Most companies don’t think about customer support in terms of return on investment (ROI) — only marketing and sales. But during my time as the VP of Success & Support at Gorgias, I've had plenty of opportunities to see the ROI of good customer service firsthand.
I remember working with a company that significantly increased conversion, average order value (AOV), and repeat purchase rate simply by adding a phone contact option — enough to pay back the $1.2 million initial investment, and then some.
Here’s another way to put it: 90% of shoppers consider customer service when deciding whether to do business with a company, so your customer service has a strong ROI, whether or not you’re aware. It’s up to you whether that ROI is positive or negative.
To help maximize the value of your brand’s customer service, let's discuss everything you need to know about the ROI of customer service. Below, I'll explain why it's important to measure customer service ROI, how to perform customer service ROI calculations, and some tried-and-true best practices to see an ROI boost from your customer service experience.
Why is it important to measure ROI in customer service?
It's always important to measure the return of any investment you make in your company, and customer service is no exception. Measuring the ROI, or return on investment, of your customer service team allows you to determine what works well and what doesn't, helping you continually improve the quality of your customer support — which boosts its impact on your company's bottom line.
Measuring your customer service also helps you with forecasting. By understanding your current situation, you can better predict the staff, resources, bandwidth, and impact any change could potentially make on your customer service program.
The relationship between customer service ROI and business growth
To start, great customer service improves customer retention, which is an especially important avenue for growth, especially considering the cost to acquire new customers has increased by 60% in recent years.
Unlike customer acquisition, repeat business is somewhat organic. Data around average ecommerce customer retention rates is sparse because rates vary so much by industry. For instance, a company that sells bags of coffee will see far higher repeat purchase rates than a company that sells coffee machines, which are usually a one-time purchase.
That said, most blogs agree the average rate is around 20-30%. But regardless of your baseline, that percentage can grow if you provide amazing customer service.
In addition to helping you retain the customers you already have, great customer service can also improve your company's net promoter score (NPS). This means that your existing customers are more likely to recommend your company to their friends and colleagues.
Of course, ROI isn’t just about output — a strong ROI means maximizing revenue while minimizing spend. Implementing the right customer service tools and processes can actually lower your customer support spending, lifting ROI by reducing your company's expenses.
The formula for calculating ROI in customer service
To calculate your customer service program's ROI, you need to consider how much you're spending versus how much revenue you bring in as a direct result. The formula is pretty simple:
ROI = [ (Money earned - Money spent) / Money spent ] x 100
In practice, say that you spend $10,000 on your customer support program, including the cost of your team and tools. In turn, you make $15,000. Your ROI would be 50%. Here's what the calculation looks like:
ROI = [ ($15,000 - $10,000) / $10,000 ] x 100
ROI = 50%
That said, the above formula is rather rudimentary and doesn’t represent the nuances of customer service ROI. Specifically, it assumes that you can easily track the revenue generated by your customer service inputs. But you already know it’s not that easy. Below, I go a step deeper to help you understand the value of your brand’s customer service — value that you might not currently be claiming.
4 expert ways to measure the value of customer service
Along with using the formula I covered above, there several other useful ways to go about calculating customer service ROI and evaluating its impact, including:
1) Provide a survey to measure your CSAT score
Customer satisfaction (CSAT) functions as a proxy for lifetime value (LFT). Each incremental increase in CSAT represents a higher likelihood of customers coming back to your brand and buying more.
You can gather this kind of customer feedback with a simple post-interaction CSAT survey. Most helpdesks have built-in survey features. I recommend you use them to gain invaluable data about your customers' experience — and your customer support team's performance.
After a customer service interaction, ask customers to rate their experience on a scale of 1 to 5 (with 1 being a horrible experience and 5 being an exceptional experience). You can then divide the total number of satisfied responses (ratings of 4 or 5) by the total number of responses and multiply that number by 100.
CSAT = (Total number of satisfied responses (4 or 5 rating) / Total number of responses) x 100
Your CSAT score will be a whole number between 0 and 100 — the higher, the better. This is an essential metric to keep an eye on as you experience customer service challenges and experiment with new tools and strategies.
