How Much Does It Cost to Support a Customer? Turning Service from a Cost Centre into a Value Centre - DigitalGenius
21 Jul 2023
6 min read
One of the key concerns we hear from our customers and contacts in the customer service (CS) industry is that they want to turn customer service from a cost centre into a value centre. Another way it’s been expressed to us is going from a 'Customer Service Department' to 'Customer Experience' – a more holistic, and proactive approach to helping customers.
Our partners at Dixa have expressed this well in an article in Forbes: that a cost centre is anything that is deemed to be essential but non-profitable. At a glance, customer service is one of those departments. There is no direct revenue attached to it but there are costs – staffing equipment, and technology being three of the main ones.
Also in the case of customer service, they are processing returns and requesting refunds. These are obvious costs, but often that’s not customer service which has ultimately created these costs.
Customer happiness should be a goal in of itself for a business, which customer service plays a huge part in. However, tangible and provable value can be a tricky thing to pin down. Here are our steps to turn Customer Service from a Cost Centre to a Value Centre
Step 1: Understanding Customer Support Costs
Understanding customer support costs is crucial for businesses to make informed decisions about their customer support team. Customer support costs can be broken down into various categories, including workforce costs, operational costs, and customer churn costs. Workforce costs include employee salaries, benefits, onboarding, IT, and training. Operational costs include rent, equipment costs, and software licensing fees. Customer churn costs include lost revenue and additional expenses to acquire new customers.
To calculate customer support costs, businesses need to consider the cost per support ticket, cost of support per order, and cost of support per revenue. The cost per support ticket can be calculated by dividing the total customer support spend by the number of tickets handled. The cost of support per order can be calculated by dividing the total customer support spending by the number of orders generated. The cost of support per revenue can be calculated by dividing the net sales by the number of tickets handled.
Step 2: Tracking the impact of customer service on customer retention
There is clearly indirect revenue attached to good customer service. Understanding retention and support costs is crucial as they directly impact the overall customer service expenses and the effectiveness of customer retention strategies. Zendesk reported that 97% of consumers they surveyed say that bad customer service changes buying behaviour (which is no great surprise), and that 87% say good customer service changes buying behaviour. Moreover, if customers have a good customer service interaction, 54% say they buy or use more services from that company.
What people say and what they do are different things, so how can retailers prove this. One method could be use a CDP (customer data platform) to tag every customer who interacts with customer service and track these cohorts across a period of time.
Do they order more often than customers who don’t interact with CS at all? Is there any connection to their CSAT (Customer satisfaction) scores and how often they shop.
If you find that customers who speak to CS and leave a high CSAT score come back and buy more, then you’ve already started to prove the value that customer service has.
On the other hand, if the data doesn’t paint such a positive picture, is inconclusive, or you’re just not able to ascertain the data, then you may have to think about other tactics.
Step 3: Giving your customer support team more time
Do you find that your customer service agents are being overwhelmed with inbound tickets that you are struggling to get through? How about during peak periods?
This is one of the main issues we see with retail customer service teams: they are so bogged down dealing with the backlog from the night before that they are just trying to stay on top of it. This means agents are rushing to resolve each ticket in order to move on to the next one to clear the mountain before the end of the day.
If agents are rushing between different cases then the opportunities to provide added value to customers are slim. So how can retailers help their agents to get more time for each case they handle?
One way is through automating repetitive and trivial tasks for agents. For example, for one retailer, it can take 10 to 15 minutes for an agent to generate a return label. Copying and pasting data into fields on a carrier website takes agents time and is something that could be automated.
Another is to use AI automation to completely automate responses to these repetitive questions. Using AI to detect what customers are asking can then trigger workflows that can answer questions in full. For instance, if a customer needs a tracking link, then through integrations with carriers, an AI can find the tracking link and provide it back.
Step 4: Deflect and resolve tickets before they reach agents
Step 3 was about solving support tickets faster, but what if you could reduce the number of cases your agents have to deal with every day?
