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Sales | Oct 19
Masooma Memon on March 8, 2021 • 16 minute read
Did you know that customers are willing to pay more for better customer service? My bet is that if you already know this, it’s probably why you’re obsessing over calculating your customer service ROI.
But, here’s the full truth: even if you don’t get a solid number in customer service ROI at the start, don’t stop. Because, in the long haul, good customer service always pays off.
Now let’s take a look at what is customer service ROI and what are the best ways to calculate ROI for customer service.
As is typical, ROI or return on investment is what you gain from what you invest. In the case of ROI in customer service, it’s the return you get from investing time and resources in helping customers when they’re stuck before and after the purchase.
The return could be in terms of a repeat order, an upgrade, or a referral. Either way, good customer service brings in higher business ROI.
Mathematically, you can calculate customer service ROI using the following formula:
Money gained/Money spent x 100
This gives you a percentage for your customer service ROI. However, while calculating what you spend is easy, getting a full idea of how much you get can be tough. That’s why our next section focuses on the metrics you can track to calculate your customer service ROI.
But before we dive into the metrics, let’s look at some examples of good customer service to set some customer service ideals for you:
“We use Postscript for SMS messaging and have dedicated staff for faster response time. With its keyword capabilities, we can respond quickly to customers’ questions. I think the speed and accuracy of our responses facilitate trust and brand loyalty.
We’re ready to support them, literally in the palm of their hands via their phone, well after they have our products. Our focus on customer experience allows us to make an outstanding brand impression with a positive shopping experience because it doesn’t end when they click ‘buy’” says Jason Wong.
“We place a premium on high-quality customer experience because it leads to increased sales. A happy customer will always spread the good word about our company and products and will make repeat customers.
We make sure that the entire customer experience — from knowing the difference among various machines, identifying which one suits their needs to receiving their order and after-sales support — is as smooth and painless as possible. We are very satisfied with how our customer support team is able to deliver excellent customer service.” says Colin Palfrey.
“We run a small business and, therefore, our top priority is customer service and support. Our sales teams are trained to go above and beyond for new and recurring customers. We offer 24/7 customer support through live chat, phone calls, emails, and trouble tickets.
Being a small business, we can focus all our attention on our customers. And so, we aim to respond to queries and assistance requests as soon as possible, within the day.
We measure our customer service team’s success through customer reviews and the number of trouble tickets resolved per month.” says Luke Genoyer.
“Our customer service team is available via email, phone, and live chat. Our customer service team is all knowledgeable about supplements and wellness and can actually provide answers and support for our customers.
We’ll regularly get customers calling asking us to help them build a pre-workout stack or how to take prohormones and we can make suggestions, walk them through the process of how and when to take their supplements, and even help put together a plan for them.
By doing this our customer service team is not just a place to call when you have a problem, it becomes a resource and they actually become part of our sales team and help with conversions and driving sales.” says John Frigo.
Let’s now walk you through how experts are calculating their customer service ROI. Here’s a list, followed by the details:
Who else can tell you how well your customer service is then customers themselves? Whether you survey your audience every six months or ask them for feedback via an engaged Facebook community or newsletter, be sure to ask customers.
Not only will this help you gauge your customer service ROI, but it might even give you some ideas on how to improve customer service straight from the horse’s mouth.
The team at Reconciled is pretty particular about this. This is why, they “send out a survey annually and have our account managers check-in with customers quarterly,” Laura Simcik shares.
Where surveys are a good way to understand your customers’ satisfaction with your customer service, talking to them can benefit you a lot more.
It’s why the team at LiveHelpNow asks important questions as they talk to their customers. “We talk to our clients frequently to see:
This feedback helps us decide what features would be most useful for our customers, how we can improve functionality, and how we can further help our customers achieve their goals,” writes Natalya Bucuy.
You can take the same page from Soapbox. Owing to their focus on the customers, Hiba Amin outlines, “we run multiple customer calls every week to learn about what’s working (and not) for customers using Soapbox… And we actually use that feedback to make our product, marketing, and customer experience better.”
This is an important point that Amin makes. Implement all that you learn from your customer calls. Listening and talking to customers can help you measure your customer service ROI. However, you can only improve the ROI when you implement what you learn.
