I’ve been advising companies on how to improve Support outcomes for nearly 20 years. Most of these efforts involve investments in new support technology and begin with, “Tom, how will I justify the cost of this?”
The tendency for most managers is to look at how much money a new technology will save, but I’m here to tell you that this is the wrong approach. I find that a more holistic approach based on a full spectrum of tangible benefits is the best way to justify new technology investments. First, let’s look at how the ROI of new support tech is traditionally calculated, and then I will introduce another idea.
Calculating Cost Savings
Typically, the rationale for assessing Support technology undergoes the scrutiny of cost-minded executives who demand to know what they will get in return for their investment. Justification implies that for a specified investment there will be an equal or greater return – okay, assume significantly greater return.
This is most easily calculated by measuring the time and effort it saves. Multiply the saved hours by the average hourly cost of fully-burdened Support staff.
COST SAVINGS = HOURS SAVED * HOURLY STAFF COST
The net savings may include the savings associated with fully answering a customer question without the direct assistance of Support staff or those associated with reducing the total time to resolve an issue.
The issue with looking at savings as the basis to justify investments in Support technology is that it implies that Support is only capable of reducing costs. So is there another way to measure success?
I believe the answer is yes.
Let’s move past the notion that Support is merely a necessary evil and a costly burden for the company. Support actually delivers tangible benefits that can strengthen relationships with customers and enhance its ability to fulfill its primary mission to help customers use and apply products.
We know that (good) Support is labor-intensive and costly to deliver. What if technologies allowed you to reallocate Support staff to help your customers be successful? How would these efforts to help customers translate into tangible benefits for your business?
Build your justification for new Support technology on savings plus the additional benefits that would arise from providing a more relevant experience.
Lower Churn Creates Expansion Opportunities
The reality is that Support accounts for the largest single touchpoint with customers and is the cornerstone of any strategy to engage and retain customers. Consider that (1) over three-quarters of customer churn (77%) is due to a customer’s inability to quickly adopt and apply a product and (2) the greatest risk to losing customers is in the early stages of product ownership.
Helping your customers to be successful is the best way to reduce churn and to encourage them to expand their relationship with you. And this is where your Support team plays a critical role.
Remember that your Support team does not simply fix what is broken or respond only to product limitations and defects. Support helps to eliminate barriers to product adoption with guidance on installation, configuration and setup and provides “how to” instruction to help your customers apply products.
Keeping the customers you have is just one benefit that stems from providing more proactive Support engagement. Existing customers also represent a significant opportunity to grow revenue.
For many companies, as much as 80% of revenue comes from existing customers. When we apply our services to help customers derive value, most (83%) tell us that they are likely to buy more products and services.
The bottom line is that when Support resources have the time to focus on what really matters to your customers, they will do a lot to help you keep the customers you have and make them happy. And happy customers are more likely to spend money with you.
Now, let’s revisit our ROI calculation to take this into account.
Calculating ROI for New Support Tech
The return on New Support Tech is the net benefit from the new tech – attained from its influence on adoption, churn risk, and expansion – after you subtract the costs of acquiring, implementing, and operating it. For the ROI to be positive the NEW SUPPORT TECH BENEFITS must exceed the NEW SUPPORT TECH COSTS.
Remember that payback may not occur in the first year or two of operation. Early acquisition and implementation costs will likely be higher than the benefits realized in the early stages. To fully examine the ROI for new Support tech you will need to analyze costs and benefits over time. The breakeven point will occur when you recoup new support tech costs from realized benefits. Breakeven may occur within several months or years depending upon the initial investment and the rate of benefits realized.
NEW SUPPORT TECH ROI = (NEW SUPPORT TECH BENEFITS – NEW SUPPORT TECH COSTS) / NEW SUPPORT TECH COSTS
Calculating New Support Tech Benefits
Support’s involvement in driving adoption may have an indirect revenue contribution. If the new Support technology can free up Support staff, and if that staff can help customers with early-stage adoption as a result, then the net benefit will be measured by the reduction in churn and the retained revenue.
In addition, helping customers realize value contributes to expansion sales opportunities. Support may also generate direct revenue by selling value-added services to customers.
NEW SUPPORT TECH BENEFITS = RETAINED REVENUE CONTRIBUTION + EXPANSION REVENUE CONTRIBUTION + DIRECT SUPPORT REVENUE INCREASE
New Support Tech Costs
The cost of new Support technology includes the initial acquisition costs, the cost of implementing the new tech, and the ongoing operating costs.
NEW SUPPORT TECH COSTS = ACQUISITION + IMPLEMENTATION + OPERATION
Making a Credible Case for the Investment
When you gather your inputs for the ROI analysis, you will be able to prove that the benefits of the Support technology investment will exceed the costs over time.
To assure that you successfully make the case and win approval, consider the following:
- Express benefits in terms that your leaders will understand and value.
- Set realistic goals about project benefits and costs – don’t oversell the benefits.
- Use credible inputs to quantify the investment – be prepared to indicate the source of your data.
Remember that the ROI justification will set expectations with your executive team. So be sure to monitor performance once the new technology is approved and implemented in order to keep the executive team up to date with project performance. Your ability to establish credibility will help to ensure future investments are funded.
Accurately calculating the ROI of new Support tech is critical to building a strong business case. And now you know how to do just that. However, you should know that payoff projections are just one part of the story.
In addition to quantifying the return of Support tech, like AI, you should also provide a real-world example of how those benefits have played out for an organization just like yours.
Learn how Tableau leveraged AI-powered search and recommendations to enhance self-service and save an astounding $18 million as a result. In conjunction with your own calculations, this case study will help you create a highly compelling business case for bringing AI on board.