How much is a more productive team worth?

The benefits of good customer service

It is very difficult to measure the financial return directly associated with the results of a better customer experience, there is little available material on the subject. However, it is increasingly clear that the customer experience plays a decisive role in the company’s operating results.

We have listed some highlights of the most recent surveys below, and we would like to introduce you to them before we begin our review (links to surveys are in their names).

According to the Zendesk CX Trends Report 2021, the year of 2020 brought a +20% increase in support requests, with 75% of customers willing to spend more to buy from companies with good customer experiences (CX). Repeated unsatisfactory experiences, however, can lead the customer to change supplier in up to 80% of cases.

As the most relevant scenario of work and consumption at home also affects the companies themselves, 60% of managers have plans to give their employees more flexibility to work from home, but up to 40% of them do not have good analytical tools to measure the success of remote teams.

Also, according to a survey by the Enterprise Strategy Group of October/2020, the most recognized companies with best practices in customer experience are the most interested in significantly expanding investment in the field, indicating the efficiency of the strategy: 57% of them plan to invest more in the coming months, against only 9% of less mature companies in that area.

Interestingly, such companies, leaders in CX, actually show much better results. Their first-response and ticket-resolution times are, respectively, 27% and 34% lower, and they’re also more effective: 29% of these companies report an unresolved issue rate below 1% (among companies that don’t prioritize CX, only 9% reach this level).

This quality of service is also recognized and rewarded by the customers: leading companies in experience have a 6.1x greater chance of achieving their satisfaction metrics (CSAT) and an even 3.3x greater chance of increasing their customer base faster than their competitors, earning Market Share. This customer also becomes more worth, as leading companies have a higher percentage of increase in lifecycle value. Precisely, they have an probability of upsell 8.7x higher than the others.

Despite all this potential, our focus in this article will be to quantify the return based only on optimizing costs and increasing productivity (number of tickets per agent).

Anyway, it is always good to keep in mind that, from our point of view, the impact of the numbers presented in this section is clear and therefore the potential return on the investment in experience is even greater than what we will calculate in the next sections.

Let’s start by introducing you to the familiar concept of Return On Investment (ROI) and how the multiples presented above can make a brutal difference to your result.

The Return on Investment (or ROI)

Return on investment is a way of estimating the viability of projects based on the financial return expected or obtained from an initial investment.

In general, it is a similar concept to ROIC (Return On Invested Capital, used to evaluate a company’s operating profitability against the invested capital), but more focused on specific investments or fixed-term projects.

It is quite common, for example, to see this metric in marketing, as a way to evaluate the investiment return obtained in the department’s actions. Here, we’ll think of ROI as the financial return generated by investments in customer service.

The ROI formula is as follows:

From this revenue, the costs necessary to sustain the operation can be deducted (net operating revenue, or EBIT).

Therefore, there are two main components of ROI : the return generated by the increase in revenue and the return made possible by the savings in costs or expenses.

ROI on LTV (increase in customer’s lifetime)

The first component of ROI is due to the increase in revenue made possible mainly by the results discussed in the first section: better customer retention and increase in the average ticket value.

Let’s recall the Lifetime Value (LTV) formula, that is, the expected financial return during the customer’s journey with your brand:

Realize that the positive impact of better customer service (experience) will improve both the “numerators” of this formula: the average ticket (average amount your customer pays through up-sells, for example) and the average time the customer stays with your company, doubling the impact on lifecycle value. Besides that, it will likely impact the “denominator” (churn rate), multiplying this result by an even greater factor.

This quality of service is also recognized and rewarded by the customers: leading companies in experience have a 6.1x greater chance of achieving their satisfaction metrics (CSAT) and an even 3.3x greater chance of increasing their customer base faster than their competitors, earning Market Share. This customer also becomes more worth, as leading companies have a higher percentage of increase in lifecycle value. Precisely, they have an probability of upsell 8.7x higher than the others.

ROI on costs (reduction in average cost per solution)

Improving the productivity of your service is a goal that can be achieved through two routes: increasing the number of tickets handled by the same team or reducing the team needed to handle the same number of tickets.

We will focus here on the second strategy: reducing the number of agents needed to meet (with quality) your demand, assuming that it remains constant over time.

This is an interesting strategy as it creates the possibility to raise the level of your customer experience by relocating these agents (for example, to a Customer Success team), but it is not the only one.

Mentioning the case of a specific client, the +55% increase in productivity was due to a +35% increase in the customer base served, and only +14% to the reduction in number of agents.

Here, we will assume that operational costs are constant and unrelated to the number of agents (such as the cost of infrastructure, office, general training and administrative expenses). Also, the data represents the reality of Brazil, from where we extracted the results used in the calculations.

According to Glassdoor, the average annual salary for a brazilian support analyst is BRL 26,000. Added to the minimum meal allowance recommended by the Brazilian Ministry of Labor, we would have BRL 28,107.00 per year of gross salary. This amount implies, in a presumed profit method, a tax of approximately BRL 19,160.00.