80% of the customers expect a response from a business within an hour. 30% anticipate a reply within 15 minutes or earlier.
Translation: Make sure you’re responding fast to all the customer queries pouring in. But, it’s essential you give them a proper answer instead of a copy-pasted template-based response. We’ll get to that in a bit.
For now, understand that improving response time is essential.
IT Compliancy, Inc.’s Brad Snow shares their experience: “In IT response time is key [true for all industries though]. Our goal is to respond to any request, with a live person, in under 60 seconds (our current average is just under 30 seconds).
We have other goals for actually fixing the problem but those vary based on the tier/complexity. People understand it takes time to resolve issues but they want to know it’s being fixed and someone is aware of it.”
This is why, Snow opines, “we think about ROI in terms of the average length of time our client stays with us. Our model is different than many IT companies in that we don’t require long-term contracts. We know that if we’re delivering great service then there’s really no need for contracts. The average IT company will have you sign a 3-year contract. Our clients on average stay with us for 5+ years.”
See what good customer service can do? So a good response time target to set is one that
DUNK Basketball has for themselves. Ben Arndt elaborates, “our primary focus is firstly to respond to queries (generally leads and order status updates) by next business day. This overt action signals to the customer that we take their business seriously.”
Even as you work on cutting down your response time, keep in mind that a clipped response is no use. The following responses can help instead:
In case you’re thinking about responding once the query has been solved, think again. Arndt notes, “confirming that a query has been satisfactorily responded to assures clients their query has been answered with a human element and goes a long way to establishing trust.” Besides, you never know how long it takes to solve a question. To this end, it’s best to inform your customer that you’re working on their problem.
Editor’s note: Does your customer service team use HelpScout? If so, use this Customer Success dashboard template that combines HelpScout and Stripe to track customer service levels versus churn rates.
First response time is when one of your customer service agents gets back to a query. It doesn’t have to a full-fledged answer as we discussed above.
Banish’s Daisy Jing, however, observes, “the faster response time and the happier our customer is for having a satisfied experience, the more loyalty or orders we gain from that.” Hence, remembering that “ROI is basically seen from having more loyal and satisfied customers,” it’s essential you work on your first response time.
Repeat customers are a testament to the fact that your business is doing good enough to keep customers coming back to you. It’s an essential metric to track for all businesses – DTC, B2B, and B2C.
For e-commerce businesses, specifically, Caligenix’s Dr. Tzur Gabi shares, “When customers cannot physically inspect a product, they rely on other factors to build trust in a company like reviews and testimonials.
If they see that your customer support team is strong, they’ll have fewer reservations about taking a chance on your brand because they know they’ll be supported if they run into any issues.”
Not only that but Gabi points out how good customer service is essential for a pandemic when “shipping delays have caused so many problems for small businesses.”
Editor’s note: Track your customers’ loyalty using this Shopify Conversion & Loyalty Analytics Dashboard Template. It shows you your average order value, average revenue per user, revenue per visit, and a lot more on one screen.
Keeping this in mind, it’s crucial you don’t focus on only a mathematical number when it comes to how to calculate ROI for customer service.
Gabi talks about this too: “Although for my business as a whole I calculate ROI using objective mathematical fact—the net quarterly gross divided by the money spent that quarter—for customer service, I tend to look more towards people-based factors such as how many resolved inquiries resulted in return customers and how many customer service inquiries were able to turn a return into an exchange or an upgrade.”
Tiffanie Hartenstein from ORACLE Lighting also shares, “While customer support can handle essential parts of our operation, such as helping a user complete a sale on the website, it is also important in strengthening the customer lifecycle after a purchase is made.”
To facilitate good service, Hartenstein suggests “providing helpful guides online [as well as] offering technical support lets our customers know that we take quality seriously and that we’ll always be here for them. That way, they return to us over any competitors or wholesalers when they’re ready to buy again.
When calculating ROI on customer support, you have to factor in the importance of repeat customers to your business. Many CRMs can help you track how your customer support team can facilitate sales.”
Closely related to winning repeat customers is client retention. After all, if your clients are satisfied, they wouldn’t feel the need to do business with someone else other than you.
