If you’re a customer service leader, chances are you’ve dealt with CFOs or other executives questioning the value of your team. Customer support teams are often seen as cost centers – a necessary function, but not something worth investing in beyond the bare minimum.

This outdated mindset has far-reaching impacts, leading to overwhelmed and under-resourced support teams dealing with 30-45% annual staff turnover.

Clinging to this perspective will inevitably harm your company in the long term.

Customer service leaders intuitively know this, but convincing your CFO and executive team requires a more strategic and data-based approach. Here’s how you can unpack the return on investment (ROI) of customer service to build a compelling case for future investments in your department.

Defining customer service ROI

The general formula for calculating ROI is pretty straightforward:

(Money generated – money invested) / (Money invested) * 100

To calculate the ROI of your customer service team, you need to know two things: how much you spent and how much you earned (or saved) from your investment.

For teams like sales or marketing, plugging in these variables is relatively simple. Costs like salaries, bonuses, commissions, and operational expenses are measured against revenue from new customers brought in by each new hire or team.

If you pay a new sales rep $100,000 and they drive $200,000 of new revenue, you’ve doubled your money. Easy choice. You’d do that all day.

But assessing ROI for customer support is different.

Unlike sales or marketing, where the connection between investment and revenue is fairly direct, customer support’s impact on financial returns is less immediate.

Sure, customer support plays a role in converting leads into paying customers. Yes, happy customers tend to stick around for longer and spend more. But the support team’s primary focus is typically on maintaining customer satisfaction and loyalty, rather than driving revenue.

That’s why calculating ROI for customer service can feel like a head-scratcher at first.

That being said, customer support teams definitely do impact revenue metrics such as retention rate, expansion, and upgrades — sometimes it just takes a little more work to prove it out.

For instance, in some industries customer service is the key differentiator directly affecting business growth and new sales, while in others, it impacts customer loyalty and lifetime value (LTV):

  • In e-commerce, excellent customer service typically leads to more repeat shoppers, upsells, and higher average order values. Personalized support and quick resolution of delivery and product issues can turn one-time buyers into loyal customers.
  • In SaaS, customer service drives higher retention, expansions, and renewals. Helpful support allows customers to get the most out of the product, reducing churn and encouraging product adoption and upgrades.
  • For service-based companies, word-of-mouth referrals and higher LTV are the key benefits of great customer service. Satisfied clients are more likely to recommend your services to others, driving new business with zero marketing costs.

Challenges with tracking customer support ROI

While the impact of customer service is clear, tracking ROI can pose some challenges. There are several reasons why.

1. Lots of touchpoints and influences on the customer journey

In an ideal world, a lead would reach out with a question, receive perfect assistance, and convert into a customer. But in reality, a customer may reach out to support, receive excellent help, and still not convert due to factors like:

  • The price being too high
  • The product not meeting their needs
  • Running into a bug

Support can only control so much, and often it’s not enough to directly correlate support actions with generated revenue. In many companies, support also doesn’t interact with customers much before the sale or conversion takes place.

For example, we intuitively know that higher customer satisfaction (CSAT) scores should lead to better retention. But this isn’t always the case.

One of our clients found that customers with high LTV and longer tenure had lower CSAT scores compared to those who canceled after the first month.

After looking into specific interactions, we found that it was because longer-term customers experienced more bugs, while most of the short-term customers were lucky and didn’t encounter any issues during their brief usage.

2. The reactive nature of customer support

Sales and marketing teams take proactive actions to attract customers and celebrate new sales. Customer success teams run proactive campaigns and cheer when the average LTV or renewal rate goes up.

All of these metrics are directly tied to revenue, the primary focus of any business.

In contrast, support teams reactively address customer issues and quietly celebrate high CSAT scores, which don’t hold much business value on their own. They ensure companies don’t lose the revenue they’ve already done the hard work of earning by helping customers when products or processes break.

This reactive nature means support teams are often removed from the revenue-generating process.

This separation is unfortunate, as customer-obsessed organizations that put customer success at the front and center of their operations report twice the retention rates.

