Customer service ROI: How to measure and improve it

You know your customer service team members are powerful contributors to customer happiness—but they’re also revenue drivers. They’re one of the only direct touchpoints you have with your customers and are responsible for creating great customer experiences. Those experiences make customers more loyal and likely to stick around, meaning revenue goes up without customer acquisition costs increasing in tandem.

Meeting their customer service objectives helps satisfy your customers and meet your internal goals, like service-level agreements (SLAs). With the right tool, it’s easy to crunch the numbers to calculate your customer service return on investment (ROI).

In this guide, we’ll help you understand customer service ROI and why it’s important to any customer service-oriented business. We’ll also explore how to calculate it and interpret the results, plus share some strategies for boosting your customer service ROI with the help of cutting-edge AI and automation.

More in this guide:

• How to measure customer service ROI
• Best practices to improve customer service ROI
• Why is ROI on customer service initiatives important?
• Frequently asked questions
• Increase your customer service ROI with an AI-driven CX solution

How to measure customer service ROI

To measure customer service ROI, you’ll need to measure several key customer service metrics to paint a broad picture of your overall performance. Once you tally up all your related revenue and expenses, you’ll use a formula to calculate your total ROI.

Use the customer service ROI formula

Your customer service expenses will include support team salaries, the cost of all support tools and technology they use, plus any training you provide and any other overhead costs associated with the customer service team.

This formula is limited to simply revenue and expenses, so it doesn’t quite measure every facet of the customer experience (CX). To do that, you need to assess the intangible value you provide your customers by exploring the customer service metrics we mentioned above. That’s easy with a customer service tool that leverages cutting-edge AI and automation to collect and interpret crucial customer service data.

Analyze sentiment and intent

Sentiment analysis gauges customer emotions, revealing feelings of satisfaction or flashes of frustration. Positive customer sentiment often correlates with loyalty and increased revenue, but negative sentiment can signal potential churn, threaten your bottom line, and require immediate attention. On the other hand, customer intent analysis uncovers customers’ underlying needs and desires, enabling targeted service improvements and personalized interactions.

Sentiment and intent are both key to optimizing customer service, reducing costs, and improving ROI. That’s where a tool like Zendesk comes in. Unlike other customer service solutions, Zendesk can comprehensively score every customer conversation on sentiment, intent, and language in real time. That means your sentiment and intent measurements are always up-to-date, so your ROI calculations are as accurate as possible.

Track your returning customers

Repeat business strongly indicates that your customers are happy with your product or service. Your customer retention rate assesses how many customers have stayed with your business over a given period compared to how many have left.

To calculate your customer retention rate, use the following formula:

The variables correlate as follows:

• E: The total number of customers at the end of a given period.
• N: The number of customers you added within the given period.
• S: The number of customers you had at the start of the given period.

Analyzing the rate of returning customers allows businesses to directly correlate customer service efforts with revenue generation. Increased repeat business often signifies successful issue resolution, efficient service, and a positive overall CX.

Measure your churn rate

Your churn rate is vital for measuring customer service ROI and ensuring that you retain your customer base. A high churn rate might indicate underlying customer dissatisfaction, highlighting areas where you can improve service, such as with self-service options to triage a large portion of inbound inquiries.

You can calculate your customer churn rate with a simple formula:

The variables correlate as follows:

• S: The number of customers you had at the start of a given period.
• L: The number of customers you lost during that period.

You can protect revenue and increase customer lifetime value by reducing churn through enhanced customer service. Analyzing the correlation between customer service initiatives and churn rate helps quantify the impact of these efforts on the bottom line. Decreased churn rate directly translates to increased revenue and a stronger customer base.

Evaluate overall satisfaction

Satisfied customers are more likely to make repeat purchases, become brand advocates, and tolerate operational changes like price increases. They also can be more inclined to provide valuable and constructive feedback about their experiences. Tracking customer satisfaction (CSAT) over time allows you to easily flag areas where you need to improve your services. A higher CSAT score typically correlates with increased revenue, reduced churn, and positive word-of-mouth marketing.

