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 measure the customer support ROI; they invest in support for customers. Customer support has a cost, and even if you 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.
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 of 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!
Why Measure Customer Support ROI in the First Place?
Would you like to know whether sending more money on customer support increases your business’s bottom line? Or is it a waste past a certain point?
Tracking support customer experience metrics over time is essential for answering 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 frustrated when signing up because of an inefficient onboarding process? Are they finding value in your support and your products/services?
Customer experience metrics can help you answer these questions and much more. They provide you and your leadership team with the information they need to make smart, strategic decisions about your business. This article will discuss several of these metrics, how to measure them, and how to measure customer support ROI and improve it.
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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 measuring the impact on your bottom line. Maybe your lifetime customer value trend up the 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 the necessary data points to calculate and measure customer support ROI.
Average Transaction Size (or Average Contract Value)
Calculate your average transaction size by dividing your total revenue during a specific period and by the number of individual sales made during that period. Depending on your business model, you might instead call this average contract value, particularly if your business is a consultancy, service-based, or SaaS business. The formula is the same, you swap the total revenue during a given 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 focusing on raising the average order value more than increasing the number of individual sales. It could be that it is easier to double the average order value but almost impossible to double the number of sales, yet both 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 throughout the average timespan someone is your customer.
You can measure customer lifetime value in a couple of different ways. One approach is to take your average annual revenue per customer and multiply it by the average customer lifespan.
Churn Rate
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 the churn rate by taking the number of existing customers you lose and dividing it by the number of new customers you acquire over a particular period.
Cost of Support (Average Per Customer or Use)
How much does offering support alongside your particular product or service cost? Depending on how your support services are structured, you might determine this by averaging 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 set up your systems to track this information in the future.
Once you have this data, you can do some cool things, such as determining the relationship between the money you spend on support services and your customer satisfaction metrics. You might find that money spent on support might greatly affect your customer experience metrics, or it could have virtually no effect!
How to Calculate Customer Support ROI?
While you can’t measure customer support ROI as a direct metric, you can calculate it by combining some of our explored metrics. For example, you can examine how your support costs affect customer experience metrics, such as NPS. Then you look at how your NPS correlates with your revenue. Multiplying the relevant ratios lets you determine the direct relationship between support costs and your revenue (ROI).
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, start tracking them over time and see how they change based on strategic decisions you make in your business.
2. Compare Results from Different Customer Segments
One particular customer segment might have 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 comparing your customer experience metrics across those segments. For example, you might segment based 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 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 in the future.
4. Run Experiments to Get the Comparison Ratios and KPIs
Once you start to draw conclusions based on the data you’ve gathered, the next step is to apply your conclusions by implementing some of the lessons learned as an experiment and then measuring the corresponding change to your customer experience metrics.
For example, maybe historical data shows that investing in customer support services positively affects your NPS score and revenue. Then you run the experiment of spending twice as much on customer support/customer experience and measure the impact on your NPS score and revenue.
Start taking a disciplined, strategic, and proactive approach to customer support in your business; your customers and bottom line will thank you.
Which new metric will you start tracking first?
