How to measure the ROI of social customer service

7th Sep 2012

Kevin Bottoms explores the methodologies that companies can use to measure the results of social care programs.

In our last article (How to measure the impact of social customer service) we examined how companies can most effectively manage and measure their social care efforts. Social care - customer care provided across social media channels - is becoming an increasingly significant part of daily operations for a growing number of companies.
However, when implementing social care programs, organisations should carefully consider whether they have the capacity to monitor, filter and engage in customer conversations on social platforms, and also calculate what the ultimate return on investment (ROI) will be for their efforts. In this article, I will explore the methodologies that companies can use to measure the results of these social interactions.
Calculating ROI
For every business entering into social care, calculating and demonstrating ROI is crucial. The first step in calculating ROI is to add up the total cost (TC) of a social care program. Usually ROI is calculated for a year, and TC often changes year over year, so calculating years one through three is a common practice. The main components of social care costs are:
  1. Labour, including both variable and fixed (customer service representatives, supervisors, business analysts and subject matter experts).
  2. Technology, such as a listening platform and agent-productivity interface.
  3. Facilities and maintenance.
  4. Human resources for hiring and training.
  5. Miscellaneous overhead for consultants, travel and chargebacks from other departments.
The formula used for this calculation is:
TC = Labour + Technology + Facilities + HR + Overhead
Labour is the most significant expense for contact centres. As companies implement social care, the cost structures for labor vary depending on the organisational design - whether social care is centralised, decentralised, or outsourced. It’s also important to note that TC may be more difficult to calculate if a company has a large social media-trained staff spread throughout the organisation. In this case, a common technology platform is required to track costs effectively.
Calculating the gain from investment
Over time, service organisations are likely to see many financial and operational gains from investing in social care. One of the biggest advantages is that issue resolution changes from a one-to-one model to a one-to-many model, meaning many people benefit from one informative, well-written response. Two of the most tangible gains are cost reduction and revenue generation.
Cost reduction activities
Examples of cost reduction activities include:
  • Eliminating the number of calls to agents by facilitating the resolution of customer questions and problems via social care channels. How to calculate? Look for year-over-year declines in the volume of other channels. It’s important to survey customers who resolved their issue on social channels to determine how many would have contacted the service department via voice, chat or email if their issue wasn’t resolved in social channels.
  • Reduce the amount of time customer service agents spend addressing inquiries by building an online platform where customers can search for answers to similar problems they are experiencing and solve their problems without interacting with the service department. How to calculate? Determining the cost savings of this indirect benefit is much harder to calculate than a direct transaction but can be estimated by looking at the reduction in utilisation of other customer service channels.
  • Prevent returns through topical and immediate help.
Revenue generation
Examples of revenue generation activities include:
  • Converting sales through direct transactions with sales agents. This type of interaction occurs when an agent directly intervenes while a customer is asking questions on a social venue about buying a product. How to calculate? Subsequent revenue generation can be measured by matching the agent interaction with the customer’s purchase.
  • Converting sales through indirect transactions with a sales agent. These types of transactions happen as a result of the social community having visibility into direct sales transactions. When an agent helps one customer to convert a sale many other potential customers see that transaction and a percentage of those will act on that information. How to calculate? These transactions are more difficult to capture but can be measured with the help of post-sales surveys.
  • Improving brand equity through proactive customer service shows customers that a company is willing to invest in their satisfaction. When a company is proactive in responding to complaints and negative comments, customers notice and brand equity increases. People are more likely to buy from a brand they trust. How to calculate? This type of gain is difficult to quantify but can be measured through overall increases in sales and improved customer satisfaction.
This emphasis on customer satisfaction is the key to all effective social care programs. Social media has opened a ‘back door’ into customer service, forcing companies to formalise their approach. However, the key to success is ensuring you have infrastructure to manage the volume, the metrics in place to measure and prove the program’s impact on customer service, and the methods to measure your program’s ROI. A well-executed social care program can not only save costs but also bring new revenue opportunities.
Kevin Bottoms is vice-president of business development at TELUS International – a provider of customer care and contact centre outsourcing solutions to global clients.
TELUS International, in partnership with Kenna Inc. and Oracle Corporation, recently released a white paper examining how companies can measure their social care program’s ROI to maximise their business goals and objectives. This paper outlines the essential components for measuring ROI, including revenue generation, cost avoidance and total program costs - providing a fundamental framework that your organisation can use.

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