If you are currently gauging if investing in customer service really makes a difference, you are in the right place.
You're about to discover why it's one of the smartest moves you can make for your business. This guide breaks down how improving customer service directly impacts your company's success, showing you the clear benefits of prioritizing customer satisfaction.
What Is Customer Service ROI?
Customer service ROI measures the financial benefit of investing in customer service activities. It considers the costs of customer service (staff, training, technology) against the revenue generated from those activities (increased customer retention, higher customer lifetime value, etc.).
5 Reasons Why You Should Invest In Customer Service
Getting a new customer costs 6-7x more than keeping an existing one. Here are 5 more reasons that will convince you to make customer service a top priority.
1. Improves Product Ideas With Customer Input
Your customers are the ultimate product testers. When you have strong customer service, you get a direct line to their needs, wants, and frustrations. Customer service agents are on the front lines, gathering real-time feedback. They hear about features customers love, features they struggle with, a quality aspect they wish was better, and features they desperately wish existed.
Analyze these common themes and pain points. This unfiltered customer voice can spark brilliant ideas for improvements and entirely new products. Imagine a customer mentioning a constant struggle you never considered. Their feedback could build a groundbreaking solution.
Once you know how you can offer your products better, you will also know what solutions to invest in first. Do they struggle with a specific feature? Then you know it is time to hire a developer and revamp your product. Do they wish the quality was better? Then you know you should prioritize investing in quality control solutions.
2. Builds A Community Of Brand Advocates
Happy customers are your best marketing team. Good customer service lets you create a positive emotional connection with your brand. When existing customers feel valued and heard, they will become loyal brand advocates.
Imagine a customer having a minor issue. A helpful and friendly customer service agent resolves it quickly. This customer will share their positive experience online or recommend your brand to friends and family.
And guess what? 92% of consumers trust recommendations from friends and family more than any other type of advertising. So just imagine what it can do to your sales.
3. Improves Operations By Identifying Better Processes
Customer service interactions can tell you a lot about inefficiencies in your company. Imagine a recurring complaint about delayed deliveries. This means there is a bottleneck in your fulfillment process.
Customer feedback will help you identify areas where internal processes are slowing things down. Fix these issues and watch your overall operational efficiency take off. Reduced wait times, faster resolutions, and smoother customer journeys – all because of the intel you gather from your customer service team.
4. Supplies Precise Customer Interaction Data To Analyze
Every interaction with a customer is a priceless data point. With excellent customer service, you can track what features they struggle with and what products they inquire about the most. Analyze this data and use it for predictive analytics.
A great example of this is if you experience a surge in inquiries about a specific merchandise print-on-demand product, it signals a future buying trend. You can use it to pre-emptively adjust inventory or contact your supplier in advance.
Then you might find out that customers purchase a certain product together with another. You can use it to suggest relevant upsells or create product bundles.
Customer service data can also help predict potential problems. If there is an increase in complaints about a service, you have an issue that you need to fix before it snowballs into something big.
5. Makes The Business More Stable During Market Fluctuations
Market fluctuations are inevitable but a strong customer base built on excellent customer service can shield you during rough economic times. Here's why:
Loyal customers who have consistently had positive experiences with your brand will stick with you even when prices increase or when products are limited in stock. The positive emotional connection they have with your brand makes them more understanding and willing to be flexible and patient.
Also, diversify your income sources with digital products like subscription-based software or online services to keep your earnings steady so you can counter losses during market dips. Use your customer service team to improve these services, ensuring customer loyalty even when markets are volatile.
Customer service efforts also help you identify at-risk customers early on. You can pinpoint customers who are dissatisfied or thinking of switching to a competitor. With targeted outreach and proactive solutions, you can win back these at-risk customers.
How Can You Measure Customer Service ROI?
Here are 5 easy steps to calculate the customer service ROI of your business. As you go through each step, pay close attention to the actionable points you need to make.
A. Define Your Goals For Customer Service
To calculate customer service ROI, start with the end in mind. What "good" looks like for your customer service. Where do you want your customer service to take you? Here's how to do it with clear and specific objectives:
- Think about the common issues customers face when interacting with your service team. Are they waiting too long for answers? Struggling to find the information they need? Write down these pain points.
- Sync your goals with your overall business strategy. Is increasing customer retention a top priority? Does your company want to boost average order value? Define how improved customer service can help with these.
- Vague goals like "better customer satisfaction" won't help you measure ROI. Instead, set SMART goals: Specific, Measurable, Achievable, Relevant, and Time-bound. For example, "Reduce customer churn rate by 5% within the next quarter with faster resolution times."
- Acquiring a new customer is expensive so you need to increase the value each customer brings to your business over time. This could be encouraging repeat purchases or upselling existing customers. Better customer service plays a big role here.
- While resolving issues is important, it is not the only measure of success. Look at the bigger picture. Can your customer service team proactively address potential problems or anticipate customer needs? Set goals around these areas for a positive customer experience that goes beyond basic issue resolution.
