What Is The ROI Of Your Customer Experience (And How To Measure It)

What Is The ROI Of Your Customer Experience (And How To Measure It)


Companies today are under a lot of pressure to provide great customer service. Customers and clients want a personalized, lightning-fast experience, and they have more channels than ever before to tout a good experience or lament a bad one.


But for the executives of a company, market share and quarterly growth are still the numbers that keep them up at night. As important as the customer experience may be, at the end of the day, its end goal is to keep the doors open and the company growing.

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Although it seems like a far stretch between good customer service and cashing in, there is, in fact, a significant return on investment (ROI) inherent in good customer service. For example, a study by Forrester Research and Watermark Consulting found that companies with high marks in their customer experience metrics had double-digit gains even during the treacherous recession years of 2007-2012. The question is, what is the ROI of customer service, and how can it be measured?


Hard to put your finger on

The ROI of customer service is hard to pin down because it requires a more complete and complex set of data than, say, operational metrics. Answering questions like what, when, and where is easy to do.


For example, what do customers buy? When do they call for support? Where do they contact a company, and what makes this the most popular support channel?  But answering the why and how questions that reach to the heart of the customer experience is significantly more challenging.

Pointing to a single metric may not be sufficient for measuring the ROI of customer experience. Rather, companies should use in combination the metrics available to them to answer key questions as to the impact that customer service is having on the company.


Here are some important questions to ask when considering the ROI of customer service.


  • How likely are customers to return for further purchases?

It is common knowledge among those in business that it is significantly
more profitable to keep an existing customer than to acquire a new one. Therefore, loyal customers returning to a company is a good indicator of profitability. Customer loyalty can be determined easily using a CRM system.

**10 best rewards programs for loyal customers**


How likely are customers to recommend your company’s products and/or services to others?

In the age of social media, customers are more vocal than ever and have a broader audience than ever to voice their approval or disapproval of a company’s goods and services. The ROI of good customer service in this case is recruitment of new customers and clients who will follow the recommendation of a trusted friend or colleague.

**How to use social media for customer support**


What is the cost of dealing with an unhappy customer?

Rather than just considering the ROI of customer service in the positive sense, consider also the importance of avoiding negative customer interaction.

An angry customer means more time and money will have to be invested to right the wrongs and make the customer happy again.

Moreover, the cost of a scathing review or social media post could have reverberations well into the future, discouraging potential customers from embarking on a customer journey with you and thwarting the efforts of your marketing department.


To track the ROI of customer service, begin with the end in mind.

Though the importance of customer service is widely accepted, how to precisely measure its financial impact is a more elusive goal. Some companies blindly accept that better customer service will lead to more profit, throwing improvement measures on their call centers in the hope that something will stick.


Other call centers attempt to systematize their analysis of ROI for customer service improvement measures, calculating that a two-percent increase in first call resolution (FCR) will result in a half-point improvement in customer satisfaction, which will become a half-cent increase in per-transaction revenue at the cost of a quarter of a penny. Whereas the first approach may have been too imprecise, this one is perhaps worse for its mechanization of the customer experience.


Here’s an alternative.


  • Determine a list of customer behaviors that result in higher profits.

This could include visiting your website more often, spending more per transaction, or a reduction in incidents of product returns. These should be measurable, observable outcomes (not customers’ impressions or feelings). 

  • Next, review this list and select the behaviors that can be directly influenced by customer service efforts.
  • Finally, consider what specific skills, training, technology, or materials could help customer service agents to increase the likelihood of these customer behaviors.

This is where to focus your time, money, and effort toward improving customer service and its ROI. Then, to measure the results, refer back to the list of measurable, observable customer behaviors that you began with, and measure again.


After determining the profit impact of increasing these customer behaviors, and subtracting the cost of the training or materials that were implemented, you should have a pretty good idea of the ROI of your customer service efforts. This process should be completed in a cyclical manner, returning, refining, and re-measuring the list of outcomes and their profitability in light of the costs.


By using this process, your company will remain focused on the customer service attributes which have a direct impact on profit, and thus can come closer to determining the ROI of customer service for your company.


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