3. Siloed data and lack of segmentation

Tracking the ROI of support is rarely a priority for other teams, making it challenging to pull the necessary data points from reporting tools. While you can see your overall CSAT score and average response time within your ticketing software, proving support ROI requires combining these metrics with other data so you can segment and analyze them.

For instance, you might want to look at CSAT scores based on high/medium/low LTV segments.

Since it’s not a high business priority, it’s hard to get the resources you need to pull these siloed tools and disparate numbers together.

Key metrics to show the ROI of customer support

As a customer service leader, you likely already track key support metrics like CSAT, response and resolution times, first contact resolution rate, and others. To truly understand the impact of your support team on financial performance, you need to connect these support numbers to financial metrics.

The metrics listed below help highlight the impact of your customer support efforts on business outcomes, giving you the insights you need to show and improve the ROI of your customer service.

1. Lifetime value (LTV)

Typically, the better customer service you provide, the higher prices the market is willing to tolerate (leading to higher LTV for the business). In fact, customers are willing to pay up to 16% more to buy from brands with great customer experience.

While tracking the average LTV after implementing positive changes in your customer service operations can be challenging because it takes awhile to see changes, one way to leverage LTV to show the ROI of support is to compare the LTV of customers who’ve worked with your support team versus those who did not.

“One of my favorite ways is to show LTV of customers who reach out to us compared to those who didn’t,” explains Zoe Kahn, a long-time ecommerce support leader and founder of Inevitable Agency. “To do this, I pull an export of customers from the helpdesk, upload it in a segment into Klaviyo and then pull that data in Lifetimely by AMP to compare the LTV and show the customer journey.”

Notice how she mentions needing three different tools to accomplish this analysis? While this can be a powerful tool to show ROI, it further highlights the challenges of siloed data faced by many support leaders.

Zooming out, Salesforce’s research also found that 88% of customers are more likely to purchase again and extend their LTV after experiencing good customer service.

2. Retention rate

Attracting new business is always important, but if customers keep leaving due to poor service, your churn rate will negate those efforts.

To understand the impact of customer service on retention, segment your customers into groups. An easy place to start might be with looking at retention by CSAT score or retention by support ticket volume.

When we did this analysis for Wildgrain, we found that retention rates were higher if CSAT was over 96%. Given that most of their revenue is subscription based, this was a powerful insight to show how customer experience was helping the business grow.

Findings like this align with Microsoft’s survey results, where 90% of respondents indicated that customer service is crucial to their brand choice and loyalty. 

3. Customer satisfaction score

CSAT isn’t a perfect tool for measuring ROI, but sometimes it’s the best you’re able to track. If so, you can still justify additional customer service resources required for a higher CSAT with the following data to support your case:

Most customer experience teams that are using CSAT to prove ROI use it as described above — as a tool for segmenting and analyzing how customers’ reported satisfaction impacts other metrics.

4. Customer contact rate

Generating additional revenue is one aspect of ROI. Saving money is the other.  

Customer contact rate measures the percentage of active customers who need to contact support in a typical period (like a month or a quarter). By analyzing your support requests, passing customer feedback to your product team,  and improving self-service resources, you can dramatically reduce the number of times customers need to reach out for help.

This allows business to scale without needing to grow the support team at the same rate – saving money for other initiatives and priorities.

5. Cost per ticket

Cost per ticket is another support ROI metric showing potential savings from support improvements.

Even if you don’t currently track this, each support request costs money. The average cost can vary depending on the channel:

  • Phone: $17.19
  • Chat: $15.72
  • Email: $16.13

Implementing process automations, such as AI-powered conversation summaries, auto-tagging, and reporting, can reduce the time your team spends on each ticket – lowering the cost per ticket. And investing in self-service resources like help centers, chatbots, and AI assistants can reduce ticket volume, decreasing the total cost of support.

For instance, if you receive 10,000 email tickets a month and 20% (2,000 tickets) of that volume are return requests (a common reality in e-commerce), automating the return process can save you about $32,000 (2,000 tickets multiplied by ~$16, the cost of an average email ticket).

Not bad, right?

