While customer support has historically been seen as a cost center rather than a growth driver by most companies, this view is increasingly outdated. In today's marketplace, customers have more choices than ever before, making it essential for companies to prioritize customer support to stay competitive.
In fact, 90% of Americans use customer service experiences to decide whether or not to do business with a company.
So, how much does customer support cost? Calculating the true cost of customer support can take time and effort.
In this article, we will break down the various costs associated with customer support and explain how you can calculate the ROI of your customer support operation.
By taking the time to understand the actual cost of customer support, you can see exactly how your operation is driving growth rather than simply being a drain on resources.
Why customer support is an untapped growth engine
While it has long been seen as a necessary evil, customer support is actually a key growth driver for businesses. More and more companies are starting to recognize its potential because it's often the first and last touchpoint your customers will have with your company. If this experience is negative, it will reflect poorly on your brand and discourage customers from doing business with you in the future. On the other hand, if this experience is positive, it will create loyalty and customer advocacy, which are essential for long-term growth.
On top of that, the team closest to your customers may provide invaluable insights into product usage, issues, and customer experiences, which is critical for product development.
Too often, customer support is seen as a separate entity from the rest of the company when in reality, they are intimately familiar with how your customers interact with your product or service.
But while all of that is true, it is also essential to understand the costs associated with your support team to be able to know if you are underinvesting or over-investing (usually, the first one is more common, but not always!).
You must allocate your resources wisely, which starts with understanding how much customer support actually costs.
How much does customer support cost?
Businesses providing excellent customer experience generate 4% to 8% more revenue than their direct competitors. But how exactly can you break down the cost of customer support into one number? While there isn't an exact answer, there are a few key areas where you can focus your attention to get an idea of how much it might cost to support a customer.
These costs can be divided into three main costs:
- Cost per support ticket
- Cost of support per order
- Cost per revenue
Cost per support ticket
One of the easiest ways to see how much it costs to support a customer is to calculate the cost per support ticket.
To do this, you'll first need to calculate how much it costs to staff your customer support team. This number will include the salaries of your customer support reps as well as any benefits they might receive.
Once you have that number, you can divide it by the total number of tickets your team handles in a given period, giving you the cost of support per ticket.
Total customer support spending/ Number of tickets = Cost of support per ticket. Let's say you spent about 8,000 on customer support in September and resolved 1,000 tickets. This would mean that the cost of support per ticket would be around $8 per ticket.
However, what's important to remember is that there are other unseen benefits that come from providing excellent customer support, like increased loyalty and customer retention. So, while it might cost an initial $8 to help your customer, they are much more likely to stay with your company (and continue spending money) in the long run.
Cost of support per order
For every dollar spent on acquiring new customers, businesses need to spend a percentage of that just to keep them. This is why it's essential to include retention and support costs when trying to understand the true cost of customer support.
To calculate the cost of support per order, you'll need to take your total customer support spending and divide it by the number of orders you generate in any given period. This will give you the cost of supporting each individual order.
Total customer support spend/number of orders = cost of support per order. For example, if you spend $8000 of total customer support costs in September and generate 100 individual orders in that time, you cost of support per order is $80.
If this number is higher than expected, you may be spending too much time on support or not enough time on sales. In this case, it might be necessary to hire more customer support reps or invest in automation tools to help lighten the load.
Cost Per Revenue
One of the last ways you can calculate the cost of customer support is by determining how much you're spending on support per dollar of revenue. This will help decide if all the costs are worth it in the long run — or at least in a range that is comfortable for your company.
To calculate this number, you'll need to take your total net sales and divide it by the number of tickets you have in a set period of time. This will tell you the true cost of support per revenue.
Net sales/ Total Number Of Tickets = Cost Per Revenue. For example, if you generate $10,000 in sales in September and resolve 1000 tickets, your cost per revenue is right around $10.
If this number is too high, it might be a good idea to analyze where the majority of costs are coming from and see if there are any areas where you can cut back or if there are any inefficiencies in your process. Is it taking too long to resolve tickets? Are there too many support requests coming in?
Answering these questions can help you get a better idea of where your money is going and how you can improve your customer support process.
Once you have a handle on your costs, you'll be able to make more informed decisions about how to grow your business while still providing excellent customer service. For example, a solution may look like investing in technology such as Fullview Cobrowsing to help make your ticket resolution process more efficient and reduce time to resolution.
How to calculate the ROI of customer support
Now that we've detailed how to calculate customer support costs, let's talk about some ways to estimate the ROI of customer support.
Upsells and cross-sells
One of the best ways to determine if you are getting any sort of ROI from your customer support team is to calculate how much more money you are making as a result of it. To do this, you'll need to figure out how many of your sales come from upsells. However, without building a backend for your data to track the right metrics, it's difficult to measure.
Once you figure out the upsells and cross-sells that resulted from a customer support interaction, use this formula to calculate the ROI:
The resulting number will show customer support costs as percent revenue. You can then use
this to compare the ROI of customer support against other investments you've made in your business.
Another great way to determine ROI on customer support is to estimate how much your customer support team helped with customer retention. Since retention is critical for long-term growth, it's important to have a metric that captures how much your customer support team contributes.
The best way to figure this out is to estimate how many people chose to continue their subscription after a customer support interaction and assume those people who have churned if they had not had a successful interaction with your customer support team.
You can then plug those numbers into the formula above and calculate your ROI in terms of retention. Your CES and CSAT are also handy metrics to keep an eye on when estimating this kind of ROI because, typically, the higher each of those CX scores is, the less likely your customers are to churn.
Your customer support team can also influence NPS scores and drive new customers to your company — just like your marketing team can with traditional customer acquisition!
In fact, they may be even better at it since 92% of consumers around the world said they trust word-of-mouth, or recommendations from others in their network, above all other forms of advertising.
By making sure that every customer has an excellent experience with your company, your customer support team can play a big role in turning them into brand evangelists to go out and spread the word. By taking the time to figure out how much new revenue this is driving by including a question about where a new user heard about your company in your sign-up form, you can use the ROI equation above to calculate ROI in terms of revenue expansion.
While the metrics mentioned above are all great ways to determine ROI on customer support, there are some benefits of customer service that are hardest to quantify, such as how it can help you develop a better product.
You see, when you provide excellent customer service, you are constantly getting feedback from your customers on what they like and don't like about your product. This feedback is essential for product development because it allows you to make changes that will improve the experience for all of your users. A few questions you may consider asking to measure these indirect returns may include:
- How many bugs have been reported by customers?
- How many features have been implemented after being suggested by customers?
- How many sales leads that have come in via support interactions have been converted?
While these numbers are harder to track, they are still important to consider when trying to calculate ROI on customer support.
Customer support is a critical part of any business, yet it's often tough to justify the expense. However, by thinking about customer support as an investment rather than a cost center, you can start to see how it can drive real growth for your business. And by using some of the methods outlined above, you can begin to quantify the ROI of customer support and make a case for investing in it.
Remember, though, that customer support is not a one-time investment. To truly see the ROI, you need to commit to continual improvement and make sure that your customer support team has the resources and technology they need to be successful. But if you do that, you'll be well on your way to growing your business in a sustainable way that puts the customer first and helps to retain, upsell and expand your customer base.