Customer support is essential for any business these days. Customers always stumble upon questions that can undermine the whole experience your product brings. For most businesses, it’s a critical front to not only establish reliability but also ensure long-term customer satisfaction. This brings us to what we wanna talk about in this article, customer support cost.
The cost of customer support is among the many fixed and variable costs of producing and marketing your product. It can have some profound implications on your margins. As your business grows and more customers line up, your customer support incurs more and more expenses.
But how much does it really cost?
To answer that you have to consider the time it takes to respond to a customer query whether through chat, email, or phone call. If it takes 10-20 minutes per ticket, you may be looking at a substantial part of your revenues spent on customer support. To keep your customer support costs sustainable, you need to consider them as a part of the final cost of producing and marketing your product.
How much does it cost to support a customer?
Here is how you can calculate the actual cost of customer support
Cost per ticket
Calculating cost per support ticket is easy. First, you need to add up the fixed costs such as maintenance, team payroll, and software licensing. Now, dividing this total by the number of total tickets submitted you get cost per ticket.
The formula would be:
Customer support spends/number of tickets = cost of support per ticket.
Take, for instance, if you spent $1000 on customer support in September 2021 and managed to resolve 900 tickets, your cost per ticket is $1.12.
If the cost is too high you probably need to hire more agents, improve your Knowledge Base resources, or bring in an expert to streamline your whole process.
Cost of support per order
To calculate the cost of support per order, divide the amount spent on customer support in a month by the total number of orders for the same month.
The formula goes as:
Customer support spends/number of orders = cost of support per order.
If your customer support cost per order is on the higher side it can signify two things.
Either your support team is taking up too much time handling routine tickets, or the complexity of regular queries is rising.
A good way to solve this is to make your agents aware of the lifetime value of a customer to evaluate the time and effort spent on their queries.
Cost of support per revenue
To calculate the cost of support per revenue you divide the number of net sales by the total number of support tickets.
The cost of support per revenue can indicate whether the overall cost of support is within acceptable limits. Especially after accounting for allowances, sales discounts, and returns on sales.
The formula here is:
Net sales/ number of tickets = cost of support per revenue
Why calculate customer support costs?
Calculating customer support costs helps to evaluate the actual cost of a product. Without this, it can obscure the estimations with other costs such as logistics and marketing. Without taking customer support costs into account, you could easily end up making expansions without having the necessary means or the need.
As a rule of thumb, you could measure customer support costs monthly or quarterly. By knowing which metrics to focus on, you’ll be much better prepared to make crucial business decisions. For instance, you can estimate how many agents you need per customer in order to scale your business. Incorporating customer support costs increases the accuracy of your calculated break-even point for your business.
A good place to act to reduce these costs is to look into the customer support systems that are available. While many help desk ticketing systems are available none of them are perfect. So it’s good to check out a few to find the right one for your business.
For every buck made from sales, you have to spend a certain percentage of it back into customer support. Factoring support expenses into the final selling price can give you a more accurate picture of your actual revenue.
Customer support is an undeniable cost to any business. However, it’s smarter to look at it as a means to improve your brand’s reputation rather than a sales obligation. Like all business costs, customer support costs need to be measured and optimized. Instead of trying to bring down support costs consider strategizing your customer support policies to make the most of what you’re spending already.