How to Improve ROI from Customer Service

Your customer service operations have a big impact on your company’s performance. The purpose of customer service is to build and maintain relationships with customers – ensuring they are happy with your products/services, and listening to their feedback about how to make your business even better. Positive customer service experiences can lead to increased customer loyalty, repeat business and referrals. Negative experiences on the other hand, can result in lost revenue and potentially crippling damage to your company’s reputation.  

Even though the value of your customer service functions are apparent, they can be expensive to operate. Staffing, IT systems, training, and management can all come with a hefty price tag. This leads to many company leaders questioning customer service effectiveness, thereby seeking ways to improve the return on investment (ROI). How they improve ROI will depend on their perception of the customer service function, either as a cost center or a source of strategic value for the company.

Customer service maturity assessment

As a management tool, ROI is a simple formula with only two components that can be influenced. You can increase the value/return the function generated for your company, or you can reduce the costs of operating the function. Influencing either factor will have a similar quantitative impact on the ROI equation. However, management choices may have significant impact on other factors such as employee morale, risk management, relationships with suppliers, and the perception of your company in the marketplace.

Why Is Measuring ROI so Important?

The first step to improving ROI is measuring it. As the management adage states, “If it isn’t measured, it isn’t managed.” When measuring the ROI of customer service accurately and consistently, companies often encounter significant challenges in picking the right metrics and factors to represent what they care about the most. Some of the measurement techniques commonly employed to evaluate the ROI of customer service include:

– Process Measures – Cycle time, time in queue and first-call resolution

– KPIs – High-level indicators such as cost per unit of work and resource utilization, that focus on the efficiency and effectiveness of your operations

– Sentiment analysis – Measurements of customer satisfaction and qualitative feedback on improvement opportunities

– Business and Sales Metrics – General company performance measurements such as customer retention rates, repeat orders and operational expenses that customer service impacts.

The individual metrics and measurements you use to calculate ROI must be both accurate, (or at least defensible) and consistent. While a specific ROI may be helpful in making resourcing decisions to improve your company’s ROI from customer service, you must be able to track it consistently and measure how it changes. If you have a solid measurement structure, then you will be able to better quantify the effects of changes, which will lead to greater precision when fine-tuning your operations.

Measuring Customer Service Costs

As mentioned, there are two components to the ROI equation: value (return) and cost (investment). Management often views the influencing of customer service costs as a simpler task than increasing value, because costs are more easily measured – at least in theory. While overall customer service costs are easy to capture from your organization’s budget (staffing costs, IT systems, workspace/facilities, and outsourcing contracts), revealing those cost details can be more challenging.  

For customer service cost data to be actionable, it must be separated into the cost per unit being delivered. Depending on the maturity of your customer service operations and how you engage with customers, this could be: cost per ticket, cost per call, cost per interaction or cost per dollar of sales. Each of these metrics evaluates cost relatively, against another factor. Along with what qualifies your costs, you will also need to qualify any value measurements you use.

Lowering Costs to Improve Customer Service ROI

Management has many options to reduce customer service costs. But before selecting one, it is helpful to focus on the specific goals of any cost-cutting measures.

Efficiency – By improving the efficiency of processes and individual activities, you are seeking to increase the speed at which your agents resolve customer issues. Increased speed means that during a normal shift, each agent will be able to resolve more issues, thus decreasing the cost per unit of work.  

Effectiveness – Also known as “first call resolution rate,” by resolving customer issues the first time they seek support, you reduce the need for customers to call again, open additional tickets or seek support on the same issue through other means. Reducing this frequency means there will be fewer transactions for your agents to address. If there is less work to do, then you require less staff.

Keeping efficiency and effectiveness in mind, it is important to note (particularly in large customer service operations) a small incremental improvement can yield significant cost savings. Here are some of the most common opportunities to reduce the cost of customer service operations.

#1 Staff Training – A small investment in training for your staff can improve both efficiency and effectiveness in resolving customer issues. Common training topics include process training, tool training, product/service knowledge, troubleshooting skills, active listening and conflict resolution.

#2 Customer Service Tools and Data – IT systems are an easy way to improve the productivity of your customer service operations. Helpdesk management and online support ticket system can help track customer requests and measure agent performance. Automation of repetitive processes and self-service capabilities for customers can reduce the need for agent-assisted support. Access to better quality and complete information can enable agents to perform their roles more effectively.

#3 Process Optimization – Improving process efficiency by reducing the number of steps, avoiding the need for queueing work and eliminating waste can not only save your company resources, but will also improve the quality of your customer’s service experiences.

#4 Restructuring for Greater Synergy – As customer service functions increase, it is common for redundancies to develop between teams, business processes and organizations. Periodic restructuring of customer service operations to maximize synergies and leverage specialization can both improve operations and reduce overhead costs of customer service management.

#5 Outsourcing – Leveraging strategic partners for customer-service outsourcing can be a good opportunity to access less costly resources that come with larger-scale operations. Business Process Outsourcing (BPO) of customer service operations is common and there are many vendors with robust processes and global workforces that will be able to support your company’s needs.

The Value of Customer Service

If customer service were merely a cost center, overhead and a service cost of doing business, then cost reduction would be the best (and only) approach to improving your ROI. But this isn’t the case. Customer service is a function that provides many value-added activities to help you acquire and retain customers. If performed well and used strategically, then your customer service operations can become a competitive differentiator for your company – enabling you to outshine the competition in the eyes of customers. It can also help you improve your financial performance, gaining approval from shareholders.

