Simple Strategies to Cut Customer Service Costs by Over 50%
In competitive markets, customer service can be the backbone that either makes or breaks a company’s reputation. However, delivering great customer service can be expensive. Here, we offer a few simple strategies to significantly reduce your customer service costs without compromising on quality. These strategies are written with minimal industry jargon so they can be useful to both veterans and newcomers.
Pro tip: Like in carpentry, measure twice and cut once. If you don’t have a solid understanding of your actual customer service costs, start by calculating your Cost per Conversation (CPC) value.
Table of Contents
Strategies to Reduce Customer Service Costs
Be Purposeful with Your Communication Channels
Customer service operates across a myriad of channels, both offline like email, social direct messaging, SMS, and online like voice, phone, and live chat. The cost implications are tied to the response time expected on these channels; quicker response expectations translate to higher costs due to the need for more customer service agents and a lower ability to queue up work. Online channels typically cost 2-3 times more than offline. Assess the ROI of live channels to ensure they are worth the additional costs compared to more affordable offline channels.
How to do it?
Generally, you should graduate to online channels after offline is performing great. "Great" offline performance looks like consistent response times of at least 24 hours or less and 24/7 coverage 365 days a year. Once you are there, then start with live chat. Run experiments with chat on and off to see how many customers choose that channel. Based on those results, determine if it is worth the cost.
Minimize Add-on Work
Inevitably, customer service agents are bogged down with additional tasks that don’t directly address customer needs. This includes things like documenting detailed conversation notes, filling out third-party forms, and the always-present logging within Excel or Google Sheets. These activities accumulate like barnacles to a boat. They are always launched with good intentions, usually to address “hot” problems, but are not free and add complexity, risking process errors. Challenge these activities to eliminate non-essential tasks.
How to do it?
Walk through the customer service process and document all steps. Identify the Add-on tasks and find the name of the person who mandated each task. Demo for them the task. There's a good chance they no longer need it. If they say it is needed, ask if they can share the benefit of that work. A good tactic is to inform them that you are going to share why this task is being done with the working team. This need to justify helps people internally question the value of the work they are prescribing.
Solve Customer Issues Fast
The number of back-and-forth messages in a conversation not only frustrates customers but also drives up costs. Strive to solve customer issues as close to the first message as possible. Common controllable drivers of high message count are misunderstanding what a customer is asking for, operating policies that add complexity, or the communication channel itself. For example, the conversational nature of live chat is better at faster resolution than offline channels like email.
How to do it?
Study customer conversations with high message counts. Seek out operating policies that force multiple messages. Like Add-on work, identify the names of those who mandate these policies and question the value. A common example is retailers often ask for photos of items reported as damaged. Question the purpose of this photo. The photo does not provide evidence of legitimacy as it can easily be faked. Discover if the photo produces other value such as for a supplier or carrier claim.
Prevent Customer Conversations
For customers, no conversation is better than a delightful conversation. Studying the reasons customers had to ask for help can point to solutions that may eliminate or reduce those reasons. Common solutions are addressing poor communication regarding updates such as shipment statuses, including messaging that points to self-service solutions, and identifying and challenging poor performing operational processes.
How to do it?
Much like previous strategies, prevention begins with studying your conversations. Label each conversation with a root cause, the primary reason the customer needed help. Identify top root causes and work with stakeholders to identify mechanisms that can, preferably, prevent the issue, or secondarily, reduce the customer’s effort to resolve. Enabling customer self-service is a common way to achieve the secondary objective.
Finally, remember that preventing conversations doesn’t reduce costs unless you actually reduce your costs. This usually means reducing spend on agent labor, or if all is going well, reducing the need to hire more labor as your business grows.
Bonus Strategy: Just use MelodyArc CX
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MelodyArc CX layers on top of your existing CRM and other customer service channels to manage all the moving parts. From responding to and resolving customer requests, to implementing and cascading policies, to forecasting and analytics, MelodyArc CX takes on daily operations. It's more cost effective than agents alone and ensures higher resolution rates than automation.
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Frequently Asked Questions
Can employee training and development play a role in reducing customer service expenses?
Yes, great training will ensure that your agent team is efficient and has high policy adherence, especially important when it comes to monetary compensation like concessions or refunds.
Are there specific communication channels that are more cost-effective for customer service?
Certain communication channels may be better suited for certain kinds of customer inquiries. For instance, for a complex issue, a phone call may actually be a more efficient way to resolve the customers issue if it takes a shorter time to resolve. However, communication channels start with the customer’s preference within the set of communication channels you offer. For instance, self-service may be the most cost-effective way to solve a return request, but the customer may prefer to request it via email.