Any customer service platform worth its salt should highlight your live CSAT score for easy tracking, with additional details for context. Here's what that would look like in the Gorgias platform:
2) Identify your repeat customers
There's no better way to evaluate customer satisfaction than looking at the number of repeat customers your business attracts. Excellent customer service is your best lever to reduce churn, improve your customer retention rate, increase your company's repeat customers — all different ways to describe the same benefit.
Repeat customers are a great indicator that your customer service program is doing well, so it's essential to consider them during your ROI evaluation.
3) Improve your net promoter score (NPS)
Along with helping you retain the customers that you've already brought on board, good customer service can also help you attract more new customers by improving your net promoter score (NPS). NPS is a measure of how likely a customer is to recommend a company to someone else — consider NPS a type of word-of-mouth marketing generated by a great customer experience.
Calculating your NPS is easy if you're already collecting customer feedback. In your post-interaction survey, include a question like, "On a scale of 1-10, how likely are you to recommend us to a friend?" From this feedback, pull out the following information:
- Total number of responses
- Number of promoters (people who give you scores of 9 or 10) and their percentage of the total responses
- Number of detractors (people who give scores of 1-6) and their percentage of the total responses
Then, calculate your NPS with this formula:
NPS = Percentage of promoters - Percentage of detractors
Your NPS score will range from -100 to 100.
If you currently use Gorgias, consider using any of our NPS calculator integrations for an even easier experience:
4) Evaluate sentiment and intent
Sentiment analysis uses machine learning to evaluate the overall sentiment of datasets. Analyzing your customer service data to see if your customers' overall sentiment is positive, negative, or neutral is a quick and simple way to get a broad sense of your customer service quality at scale.
Intent analysis also uses machine learning to understand the underlying request of an incoming message. While most other customer service platforms rely on keywords, Gorgias’s intent analysis understands when a customer submits a common request (like asking for order status or updating shipping address) regardless of whether they use one of your pre-selected keywords. The platform automatically handles the ticket, whether that means auto-responding with a Macro or assigning the ticket to a specialized agent with a Rule.
These features are possible because Gorgias is built specifically for ecommerce, meaning we have an incredibly high and untainted volume of ecommerce support tickets which we use to train our algorithms for your online store.
5 best practices to improve customer service ROI
The entire point of calculating the ROI of customer service is identifying opportunities to boost the value that your customer service agents can deliver to the company. Here are five best practices that you can implement to improve customer service ROI:
1) Provide training or education for your team members
Your company's customer service reps are the cornerstone of your customer service efforts. To maximize customer satisfaction, provide your team members with the training and education they need to perform at their best.
2) Use customer feedback to create new policies and procedures
Post-experience surveys aren’t just for measuring satisfaction. Open-ended questions allow customers to communicate why they loved their experience or — perhaps more importantly — why they didn’t. Comb through those responses to find areas of opportunity for your customer experience.
Most feedback will fall into two categories:
- Policy: e.g. your company doesn’t accept returns
- Experience: e.g. the customer had to jump through a bunch of hoops to resolve their issue
Take note of patterns in customer feedback to guide you toward the most high-impact opportunities. You may not be able to act today, but this qualitative feedback is gold as you set your long-term roadmap.
3) Give rewards to team members who provide exceptional customer service
I remember working with a company that went out of its way to reward customer service agents with high customer satisfaction rates. At our Support All Hands, people would read tickets with exceptional support out loud. For example, one customer with a particular sense of humor wrote in old English, so our agent responded in old English to solve his issue. The customer wrote back, "[your brand] just gets me," and proceeded to come back again and again. The Agent got recognized as the go-to for clever replies, and it boosted morale on the floor.
While rewards such as this may seem trivial, everyone loves being recognized for their hard work. Even something as simple as a few words of appreciation can go a long way toward boosting your customer service team's morale and performance.