In fact, “Customer retention with quality support is easier and cheaper than acquiring new customers,” Mobstac’s Monika Adarsh says. Here’s research confirming this: acquiring a new customer costs five times more than retaining an existing one.
So, “even if customer support can help retain 5% of the high-value customers, the company can meet 30% of its quarterly goals,”
A mindset of helping your customer can help with client retention.
For instance, at Intuitive Digital, Alysha Schultz shares, “We call our customers ‘partners’. Because that’s the only way you can successfully do marketing for another company. By truly understanding who they are, what their goals are, and what they have to uniquely offer their customers.
We think of customer support more as ‘building long-term relationships’ sure we have a rule that partners’ emails get answered within 24 business hours. And that we own up to everything we do for them, good or bad.”
Schultz carries on, “We know this works because we track retention of our partners, and in an industry where clients often jump from one agency to another in about a year or two, we have many clients who’ve been with us for 4+ years. Honesty, accountability, and doing good work is the best way to support your customers.”
Your net promoter score (NPS) is the percentage of customers who are likely to recommend your product or service to someone else. Naturally, the higher it is, the better your customer service and service/product are.
Want an example of a company noting their NPS? Bon Accord Pest Control does so. Gabriel Nightingale explains, “we have designated customer support and our main focus is Net Promoter Score. Being a pest control service, usually, it’s a one-time purchase for each person, so them recommending us to somebody else is our primary priority. NPS is a metric that we use for measuring ROI, as well as CSAT improvement.”
Sentiment analysis gives you a snapshot of your customer satisfaction. This is what makes it an essential metric for measuring your customer service ROI.
Admittedly, good customer service helps to “builds a relationship with the customers and helps in getting to know the real demands and needs of the audience that’s targeted.
Ensuring the customer’s satisfaction, solving their queries, and providing them with exactly what they need can enhance customer loyalty and in turn, increase sales and revenue,” in the words of Catriona Jasica from Top Vouchers Code.
So a good way to learn how well your customers are satisfied besides asking them is sentiment analysis. Jasica writes, “one of the components of measuring ROI is ‘Sentiment Analysis’ which can be conveniently done by measuring customer satisfaction and acquiring quality feedback about the services and products.”
It’s also critical to work on reducing the queries you get in the first place. Why? Because a measure of good customer service is customers who don’t encounter only a handful of problems.
It’s why Milkwhale’s Andre Oentoro says, “one way to measure ROI from customer support is to see how many tickets or messages we are receiving in the customer service division. As we receive less, it shows that we are doing well with the customers.”
Want a tip to reduce the number of tickets you get? Create a knowledge base that answers frequently asked questions. This way, customers can get answers to their questions themselves.
Editor’s note: Use this free HubSpot Service (Tickets Overview) dashboard template that gives you insights into your tickets, productivity, open vs. closed tickets ratio and more.
To make sure all the moving pieces in your customer service plan are well oiled, consider creating a detailed Standard Operating Procedures (SOPs) as Jonathan Aufray from Growth Hackers Management suggests.
“To make sure that our customer support is outstanding, we created detailed SOPs in order to make sure that our customer support is standardized. Even if it’s standardized, we are still flexible and adapt to our customers’ needs and requests.”
“Indeed, we put several channels in place so that the customer support they receive is on the client’s favorite platform (Email, phone, WhatsApp, through our project management tool, etc.),” Aufray adds.
“Having quality customer support is essential to retain your customers. It will not really bring you new direct sales but it will help you retain your customers for longer periods. So, to measure your customer support ROI, what you need is to analyze your retention and CLV (Customer Lifetime Value).”
Keeping your eyes peeled on multiple KPIs is a great way to get a full idea of your customer service ROI. Here are some businesses that do so along with the KPIs they look at:
No matter which metric you track to get your customer service ROI, remember what matters the most is “connecting on a personal level,” as Paige Arnof- Fenn from Mavens & Moguls puts it.
“Successful businesses understand their product or service is about more than the transaction, they are in the relationship business.”
So it’s essential you stick by the following: “‘People do not care how much you know until they know how much you care.’” – a quote that Arnof-Fenn shares. “It has been attributed to many people including Teddy Roosevelt.”
The point is: remember to be human and be invested in the success of your customers/clients.
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