Do you think about how customer service impacts your margins? It’s not a topic people like to dig into because it plays into the narrative that customer service is a cost centre, and not a value centre (which we believe is false).
But nonetheless there is a cost to customer service, and one way to measure it is with contact to order ratio. If the majority of orders you receive result in your customer service team having to do some work, then that starts to eat into your margins.
Let’s imagine that your average order value is £20, but the cost of dealing with a ticket is £5. That means that every time a customer gets in touch about an order, you could be losing 25% of the value immediately. If that happens across lots of your orders then you start to eat into your profitability.
Keeping your contact to order ratio under control is therefore important to the business overall. So let’s dig into it a little bit.
Understanding the Concept of Contact to Order Ratio
The concept of contact to order ratio is crucial in ecommerce and customer service. It’s a simple yet powerful metric that gives you insight into your business efficiency. But what does it mean exactly?
In layman terms, the contact to order ratio represents how many contacts (like emails or calls) are needed for each order placed by customers. If the figure is elevated, it suggests customers require more assistance prior to placing an order.
This source explains it brilliantly: imagine running a brick-and-mortar store where every customer asks five questions before buying anything. You’d be spending all day answering queries rather than selling products.
The Importance of This Metric
Contact to order ratio isn’t just about identifying how much support your customers need; it’s also about gauging the overall health of your sales and fulfilment processes.
If people have loads of questions or face issues while placing orders, there could be underlying problems with your product descriptions or checkout system. Similarly if, post-purchase, customers are getting in touch a lot, then perhaps your warehouse and delivery systems need some attention. On top of that, higher ratios might indicate inadequate self-service options which forces users ask for assistance too often.
Making Sense Of The Numbers
An ideal contact to order ratio varies across industries and companies’ sizes – but generally speaking lower is better. Why? Because less time spent on answering questions equals more time focused on growth strategies. For some businesses with a good sales process, they may want to speak to customers in order to upsell and cross-sell.
Calculating Contact to Order Ratio
The contact to order ratio is a vital metric for e-commerce businesses. But, how do you calculate it? It’s simple mathematics.
Divide the amount of customer service interactions by the total number of orders to ascertain a ratio. Multiply this result by 100 to express it as a percentage.
Contact to Order Ratio (%) = (Total Contacts / Total Orders) x 100
This calculation gives an indication of how many customers need help per order. The lower this figure, the smoother your operations are running.
Consider an example: If in one month your business receives 500 customer queries and processes 2000 orders:
Contact to Order Ratio (%) = (500/2000) x 100 = 25%
In other words, for every four orders made on your website or app, there’s likely one query coming into your customer service team.
Data Collection Considerations
- Gather data over several months before calculating – this helps level out any anomalies caused by high-traffic events like sales or holidays.
- Keep tabs on both positive and negative interactions – these could include inquiries about product availability but also complaints about delivery delays.
- Categorise different types of interactions – understanding what questions people ask most frequently can give insight into where improvements can be made in self-service resources. If you need help categorising, speak to us about our Ticket Analysis.
Benefits of a Low Contact to Order Ratio
A low contact to order ratio has clear advantages. For starters, it’s a signal of efficient operations and high customer satisfaction – albeit unspoken customer satisfaction.
When customers receive what they require without having to make a request for assistance, it is an indication that your company has been doing well. This highlights the effectiveness of your processes.
Elevated Customer Experience
Customers prefer self-reliance when shopping online. The fewer obstacles they encounter, the smoother their experience will be.
The result? A boost in customer loyalty and increased repeat purchases. According to HubSpot, return shoppers are more likely than first-time buyers to make future purchases.
Better Resource Management
A low ratio allows you better manage resources by focusing on key areas that directly impact sales instead of dealing with customer queries all day long.
- You can allocate staff time towards tasks like marketing or product development rather than troubleshooting issues.
- This approach conserves both money and time, allowing them to be reinvested back into the business for further expansion.
- In essence, every pound saved from handling fewer inquiries is another pound earned.
Gaining insights from data helps fine-tune strategies. With fewer contacts per order, you have an easier task analyzing patterns behind successful transactions.
Your team gets crucial insights on what’s working, helping them make informed decisions to further improve the customer journey.
There you have it. A low contact to order ratio isn’t just about saving time or reducing workload. It’s a strategy for delivering top-notch service while growing your business efficiently.
Strategies for Reducing Contact to Order Ratio
Cutting down your contact to order ratio can significantly boost your business performance. Let’s dig into some proven strategies.
Invest in Self-Service Options
Giving customers the tools they need to answer their own questions can reduce contacts and improve customer satisfaction. Think FAQ pages, tutorials, or AI-powered chatbots – these options let customers get instant answers without needing human intervention.
Improve Website Clarity
If customers struggle to find information on your website, they’ll reach out for help more often. Make sure all product details are clear and easily accessible; this includes pricing, shipping info, return policies etc. If you can use generative AI in a chatbot to answer these questions that can be even better.
Streamline Customer Service Processes
Sometimes reducing contact rates means taking a closer look at internal processes. Regularly review workflows within your team and use CRM systems, so every interaction counts towards resolving customer queries faster.
Educate Your Customers Proactively
The Harvard Business Review (source) highlights that educated customers make fewer service calls because you’ve answered their potential questions upfront through proactive communication like newsletters or product update announcements.
Remember: It’s not just about having less contact with each customer; it’s about making each contact more effective. These strategies can help you strike that balance and ultimately reduce your contact to order ratio. Sending automatic proactive emails that solve problems before they occur is cheaper and quicker than having an agent deal with queries one-by-one.
How AI Automation Can Help Reduce Contact Order Ratio
The emergence of AI automation has revolutionised how businesses manage their contact to order ratio. This is largely because it offers efficient ways to handle customer questions, which can often be repetitive or simple.
Firstly, AI-powered chatbots have become an indispensable tool for reducing the number of contacts per order. They’re designed to answer common questions instantly and accurately, freeing up your team’s time for more complex queries.
Apart from providing instant responses, these intelligent machines also offer round-the-clock support – a feature customers increasingly expect in our always-on digital world.
Sophisticated Machine Learning Models
Moving beyond basic bots are sophisticated machine learning models capable of handling intricate scenarios with minimal human intervention. These systems learn from past interactions and continually improve their performance over time – ultimately leading to fewer touchpoints needed per transaction.
To illustrate this point further: imagine a smart assistant that learns your food preferences over time based on your previous orders and suggests meals accordingly. As such experiences become more seamless and personalised, the need for direct interaction decreases significantly.
Predictive Analytics & Proactive Customer Service
Beyond dealing with existing issues efficiently, predictive analytics tools within AI automation allow companies to anticipate potential hiccups before they even happen. By identifying patterns and trends in customer behaviour, businesses can address potential issues proactively – thereby reducing the need for customers to reach out.
Consider a situation where an online retailer uses AI tools to predict when certain products might be out of stock based on buying patterns. This allows them to communicate with customers early about alternative options, preventing possible complaints or returns down the line.
So, you’ve navigated the complex landscape of Contact to Order Ratio. It’s a potent weapon in your armory.
You now know how to calculate it – an invaluable skill that can provide insight into your customer service efficiency.
A low ratio? That’s the dream! We’ve uncovered why this matters and how it benefits both business operations and customer satisfaction alike.
In short: Embrace AI automation as part of future-proofing strategies… Because mastering Contact to Order Ratio might be what sets you apart from competitors in today’s bustling e-commerce world…