B. Identify Relevant Metrics To Track Progress
Now you need a way to track your progress with metrics. These data points tell you if you are moving in the right direction. The best metrics for you will depend on your specific goals. But there are those that tell you a lot about your customer service quality and its impact on customer loyalty. Let’s take a look:
- Customer Satisfaction (CSAT): Measures how happy customers are with their service experience.
- Customer Effort Score (CES): Gauges how easy it is for customers to get their issues resolved.
- First Contact Resolution (FCR): Measures the percentage of issues resolved on the first try.
- Resolution Time: Average time it takes to resolve customer issues.
- Net Promoter Score (NPS): Assesses the likelihood of customers recommending your service to others.
- Customer Retention Rate: Indicates the percentage of customers who continue to use your service over a specified period.
- Churn Rate: Measures the percentage of customers who stop using your service during a given time frame.
- Customer Lifetime Value (CLV): Estimates the total revenue a business can expect from a single customer account.
- Average Handling Time (AHT): Tracks the average duration of customer service interactions, including call time and after-call work.
Beyond the basics, look at customer sentiment. Social media listening tools like Hootsuite and Sprout Social can help you identify trends in how customers are talking about your service online.
C. Track Customer Service Costs
This might seem straightforward but there is more to it than just salaries. Here's what you need to factor in:
- Personnel Costs: This includes salaries, benefits, and any overtime pay for your customer service team. Don't forget about training and development expenses – investing in your reps will motivate them to be more efficient so you can reduce overall costs.
- Technology Costs: The tools your team uses can add up. Factor in software licenses, maintenance fees, and any costs for communication channels like phone systems or chat platforms.
- Overhead Costs: Don't forget about your team's space, office supplies, and any other indirect expenses for running your customer service department.
Here's a pro advice:
Get granular with your cost tracking. If you can, break down expenses by channel (phone, email, chat) or even by specific issue types. This will help you identify areas where you might be able to optimize spending.
Don't just estimate costs – track them accurately. Use accounting software like QuickBooks or Xero to manage these details. The more precise you are, the more meaningful your ROI calculation will be.
D. Find Out How Customer Service Affects Revenue & Retention
This isn't always a straightforward calculation, but here are ways you can get granular and track the impact:
Track Upselling & Cross-Selling Opportunities Saved By Service
Identify instances where customer service representatives identified upselling or cross-selling opportunities when they were resolving issues. You can then track the value of these saved sales. This could be the revenue generated from the additional product or service the customer purchased.
Quantify Reduced Customer Churn Because Of Service
Analyze customer satisfaction surveys carried out after service interactions. Look for correlations between positive feedback and customer retention. You can use customer relationship management (CRM) data to track repurchases by customers who received high satisfaction ratings from service interactions.
Isolate The Value Of Service-Driven Customer Referrals
Add a field in your customer feedback surveys for referral sources. Track how much revenue new customers bring in when they refer others after positive service experiences.
Measure The Impact Of Saved Carts & Abandoned Orders
Integrate your customer service platform with your shopping cart system to identify abandoned carts. This lets you track instances where service representatives successfully recovered abandoned carts and the total value of those recovered sales.
Analyze The Influence Of Service On Increased Customer Lifetime Value (CLTV)
Segment your customer base by their service interaction history (e.g., high satisfaction, frequent interactions). Analyze the average purchase value and repurchase frequency within each segment. This will show how effective service can be in increasing CLTV.
E. Calculate ROI Using The Standard Formula
Before we start calculating the ROI, remember you have to isolate the impact of customer service specifically. Not all upsells or retained customers can be solely credited to service interactions.
Here's how you can use this classic ROI formula:
Customer Service ROI = Total Customer Service Benefit - Total Customer Service Cost x 100
Total Customer Service Cost
Let's say your total customer service cost (of all the factors we discussed in point. C) for a specific period is $100,000. Through your analysis, you identified the following benefits:
Increased Revenue from Upsells/Cross-sells: $250,000
- Recovered Revenue from Saved Carts: $50,000
- Increased Customer Lifetime Value: $100,000 (attributable to service)
Step 1: Calculate Total Benefit
Total Benefit = $250,000 (Upsells) + $50,000 (Saved Carts) + $100,000 (CLTV) = $400,000
Step 2: Calculate ROI
Customer Service ROI = $400,000 X 100 = 400%
$100,000
So your customer service ROI is 400%. This means that for every dollar invested in customer service, you are generating a revenue benefit of $4.
6 Guaranteed Strategies To Increase Your Customer Service ROI
Increasing customer retention by just 5% will increase your profits by anywhere from 25% to 95%. If you are looking to have a similar impact, here are 6 strategies you should use to boost your customer service ROI.