4) Consider developing an omnichannel customer service strategy
If contacting a call center is the only customer service option you provide to your customers, you are probably missing out on many opportunities to make your customer service more convenient and accessible. Omnichannel customer service turns communication channels such as SMS, social media, email, and live chat into customer support channels, making it as easy and convenient as possible for customers to reach out to your company for assistance.
At Stitch Fix, we found that simply adding phone instilled more trust for our target demographic. We saw significant increases in AOV, repeat purchase rate, and conversion. We found that phone made more sense for specific instances and actually saved expenses when it came to billing and urgent issues (like an address change) because we would either get notified faster or reduce tons of back and forth. Overall, the additional channel netted Stitch Fix $1.2 million.
Remember that every time a customer reaches out for help is an opportunity to create a positive experience. Be sure that your omnichannel support strategy is convenient and consistent, so customers can expect the same support quality no matter what communication channel they choose.
5) Lean on customer self-service
Customer self-service options such as knowledge bases, FAQ pages, and automation like AI chatbots can improve your customer service ROI in two key ways. For one, self-service options can reduce your customer service expenses by eliminating many customer support tickets you’d otherwise pay a human agent to handle.
In addition to reducing expenses, lowering your support ticket volume can also free up your team to spend more time focusing on complex customer issues that require more personalized service.
Common issues companies face with customer service ROI
Over the years, I've encountered several common issues while helping companies improve their customer service ROI. Hopefully, examining these common issues will help your company avoid making the same mistakes.
Over-reliance on vanity metrics
Many companies look at the wrong data when evaluating their customer service quality. Rather than looking at the number of support requests your team receives, it's much more enlightening to consider your CSAT score and compare customers who report the best and worst experiences.
Evaluating the differences between these two groups can tell you much more about what's working well and what isn't than looking at customers who write in versus those who don't.
A false assumption that customer support is an expense, not a growth opportunity
Far too many companies put too much emphasis on lowering customer service costs and not enough emphasis on improving customer satisfaction. While lowering expenses is an integral part of maximizing customer service ROI, offering fast first response times and high-quality service is even more critical in the long run.
When you consider the rising cost of acquiring customers, it puts the cost of investing in your support to retain customers into perspective. Industry standard says the cost of acquiring a customer costs (at minimum) 5 times more than the cost of retaining one. A customer who gives you a ⅕ CSAT probably won’t come back — if it would have cost you $5 extra to make sure they were delighted, you now have to spend $25 to win a new customer instead.
Reluctance to invest in a scalable customer service organization
Providing excellent customer service is easy when support tickets are few and far between. But as companies grow and ticket volume increases, a more strategic and efficient approach to customer service is often required. Usually, this means investing in tools and processes.
But again, if companies view customer support as a cost center, the impact of customer support is limited. (Which makes leaders reluctant to invest in tools and processes. Which limits the impact. You see the cycle.)
How to present customer service ROI to company leaders
Before you can achieve an optimal customer service ROI, you'll first need to convince your company's management team that customer service is a worthwhile investment. To this end, you can highlight several key metrics when proposing your customer service ROI strategy, including:
- Percent of revenue on the expense side
- Cost per ticket
- Cost per order
By comparing these metrics against metrics such as NPS, CSAT, and churn rates, you can present a compelling argument for investing in customer service. Thankfully, Gorgias makes it easier than ever to demonstrate the importance of customer service ROI by providing you with access to a wealth of customer service data, including revenue statistics — all of which you can customize and quickly pull from your Gorgias dashboard.
Boost your business's customer service ROI with Gorgias
If you are looking for a simple solution to optimize your company's customer service ROI, Gorgias' industry-leading customer service platform is a great option.
With Gorgias, you can easily develop an omnichannel customer service strategy that enables you to offer customer service via social media, SMS, email, live chat, and numerous other channels. You can also implement self-service options to improve convenience, reduce ticket volume, access insightful customer service analytics, and more.
To see how our powerful customer service solutions can dramatically boost your business's customer service ROI, be sure to sign up for Gorgias today!