Now, imagine you’re able to automate some of your Tier 2 processes, where reps typically have higher salaries – you’ll see a much higher cost savings in this case.

You could also explore outsourcing your customer service to bring down the cost per ticket. For example, if you’re able to reduce the cost per ticket from $30 to $20 (saving $10 per ticket), it can lead to a monthly saving of $100,000 (when multiplied by 10,000 tickets).

How to measure and improve customer service ROI

Now that you know which metrics to track, it’s time to start measuring and improving your support team’s ROI to drive valuable business outcomes.

Here’s a three-step framework to guide you through this process.

1. Create hypotheses

First, think about what business outcomes your team can impact in your specific context.

As we discussed above, key areas support can impact typically include upgrades, retention, and expansion. Consider what behaviors your team can embrace to have the biggest positive impact on these customer actions. Then, formulate “If we do X, customers will do Y” hypotheses that you can test. 

For example:

  • If we deliver a CSAT over 95%, customers will be more likely to repurchase from us.
  • If we keep resolution time under 24 hours, customers will be 25% more likely to renew.
  • If response time is under 5 minutes, free trial users are more likely to convert to paying customers.

2. Test your hypotheses

Once you’ve found correlations and settled on your hypotheses, set up tracking and segment your existing data to run experiments. Here are some examples:

  • CSAT and retention. Track the average retention rate of customers who give a high CSAT versus those with low CSAT and versus those who never contacted support for 90 days. If you see a correlation between higher retention and higher CSAT scores, you can make a case for additional resources to increase the average CSAT and positively impact retention rates.
  • Response time and churn rate. Track the cancellation rate of customers who reported issues, segmented by response times below and above 12 hours for 3 months. If a correlation is found, implement changes to ensure response times are under 12 hours for all reported issues, then monitor how this affects cancellation and retention rates over time.
  • Response time and conversion rates: Track the conversion rates of leads who received a response in under 5 minutes and those who had response times over 5 minutes for a month. If you notice a connection between higher conversion likelihood and faster response times, investing in additional support coverage for better response times around the clock can lead to significant ROI by increasing conversion rates.

Ensure that the tracking period you choose is long enough to identify patterns. The lower your support volume, the longer the period should be. Driving conclusions based on the behavior of just a few customers can be misleading.

3. Rinse and repeat

Once you identify successful hypotheses, don’t stop there. Keep working with data to identify more correlations, ensuring that your team remains central to business operations.

This approach will help you gain the resources needed to continue doing an outstanding job and showing increasing ROI, proving the value of investing in customer support.

Customer service ROI comes in different shapes and sizes

These aspects are crucial to consider when evaluating your team’s ROI – to negotiate additional resources or justify current investments in your department. Here are some examples of support ROI that, while not directly generating revenue or saving costs, still contribute significant value:

  • Product feedback. Support teams gather valuable product feedback from customers, which can be shared with the product development team. This feedback helps improve the product, enhancing product-market fit and customer loyalty.
  • Inbound leads. Support can function as part of the sales funnel by driving new leads that come into support directly to the sales team, bypassing the hassle of prospecting. This can lead to more efficient lead generation and a smoother sales process, ultimately contributing to increased revenue.
  • Saving resources for other teams. Support can save significant time for other teams, such as customer success and sales by  assisting with technical questions during the sales process or renewal negotiations. This collaboration enhances overall efficiency and productivity within the company.

These examples highlight the broader impact of quality customer support beyond direct revenue generation and cost savings.

By recognizing and leveraging these additional forms of ROI, you can demonstrate the true value of your support team and advocate for the resources needed to continue delivering exceptional service.

Turn customer support into a strategic asset

By identifying reliable ways to prove your team’s ROI and showing the connection between great support and key business metrics, you can help your company leadership make informed decisions and continue investing in support operations.

And if you need help with running support operations, Peak Support experts build effective service teams across industries — from gaming to SaaS, to e-commerce, and more. We’ve helped dozens of customer service leaders understand the ROI of stellar support operations.

If you’re looking to transform customer service into a strategic tool for your brand, our team is ready to provide a free consultation. Reach out today to learn more!