To measure CSAT, you can use surveys with rating scales or Net Promoter Scores® (NPS). With a solution like Zendesk, you can also gauge the sentiment of customer feedback. This can help you quantify the impact of your service efforts on customer opinions and overall business performance.

Best practices to improve customer service ROI

Of course, the ultimate goal in measuring customer service ROI is improving it. But how can you lower your customer service costs and improve service quality simultaneously? It’s fairly easy—as long as you have the right capabilities within your tech stack to prioritize customer focus. Check out these best practices for improving customer service ROI.

Empower agents with AI tools

Businesses are handling more inbound support requests than ever before. If they’re not using AI to triage those requests, they’re likely letting customers sit on hold or wait for a callback, both surefire ways to increase frustration. AI tools can help agents handle more customer requests and even take over fully on simple and complex inquiries, drastically improving service efficiency.

Agent copilot from Zendesk, for example, gives agents proactive guidance and can even take action on their behalf to deliver customer-oriented support. This means you don’t waste time ramping up service capabilities after adopting a new tool—and you’re well on your way to a better ROI in customer service.

Ethical cosmetics brand Lush used Zendesk AI to help bolster their customer feedback intake and analysis. As a result, the brand achieved a massive 369 percent ROI on implementing Zendesk, recovering the full initial investment in less than one year.

Scale while maintaining support quality with AI agents

According to the Zendesk AI-Powered CX Report, 88 percent of CX leaders say the pace of change in CX is becoming overwhelming, while 78 percent say AI will make or break businesses in CX. With intelligent bots like AI agents, you can deploy more quickly and scale rapidly to meet increasing support and innovation needs— dramatically improving your customer service ROI and reducing metrics like first response time and cost per ticket in the process.

Zendesk AI agents are trained on billions of customer service interactions, so they can help you deliver immediate value from day one, meeting your business’s growing need for automated resolutions. They also empower your people to grow and develop into new roles, like managers and supervisors of AI, to stimulate their creativity and improve their engagement.

That rapid scaling doesn’t come at the expense of quality. AI agents learn with every interaction to deliver consistently higher-quality service, meaning you can scale while maintaining top-notch support standards. You can even grow business directly with AI agents that can cross- and upsell products in customer conversations, creating a new function for automatic revenue generation.

Personalize support to retain more customers

Personalization used to just mean using a customer’s name in correspondence or sending a promotional code for them to use on their birthday. Now, businesses need to be able to assess the reason for a customer inquiry and deliver fast answers in friendly and human ways.

AI tools can help provide more proactive, personalized, and empathetic service and support that keeps customers hooked. That’s because AI can act as a personal concierge for every interaction, understanding unique customer needs, preferences, and history. Then, businesses can use those insights to fully anticipate and act on those needs at scale.

Subscription-based toy retailer Lovevery saw the opportunity to drive retention by increasing the personalization of its customer service initiatives. The company used Zendesk to give customers faster, more comprehensive, and more tailored support—the result was 86 percent of tickets resolved in one touch and a 10 to 15 percent increase in agent productivity.

Create a knowledge base to enable self-service

It’s no secret that AI helps ramp up service capacity. According to Tom Eggemeier, CEO at Zendesk, 100 percent of customer interactions will soon involve AI tools. AI will be able to resolve 80 percent of those interactions independent of any human intervention. But there’s also a way to lower the number of inbound tickets you receive in the first place: self-service options.

Self-service, like a knowledge base for contextual articles about products, services, or operations, helps empower customers to find information. This not only helps resolve issues without ever opening a support ticket but also gets customers the information they want faster, saving them the time to reach out to support via live chat, phone, or any other channel.

Drive customer satisfaction with omnichannel support

Your customers will be happiest if they can contact you on their terms. This means you need to be ready to receive their inquiries at any time from any channel, meeting them where they already are for their convenience. Omnichannel customer service helps you cater to customer preferences and increase your capacity to collect inbound tickets.

For the best ROI on customer service, you should reserve costly live channels like the phone solely for the most complex cases. Omnichannel support lets customers submit tickets via web chat, social media, text, or email. It also lowers your total cost of ownership with less money spent on IT support or training for complicated live channel support solutions. One solution that supports unified communications across several channels, like Zendesk, helps to maximize your ROI in the long run.

