Studies show that companies that provide an excellent customer experience enjoy five times more revenue growth compared to companies delivering a poor customer experience.
At the same time, many companies don’t clearly measure the impact of the money they invest in support for customers. Customer support does have a cost, and even if you do keep track of your budget for customer support, there’s a good chance you aren’t tracking the data which indicates the impact that investing in customer support has on your bottom line, and your business as a whole.
Take a moment and consider for your own business:
How much money do you currently spend on support on average, per customer?
How much revenue does that generate for you? What is the ROI on that investment?
There’s a good chance you aren’t sure. No problem, that’s exactly what this article is designed to help you with!
But why should you calculate the ROI of your customer support in the first place?
Well, would you like to know whether sending more money on customer support actually increases the bottom line of your business? Or if it’s basically a waste past a certain point?
More broadly, tracking support customer experience metrics over time is essential for being able to answer many important questions about how your customers view your company, products, and services. Do they love you, and want to recommend your products to all their friends? Do they get very frustrated when they first sign up because of an inefficient onboarding process? Do they find value in the support that you offer alongside your products / services?
Customer experience metrics can help you answer all of these questions, and much more. They provide you and your leadership team with information they need to make smart, strategic decisions about your business. This article will discuss several of these metrics and how to measure them, as well as how to measure (and improve) your overall customer support ROI.
How to Measure Customer Experience
You might be familiar with some common metrics for directly measuring one particular aspect of your customer experience, such as:
- First Reply Time
- NPS (net promoter score)
- CES (customer effort score)
- CSAT (customer satisfaction score).
These are useful metrics for gauging the state of your current customer experience strategy. However they don’t necessarily translate to a measurement of the impact on your bottom line. Maybe your lifetime customer value trend up word in direct proportion to your MPS, or maybe your revenue and CES trend in opposite directions.
Here’s an overview of the main metrics to keep track of, which will provide a more comprehensive analysis of your business, and provide the necessary data points to start calculating your ROI.
Average Transaction Size (or Average Contract Value)
Calculate your average transaction size by dividing taking your total revenue during a specific time period, and dividing by the number of individual sales made during that time period. Depending on your business model, you might instead call this average contract value, in particular if your business is a consultancy, service-based business, or SaaS business. The formula is basically the same, you just swap the total revenue during a given time period with the total value of contracts made during that period.
This metric might indicate, for example, that your best strategy for increasing revenue is actually focusing on raising the average order value, more than trying to increase the number of individual sales. It could very well be the case that it is easier for to double the average order value, but almost impossible to double the number of sales, yet both of these would still double your revenue.
Customer Lifetime Value (CLV)
Customer lifetime value refers to the total amount of money an average customer will spend on your products or services over the course of the average timespan someone is your customer.
You can measure customer lifetime value in a couple different ways. One approach is to take your average annual revenue per customer and multiply it by the average customer lifespan.
Churn rate refers to the percentage of customers that stop being your customer during a given time. A typical example might be for a subscription business where 10% of first-time users cancel their subscription during the first month.
You calculate churn rate by taking the number of existing customers you lose, and divide by the number of new customers you acquire, over a particular period of time.
Cost of Support (average per customer, or per-use)
How much does it cost to offer the support alongside your particular product or service? Depending on how your support services are structured, you might determine this by averaging out the cost of ongoing support over the customer’s lifespan. Or, it might be more helpful to measure this in terms of one-off costs, for example if your company’s support is largely in the form of an initial implementation or consultation or kickoff, versus support that is more ongoing.
The challenge of this metric is not some complicated mathematical formula, but because this information may not be currently tracked in your business. And there may or may not be a way to put it together based on historical information. If that’s the case, the best thing to do is to set up your systems to start consistently tracking this information going forward.
Once you have this data, you’re able to do some very cool things, such as determining the relationship between the money you spend on support services, andn your customer satisfaction metrics. You might find that money spent on support might have a very large effect on your customer experience metrics, or it could have virtually no effect at all!
How to Calculate Customer Support ROI
While you can’t measure the ROI on your customer support as a direct metric, you can calculate it by combining some of the metrics we’ve explored. For example, you can look at how your support costs affect your customer experience metrics, such as NPS. Then you look at how your NPS correlates with your revenue. This allows you to determine the direct relationship between support costs and your revenue (aka ROI) by multiplying the relevant ratios.
How to Optimize Your Customer Support ROI
1. Track consistently over time
The easiest place to start if you’re measuring customer experience metrics for the first time is to start with the NPS and CSAT scores. If you’ve already measured these metrics at specific points in time, start tracking these metrics overtime and see how they change based on strategic decisions you make in your business.
2. Compare results from different customer segments
You might find that one particular customer segment has a very high churn rate. Or you might find that one particular demographic yields the highest customer lifetime value.
Try segmenting your customer base, and then comparing your customer experience metrics across those different segments. For example, you might segmentbased on:
- Age / Location / Demographic Info
- Average Transaction Size
- Type of Job or Industry
- Which Type of Product / Service / Membership Purchased
3. Try to spot historical trends
As you gather these various data points, it can be helpful to see if you can spot trends over time. You are almost guaranteed to find anomalies in the historical data…but the question is about whether you can accurately identify the cause of the change (whether it’s random, seasonal, or a specific response to something). While you may not always be able to identify the cause for each of these anomalies, the exercise to try is always well worth it. The times when you can determine a casual relationship can be transformative for your business, and will provide extremely valuable insights that can help guide your decisions going forward.
4. Run experiments to get the comparison ratios and KPIs
Once you start to draw conclusions based on the data that you’ve gathered, the next step is to apply your conclusions by implementing some of the lessons learned in the form of an experiment, and then measuring the corresponding change to your customer experience metrics.
For example, maybe historical data shows that investing in your customer support services positively affects your NPS score as well as your revenue. Then you run the experiment of spending twice as much on customer support / customer experience and measure the real impact this has on your NPS score and revenue.
Start taking a disciplined, strategic, and proactive approach to customer support in your business, and both your customers and your bottom line will thank you.
Which new metric will you start tracking first?