I. Provide Multi-Channel Support Options
Customers come in all shapes and sizes, and so do their preferred ways of getting help. Here's how to create a multi-channel support experience that keeps them happy:
- Customers are increasingly vocal on social media platforms. Respond to comments and messages to show you care. This can turn a frustrated tweet into a positive brand advocate.
- Website visitors usually have quick questions. Use live chat to answer them in real-time to reduce wait times.
- Many customers prefer messaging apps like WhatsApp or Facebook Messenger. Offer support through these channels to stay connected with customers on their turf.
- Imagine a customer starting a chat and then needing to switch to email. Make sure your system smoothly transitions between channels so the customer doesn't have to repeat themselves.
- Hire interns to reinforce your customer service team with cost-effective support so customers feel a personal touch instead of just getting answered by generic AI.
- Monitor which channels customers use most and how efficiently issues are resolved through each channel. Focus resources on optimizing the high-performing channels.
Managing multiple communication channels can get overwhelming for your customer service team. Glassix's unified inbox brings all your customer conversations from different channels, like social media, live chat, and email, into one place.
This means you can see the entire communication history with a customer, no matter which channel they used to contact you. This makes it a double win: your customers get help on their preferred platform and your team will love the smooth workflow.
II. Comprehensively Train Your Customer Service Team
Your customer service team is your brand’s frontline. Equip them with the right knowledge and it will pay off in spades. In fact, 89% of consumers are likely to buy from you again if they've had a positive customer service experience. So here’s how to do it right:
- Sure, product knowledge is essential, but go deeper. Train your team on customer psychology and de-escalation techniques. Equip them to handle frustrated customers with empathy and professionalism.
- Don't just throw a manual at your team. Use real-world scenarios and role-playing exercises to make training practical and engaging.
- Learning shouldn't stop after onboarding. Regular skills refreshers and product updates keep your team sharp.
- Add micro-learning modules to your training program. These short, focused lessons (delivered in short videos or interactive quizzes) easily fit into busy schedules and can be a great way to reinforce key concepts or introduce new information.
III. Use Customer Relationship Management (CRM) Software
As we said, CSRs are on the front lines, but they can't work magic without the right tools. Here’s how you can make the most out of it:
- CRM stores customer data like purchase history, past interactions, and preferences. Your team can use this data to personalize interactions and address needs in a better way.
- With all customer data in one place, your team can access information quickly. They can resolve issues on the first contact, reducing frustration and repeat contacts.
- CRM software can tell a lot about customer buying patterns and preferences. Use this data to identify potential upsell or cross-sell opportunities during interactions.
- CRM software lets you track resolution times and customer satisfaction scores. This data helps you identify areas for improvement and optimize your service operations.
IV. Implement Self-Service Options For Customers
67% of customers actually prefer using self-service options over speaking to a customer service agent. Here's how you can implement self-service options to boost your ROI:
- Build a comprehensive knowledge base packed with helpful articles, FAQs, and troubleshooting guides. Make it easily searchable so customers can find answers to their questions on their own time.
- Provide customers with self-service tools to track orders and manage accounts.
- Integrate customer feedback mechanisms into your self-service options.
- Add video tutorials that show how to use your products or troubleshoot common issues.
- Create a community forum where customers can share solutions and help each other.
V. Empower CSRs To Solve Problems & Make Decisions
We talked about training your customer service representatives but empowerment goes a step further. Here's how to give your team the reins for a higher ROI:
- Ditch the micromanagement and trust your team. Give them clear guidelines and service level agreements (SLAs), but let them make independent decisions within those parameters.
- Give representatives the ability to "own" customer issues from start to finish. This makes them more accountable and they start taking pride in their work.
- Train your team to understand the bigger picture. Focus on achieving positive customer outcomes, not just rigidly following scripts.
- Recognize and reward agents who go the extra mile to solve customer problems creatively.
VI. Automate Repetitive Tasks
Your customer service team is full of talented individuals but some tasks are just plain repetitive, like password resets or order status updates. Here's how customer service automation can free up your team:
- Take a close look at your customer service inquiries. Perfect candidates for automation include password resets, order status updates, or basic product information requests.
- Smart chatbots can handle routine inquiries and even route customers to the appropriate representative for more complex issues. This frees up your team's time for higher-level interactions.
- Use Glassix's conversation routing engine to dynamically assign conversations to the right team members and customize routing rules.
Conclusion
Investing in customer service ROI is an investment in the very foundation of your business – its customers. Happy customers are like walking advertisem*nts – bringing in new business without you even lifting a finger. So the next time you have doubts about investing in customer service, remember that your best salespeople are already on your payroll, waiting to be empowered.
For this, you need the right tools like Glassix that can dramatically improve your customer service team’s efficiency and effectiveness. Glassix is an AI-powered omnichannel customer communication platform that offers a unified inbox to manage all customer interactions, from emails and social media messages to live chat and text messages.
Start your 30-day free trial now and see how and see how Glassix can transform your customer service.