Wondersign, a digital media and signage company, opted for a cost-effective CX solution by swapping to Zendesk. The company made the change in less than 24 hours without disrupting ongoing business. Now, it can resolve nearly 85 percent of tickets in one touch and more than one-half of tickets in less than five hours.

Adopt workforce management for effective staffing

Payroll costs make up a large chunk of customer service-related expenses. Even if upfront payroll costs aren’t sky-high, many businesses lack the foresight to predict future staffing needs, leading to high overtime costs.

Workforce management (WFM) tools that provide granular and comprehensive agent activity and performance reporting can help you staff more effectively. These tools also help you understand the causes of stalled agent productivity so you can make adjustments to improve team productivity. That way, you can ensure you have the support you need during peak activity times.

Leverage QA tools to get ahead of churn

It’s not uncommon for businesses to struggle to accurately gauge and improve the quality of service their agents deliver. AI-driven quality assurance (QA) tools automate the process, spotting issues before they escalate into giant problems.

These tools help guarantee consistency for 100 percent of support interactions and speed up the QA process, meaning less time and money spent hunting for problems that might as well be needles in your CX haystack. In short, you can automatically monitor and help improve your agents’ customer service skills, helping improve training and coaching efficiency.

Use reporting and analytics to monitor KPIs

For the most up-to-date information, you need a tool that monitors performance metrics in real time. Comprehensive, instantaneous reporting gives insights that help spot weaknesses in your customer service operations, like high unresolved tickets or a low first contact resolution rate.

Productivity tools and automations like macros, triggers, and dynamic ticket layouts help increase efficiency and support more customers, boosting those key metrics. AI can even suggest specific topics to automate to help resolve more inbound requests, further lowering operational costs.

Gather and act on customer feedback to improve

With a full support suite of AI-driven features, you can not only improve your customer experience but also collect, analyze, and act on customer feedback faster than ever. Customer feedback helps avoid the hallmarks of bad customer service and provides consistently better support from your agents as well as the AI tools your customers use.

By collecting and analyzing data on customer sentiment and intent, you can get a clear picture of what customers want and why they want it. This helps you make informed, data-driven decisions on specific customer service initiatives that will make an impact.

Why is ROI on customer service initiatives important?

In order to improve customer service ROI, you have to measure it. But why is it necessary to measure it in the first place?

Customer service ROI measurements are crucial for several reasons:

• Justifying budget allocation by demonstrating the value of customer service initiatives
• Optimizing resources by identifying high-performing areas and areas for improvement
• Improving decision-making with data-driven insights for strategic planning
• Enhancing customer satisfaction by correlating a higher ROI with customer happiness and loyalty
• Reducing churn by identifying service gaps that lead to customer attrition
  Building a strong reputation linking excellent service to positive brand perception
• Fostering employee engagement by highlighting the impact of employee efforts on business success
• Enabling benchmarking against industry ROI standards
• Driving continuous improvement with data for refining customer service strategies

Identifying ROI helps businesses with customer service management. By tracking performance metrics and feedback and then analyzing results, businesses can flag pain points and refine their customer service strategies accordingly. This iterative process leads to a higher quality CX and increased satisfaction, driving long-term business growth and a higher ROI on customer service.

Frequently asked questions

Increase your customer service ROI with an AI-driven CX solution

Data is key to better decision-making in customer service—whether for customers to engage with AI tools or human agents or for business leaders to review and interpret. The right AI-powered customer service tool can help you deliver a better CX while simultaneously collecting and analyzing data that helps you measure and improve your customer service ROI.

With Zendesk, you get a fully operational solution with a fast time to value, keeping costs low thanks to its ease of use and setup speed. In the long term, your total cost of ownership will stay low thanks to scalability and transparent pricing without expensive a la carte add-ons.

Net Promoter, Net Promoter Score, and NPS are trademarks of NICE Satmetrix, Inc., Bain & Company, Inc., and Fred Reichheld.