Let’s add to the salary and taxes plus BRL 940.00 in commuter benefits and, of course, an intermediate license of a helpdesk software for BRL 2,940.00.

Thus, we reach a total of BRL 51,147.00 per year, per agent.

Given our experience with our customers, just adopting real-time control of ticket queues and defining appropriate request categories, it is common to reduce the required team size by about 20% to 30% .

This means that, in a team of 5 agents, one of them can be reallocated. One of the companies we worked with had a support of 7 people and managed to structure a CS team after with 2 of these agents, who were no longer needed to fulfill the support demand. This was made possible with the support of our consultancy and through the regular use of the Deskflows application.

You see: with a cost per agent above BRL 50,000 per year, for the size of most companies we operate, it is highly undesirable for any area to consume more resources than would be necessary. Even so, this is what happens in many companies without maturity in service.

For these companies, agents already seem overworked and the day-to-day is often reduced to solving last-minute problems. In all the cases we followed up after investing in productivity, the quality of agents’ routine improved, while the team was answering more issues.

One note is important here: while we’re looking at it from a departmental perspective, in which reducing the number of agents represents a “cost reduction”, all of this text is about investment, about offering a better customer experience.

Thus, in the organizational context, we are not talking about laying people off, we are talking about better allocation of the productive force in order to employ these people where they generate the highest return for your company.

To make this “organizational point of view” even clearer, the last section of this article will address the topic of budgets and timid choices. Read on and see!

Does Deskflows generate return?

We are talking about increased productivity in support teams, which, for teams that had already reached a certain degree of maturity, is achieved through the Deskflows application. For teams that are being structured “from scratch”, we act mainly through consulting and helping with other tools.

Considering that, for example, there is already a helpdesk system in use and a well defined process, the basic implementation plus the application cost is can generate an ROI from 700% up to 1400%, already in the first year.

It is important to emphasize that this return adopts the perspective of support (the agent will probably be allocated to another team). In any case, considering the production of this agent in their new area, this is a very significant real gain.

Vale ressaltar também que, além do ROI sobre o custo, entrará na conta o ROI sobre LTV. Citando o caso de um cliente em específico, o aumento de +55% na produtividade foi devido a um aumento de base atendida de +35%, e apenas `+14% na redução do número de agentes.

It is also worth mentioning that, in addition to the ROI on cost, the ROI on LTV will be included in the account. Mentioning the case of a specific client, the +55% increase in productivity was due to a +35% increase in the customer base served, and only +14% to the reduction in number of agents.

In summary: here we calculate a feasible return based on cost reduction (reduction in number of agents). However, the most expressive return may still be in the topics we do not consider here!

About budgets and timid choices

In 1993, Daniel Kahneman, a psychologist, and Dan Lovallo, one of his graduate students, worked together to study two divergent and common biases in organizational decisions.

The first bias concerns over-confident schedules when the team’s internal view prevails over the reference base rates in similar projects.

The other, which interests us more at the moment, is the issue of “timid choices”.

Take this example: imagine yourself as a manager responsible for an area of your company. Suppose you are offered an investment opportunity with a 50% chance of making a profit of $2,000,000, but another 50% chance of losing $1,000,000. Suppose your company is large enough so that this loss does not means a solvency risk. Still, it seems an ungrateful choice, doesn’t it? What would be the board’s reaction to a gain of $2 million? And at a $1 million loss?

Now, put yourself in this company’s CEO shoes, with 20 of your directors exposed to the same decision. We’re talking about an expected gain of 10 million, with only a 0.006% chance of actually losing any money. Wouldn’t you like all your directors to take the chances?

This is an example provided by Richard Thaler, a behavioral economist, to show how “tight framing”, or the departmentalization of the budget can hurt the whole when it comes to “fair bets” and even financial returns.

All this history to show that, from the point of view of the organization, it can be advantageous to consider the integrated budget, investing in what can actually generate more return.

Of course, departmentalization is important for establishing budgets and limits, but given all the advantages of good customer service mentioned above, is your company paying enough attention to this area?

Conclusion

Considering that, for example, there is already a helpdesk system in use and a well defined process, the basic implementation plus the application cost is can generate an ROI from 700% up to 1400%, already in the first year.

Here at Deskflows, from our own experience, the investment in customer experience (usually through support or CS) has an incredible potential for the company, but it often generates hesitation or dropouts.

We understand that the financial issue is delicate and must be carefully pondered. But precisely for this reason, we invite the readers of this article to take a broad view of resource management. Customer service is one of the most impacting areas, yes, but it is often left behind by investments in marketing, for example.

Of course, without your company’s acquisition and growth engine, the entire operation would have nothing to work on. However, keep in mind that the proportion of resources invested in CX will always be limited, in addition to the less scalable ROI.

Thus, your investments with customer service will hardly represent a very relevant slice in contrast to areas that require a much larger budget. But its return can actually be a nice surprise. Think in ROI!

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