much more.
If your team has the skills, the systems, and the internal support to collect and collate that information, they will be a continual source of feedback to the rest of the company.
Putting a hard number on that sort of contribution isn’t easy, but consider reporting on what you can measure. For example:
- Number of bugs reported
- Feature suggestions added
- Sales leads who came in via support
Create testable ROI hypotheses
If you’ve done the work to figure out which customer behaviors your team can influence and how that contributes to the company’s success, then you can start to run small, measurable experiments with individual ROI figures attached.
If we add one more staff member in the U.S. timezones for $X/year, we can bring the time to first response down under two hours. We expect that to result in an improvement to our CSAT, which we find correlates strongly to higher customer lifetime value.
In this example, you can know how many conversations that staff member will be able to handle and how much each conversation will cost, and you can confidently predict the improvement in response time and therefore CSAT. Your ROI calculation will be much more solid at this scale than it could be for customer service as a whole.
Some other examples:
My team spends three hours a week answering questions about X area of our product, impacting Y customers and costing us $Z/year in support staff time. We could save that money by making this change.
During our last service outage, we handled X conversations from customers, and our response times dropped. Making our status page more visible on the contact form and on social channels would save us Y hours of time for each event.
Every time you make testable predictions, you will create new data to feed into the next one. Each bet is smaller, less risky, and much more defensible.
By building up small wins, you can develop the trust you’ll need to ask for longer term investments in your team and in customer experience across the company.
Great support matters
Providing excellent support to your customers is ultimately about investing in a relationship with them.
By helping customers reach their goals, you create a benefit they’ll be willing to pay for.
Like most relationships, demanding an immediate quid pro quo is not likely to lead to a happy outcome. If you’re willing to invest in the long term in your customer relationships, then there should be measurable financial benefits to be had, even if it cannot be reduced to a single percentage.
With some forethought and with the commitment of your company leadership, it is possible to demonstrate that value over the long term.
Have you tried measuring ROI for customer service? We’d love to hear your story. Leave a comment below and let’s talk about it!