What is the ROI of Customer Service?
Globally speaking, we are sucking at customer service. Sorry, but it’s true – and it’s getting worse. It’s not really a question of whether customer service needs improvement. It’s a question of why aren’t companies trying harder?
In a lot of cases, maybe most, it ultimately boils down to a reluctance to make the financial and time investment necessary to move the customer service bar. Why the reluctance? Because the decision makers know that at some point, somebody’s going to ask them to justify the commitment. Someone’s inevitably going to look at customer service training or some other initiative and ask, “What’s the ROI of this? What is the ROI of this training?”
The "ROI of customer service" question is a trap
On the surface, it’s a great question. An awesome question. An absolutely must-be-asked question. One that every responsible business person should consider. But it’s also a trap.
It’s a trap because the question begs a simple, linear answer to a non-linear result. It is similar to questions like:
- What is the ROI of doing an oil change for your car?
- What is the ROI of that trip to the gym?
- What is the ROI of brushing your teeth?
Like all of these, the impact of improving customer service is both dependent and cumulative. It is dependent because customer service is not a single, tangible thing. It is one of three components that collectively build customer trust. Attaching a direct, linear outcome to just customer service is like asking which of the last five breaths you just took were the most meaningful.
The ROI is cumulative
Customer service is more than a series of isolated situations. The impact is cumulative:
You have a good experience at a restaurant. A month later, you take a friend there. You both have a good experience, so a month after that, you each take someone else there…
You get the picture. Six months down the road the restaurant might see a nice lift in its repeat customer metrics – but that’s assuming that they stuck to their guns in their customer service training, coaching, etc.
Customer service is like vegetables
It’s kind of like vegetables. We all know that there is a mountain of evidence telling us how good vegetables are for us. But what was the ROI of that carrot you had at lunch today? What metric do you have to prove that last night’s salad directly impacted your health? Silly questions? Of course. There’s no per-plate ROI for vegetables, so why do we still pile them high on our children’s plates?
Is there an ROI to improving your customer service? Absolutely. Want to measure it? No problem. Just don’t try to do it monthly or weekly.
Measure loss - not gain
The most effective and meaningful strategy for assessing the impact of customer service is by measuring losses and potential losses. What will happen when you don’t have well-trained people? What will happen if the overall experience is below customers’ expectations? This is where you can start to find real, concrete numbers.
Is traffic down? Is satisfaction down? Are escalations up? These can be attached to real numbers. A simple tool like Belding’s Cost of a Lost Customer calculator can give you estimates of the potential loss.
Want to see ROI? Try this
One of our clients in an industrial fabricating business shared her rationale for the training expenditure this way:
“We average a churn of around 120 customers a year. If this training helps us retain just one of them, it has paid for itself forty times over in just the first year.”
That’s a pretty persuasive argument.
Try it for yourself: Look at core business metrics like number of complaints, repeat business, average sale value, employee turnover, etc. Then make the investment to improve customer service – and stick with your plan solidly for a full year.
Then look at the numbers again.
“I’ve never seen a company fail because its customer service is too good.”