The value of customer service starts with the relationships you develop and nurture with your customers. From the initial marketing engagement through sales, delivery and post-sales support, your company engages with customers for many reasons. Through these engagements, you should be seeking to develop a rapport with your customers – understanding their needs, wants and concerns and looking for ways to help address them. While it is tempting to think of customer service as simply answering questions, processing orders and fulfilling service requests, that approach can result in you receiving less than the total value of customer relationships.

Upsell/Cross-sell

Don’t focus just on the word “sell.” Upselling and cross-selling relate to understanding customer needs and finding ways your company can help them. Your customer service team should always be looking for new business opportunities and be empowered enough to offer customers additional products and services or direct them to someone within the company who can. Your customers may be more than willing to give you more business, but they may not be aware that you have more to offer them.

Sales Insights

Customers are a great source of information about buying behavior. Your customer service agents already have access to customer purchases. Through the relationships you’ve developed, your agents can gain insights as to why customers are buying your products or services, what needs your company is fulfilling and how well your customers perceive the quality, features and performance of your offerings. Armed with these insights, a well-trained sales team will be able to identify similar needs and patterns with other customers, and drive sales.

Product/Service Improvement Opportunities

No customer perceives a company’s products and services as perfect. Your customer service team is on the frontline, fielding customer questions, complaints and feedback, about your products and services as well as customer experiences. Many customer service agents (and companies) view customer complaints and feedback as defects. That may be true, but the value of customer service is more than solving individual problems – your customer service team can help make your products and services better.

Customer service is an important part of the continuous improvement process for your products and services. The key is to create a method for your customer service agents to share the insights they are learning with your product management, R&D and delivery teams, so they can be used as improvement opportunities. Your products will improve, your customers will be more satisfied and your customer service costs will decrease as a result.

Customer Loyalty

A satisfied customer will consider engaging in repeated business with your company. A loyal customer will come to you first before even considering your competitors, and he or she is likely to refer you to his or her friends and family members. Developing customer loyalty is more than having great products. It is showing your customers you care about them, you respect their time and understand their needs and motivations. Your customer service staff provides the essential personal touch to develop deep connections with customers that lead to loyalty. Your customer service staff members are also typically the last employees with whom customers would have interacted, before making the decision of whether to bring you more business.  

Competitive Insights

What makes your company better or worse than your competitors? How does your quality compare? Are your features evolving according to customer needs? What about pricing and customer perception of value? Customer service interactions are a great way to gain access to insights about other companies that can help you better compete in the marketplace. Many customers may be wary of sharing information with you during the sales process, particularly if there is any sort of negotiation involved in their purchase. After the sale is made (while they are talking to your customer service agents), most customers are happy to share why they chose to do business with you. Their answers may be feedback about your company, but more than likely they will also share information about why they didn’t choose your competitors.  

Company Reputation

While first impressions are important, the last impression is what people will remember. You may be in an industry where product features, quality, and price are comparable. In such a situation, your company’s reputation may be the determining factor of who receives the sale. Customer service and post-sales support experiences weigh heavily on the perception that customers, analysts and even potential employees have about your company. Are your staff friendly? Does your team seem to genuinely care about the customers? Are customer service processes easy to navigate and efficient or does your company cuts corners? Customer service experiences are good indicators about how your company functions and answers all these essential questions.

How to Increase the Value of Your Customer Service Functions

Improving the value you receive from your customer service functions may require some process refinement, IT tools or organizational structure changes. But the starting point for maximum customer service impact is your company culture. Customer service is about interactions and the experience, so the best way to improve your customer service is to make those experiences better. Here are four guidelines for selecting improvement efforts to help maximize customer service value for your company.

#1 Customer listening – Solving customer issues and concerns have less to do with fixing the actual problem and more to do with making the customer think he or she is being heard, and that you genuinely empathize with his or her situation. Empathetic listening starts with culture and staff mindset – becoming an advocate for your customers. By improving both mindset and listening skills, you will be able to improve customer satisfaction and loyalty, even if the underlying issue or question cannot be immediately resolved.

#2 Don’t make your customers wait – This may seem simple, but one of the biggest customer service complaints is the time spent on-hold, in lines and waiting for the agent’s attention. By the time a customer talks to an agent, he or she is already agitated – this doesn’t create a positive customer service experience. Reducing queuing often requires changes to staffing levels, business processes and IT systems. Tracking and minimizing customer wait times (also known as queueing) shows your customers that you value their time as well as their business.  

#3 Knowledgeable and caring staff – Most customers will try to answer their questions themselves without asking for help, so when they do engage with your customer service agents, they expect to interact with a knowledgeable staff with the skills and information to solve their problems.  There are many different options for staff knowledge and skill training, from product features to business processes to diagnostic techniques. Your customer service staff must know your business better than your customers – and training is often needed most.

#4 Give agents access to the information they need – When a customer interacts with your company, he or she expects to talk with a person who knows about all the previous customer interactions, good and bad. If your agents don’t have access to this information, they will need to collect considerable background information before being able to provide any kind of good quality support. This slows the support process, creates a potential for providing conflicting guidance and well, annoys customers. Your helpdesk system serves an important function by providing agents access to complete customer contact history, so they can engage the customer more effectively.

The Role of Your Helpdesk Management System

Your helpdesk management system, or customer service system, is also important to the support of customer service functions. It provides a common repository to record customer interactions, track requests, capture knowledge and measure customer service performance. Beyond record-keeping, this system provides consistent workflow orchestration, automation and measures process performance. The reports generated from your helpdesk management system help the management truly understand the factors that impact customer service ROI, and identify improvement initiatives to increase value, reduce costs, improve customer satisfaction and utilize resources efficiently.  

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