The ROI of Social Customer Service

Customer service executives have an opportunity to lead the customer experience (CX) revolution. They are responsible for delivering experiences that result in customers deciding whether to stay loyal to a company or move to a competitor. That decision affects the bottom line by either increasing or decreasing costs and revenue.

Social media represent a new dynamic in CX where the company and its products, services, reputation, and treatment of customers become highly visible to millions of people. Comments, reviews, ratings, and customer dissatisfaction are permanently inked in the online world for millions of people? to view forever.

Social media also provides new channels to allow companies to service customers in new ways and heighten customer satisfaction. How can your company use social customer service with a tangible ROI?

First, think of customer service as the new marketing and advertising. Why? Brands realize that poor customer service takes current and potential customers out of the marketing funnel. If a customer doesn't get the help she needs, she won't remain loyal; or worse, she will take to social media and tarnish the brand. If a consumer's flight gets delayed or she receives terrible food brought to the table, she might post on Twitter, Facebook, Instagram, Snapchat, and Yelp within minutes of the incident. From one mistake, a company's reputation can be smeared all over the Internet.

Second, to gain buy-in for a social customer service program, executives need to show senior leaders a viable business case. Once everyone is on board, it's time to create some baseline metrics and goals and then determine what the ROI needs to be based on the program qualifications in place. The components of a business case include the following:

  • Goals and objectives for the social customer care initiative;
  • A strategy to meet the social customer care goals and objectives;
  • Metrics/key performance indicators (KPIs) to measure the goals and objectives; and
  • The business results (cost savings or revenue generation) or the return on investment (ROI) for the social customer care initiative.

Social Customer Care Increases Revenue and Customer Lifetime Value

For our example, let's use an international airline servicing more than 280 destinations worldwide. It uses social media monitoring for all its social channels, engaging with its online communities, doing in-depth reporting, and tracking KPI metrics and agent performance. The airline monitors its global customer base, receiving 30,000 social mentions in nine languages per month.

Like so many other companies, its revenue is based on the number of customers and the average purchase value in a period of time. When companies use a social media platform, they can increase their revenue from existing customers. By engaging and listening, they retain them as customers and increase the amount and frequency of purchases over a longer period of time. When the company is truly integrating the feedback, it can meet the needs of the customer and increase not only the amount that the customer spends, but also the number of years the customer spends with that company.

To calculate costs, look at the cost of the technology, the implementation, and the customer service agents providing the social customer care. If payroll costs include a manager part-time, 10 part-time customer service agents with 40 percent of their time spent on social customer care, and 50 full-time customer care social media professionals, the total of the costs for both technology ($30,000) and payroll ($2,720,400) is $2,750,400.

The benefit calculation looks at the extra revenue generated from more loyal customers spending more with the company. The annual number of customers per year year is 22 million with an average spend per customer of $250. With the increased responsive social customer service, we estimate that 10 percent of the customers will spend 10 percent more per year or $55 million. The ROI is calculated by taking the $55 million minus $2,750,400 times 100 divided by $2,750,400. This total increase in revenue is approximately $55 million, and the ROI is 1899 percent. This means that the airline made $18.99 for every dollar it invested in social customer service.

Natalie Petouhoff, PhD, is a vice president and principal analyst at Constellation Research.

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With rumors swirling about a possible acquisition, Twitter's future is uncertain, but the company's role in enabling brands to deliver customer service remains solid. Earlier this month, Twitter released findings from a customer service study, an effort the company expanded from the airline industry alone to the quick service restaurant and telecom industries as well. The findings revealed that the manner in which customer service is delivered on Twitter plays a significant role in how much consumers spend.

Posted October 14, 2016