One of the main reasons that customers will get in touch with you is because they can’t solve the issue themselves. Take returning an item for instance: if customers can easily find a way to organise a return for their order, they are less likely to reach out to you. If you have a self-service portal to generate a return label or a collection, then customers don’t need to speak to you as much.
The best place to start is by categorising the tickets that you currently receive – this will show you the most common reasons for customers to reach out, allowing you to look into which topics are causing the most work for your team, and thus are ripe for deflection tactics.
If categorising tickets is too big a job, there are automatic solutions. Like our DigitalGenius Automation Analysis, which does this automatically by analysing the intent in every customer ticket.
If self-service is not an option for you, then you may want to look into how you can use automation to help deflect and resolve these cases instead.
Step 5: Proactive customer service
One way to become value-generating for your business is to do proactive customer service, or outbound customer service. Providing exceptional customer service through proactive outreach can significantly enhance customer satisfaction and loyalty. As McKinsey put it, customers don’t just want personalisation - they demand it! Nothing is more personalised than getting dedicated outreach from a customer service rep to ensure that you have everything that you need.
This could be a call or an email to check that everything is satisfactory with the items purchased, that the ordering process was smooth, and to seek any further useful feedback. You could even see if the customer needs to place another order – and if so the agent could process that order on their behalf.
If you have a loyalty program, you could issue loyalty points for anyone who takes a call, or you could even use referral discount codes to thank customers for their order. The possibilities are endless: what would you ask your agents to do if they had time to reach out to customers?
Step 6: Optimizing Customer Service Costs
Optimizing customer service costs is essential for businesses to reduce expenses and improve efficiency. One way to optimize customer service costs is to implement customer self-service options, such as chatbots, which can automate customer resolutions and reduce overall customer support costs. Another way is to use omnichannel customer support platforms, which provide a unified agent desktop with real-time support across channels.
Agent training and customizable workflows can also simplify processes and boost efficiency. Additionally, businesses can use metrics such as customer self-service options, omnichannel customer support, and agent training to optimize customer service costs. By optimizing customer service costs, businesses can improve customer satisfaction, reduce churn, and increase revenue.
Step 7: Customer Service Outsourcing
Customer service outsourcing is a popular option for businesses looking to reduce costs and improve efficiency. Outsourcing customer service can provide access to technical expertise, reduce training requirements, and improve service quality. However, it’s essential to choose the right customer service outsourcing provider, considering factors such as reputation, experience, quality of service, integration with existing systems, customer support, people, and processes.
When outsourcing customer service, businesses need to consider the cost of outsourcing, which can vary depending on factors such as the size of the company, level of service needed, location, availability, and customization options. The average cost to outsource customer service is $8 to $15 per hour internationally and $22 to $28 per hour domestically.
By understanding customer support costs, optimizing customer service costs, and considering customer service outsourcing, businesses can make informed decisions about their customer support team and improve customer satisfaction, reduce churn, and increase revenue.
Step 8: Upsells and cross-sells
If you have managed to reduce your backlog, having a more active customer service team on site is a real possibility for your business. Implementing live chat can allow you to help customers to find the products, make recommendations, or answer important questions related to a customer query. All of which can help increase your average order value, and allow you to convert more customers. Some suggest that adding live chat can increase conversions by up to 20%.
From this point, you can start to directly attribute revenue to your customer service team and measure how much they are driving the bottom line.
Conclusion – measure the impact of customer service costs
In turning CS from a Cost Centre into a Value Centre, remember that this is about proving that Customer Service generates value to the business. Measuring the customer support cost is essential to understand the financial impact of your customer service operations. There will always be the intangibles that can be hard to ascertain, and it may appear that CS costs more than it drives in revenue. That’s OK – the first step is understanding what your baseline is and then working on ways to improve it.
To discuss how automation can help free up your agents to drive more value to customers, get in touch with the DigitalGenius team today
