The e-commerce Customer Service Cost Blindspot

If you're here for the free cost calculators - scroll down a little to get to both

One of the most fundamental tidbits of information that a customer support leader should know when thinking about efficiency and optimization is the overall cost per ticket. However, over the years we’ve identified several blindspots that prevent seeing the true numbers and making truly informed decisions in this regard.

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Most leaders we speak with believe that the cost of running their customer support operation is limited to the salaries and benefits of their agents, sometimes adding the cost of office space and software licenses. However, there are many hidden costs that are often overlooked. In this blog post, we will examine the true cost of customer support for e-commerce brands and the three components that should be included when making this calculation: the direct costs, the indirect costs, and the lost revenue of a non-perfect CSAT.

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First, let's use the calculator below to see the theoretical capacity of your CS team. This will help to initially scope the limits of the calculation.

First, a few examples

Let’s start with Company A. They were estimating their cost per ticket to be (way) lower than $1 because they were hiring most of their staff in the Far East, paying less than $1000 a month per customer support employee.

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The lower salary of some of their customer service agents gave the company’s leaders a sense of economical efficiency that wasn’t substantiated by the true overall expenditure the company made on customer service - which eventually turned out to be higher than $3 per ticket! They underestimated the impact of the US based team members on the cost and over estimated the number of tickets that each remote agent solved.

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We also spoke with Company B, which was certain that each of their agents can handle 200 tickets per day. When we looked into the real data it turned out that the actual number of tickets each agent solved on average was closer to 50 per day. It was a 4x error that prevented that leader from looking at efficiency improvements to begin with - quite a blindspot.

The best way to calculate customer support cost

The most accurate way to calculate the cost per ticket is to take all the customer-service related costs for a given month and divide them by the total number of tickets solved during that month.Easy enough right?
The problem with that approach is that often companies can’t easily separate the costs of customer service from other costs, or recognize other factors that should be counted in their customer support costs.For that reason we’ve listed below the common blindspots that customer service leaders have and more tips on how to calculate the actual overall cost per ticket.

Common mistakes when calculating customer support cost

The following are the most common blindspots that we’re seeing with customer service leaders:

• Not taking into account all the costs - such as team leads, training periods, software licenses, etc.
• Assuming that agents work at full capacity and full speed all day long - for example by measuring the best agent at their best time and not averaging over a full week or month.
• Not taking training into consideration - the first few weeks of every agent aren’t efficient. Combined with the high turnover rate that is common in the industry, can increase the cost per ticket by over 10% when calculating annually.

The Direct Cost

The direct cost of customer support includes the base salary, benefits, hardware, and software licenses of each agent. These costs are usually easy to calculate and are included in the company's budget.

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While we might tend to glance over them, software and hardware costs can add up quickly. The company sometimes provides each agent with a computer, headset, and other necessary equipment, along with software licenses for the tools that they use to manage customer inquiries, anti viruses, password managers, etc. All of these expenses can be quite significant and should be taken into account when calculating the direct cost of customer support.

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Common monthly gross salary brackets (including benefits) based on our experience, customer input, and industry data:

• APAC - $800 - $1500
• Eastern Europe - $2000 - $3500
• USA - $3000 - $5000

The Indirect Cost

The indirect cost of customer support includes the cost of inefficient training time (both for the trainer and the trainee), attrition during training, and office space. During the first two months of every agent's employment their contribution to the team’s productivity is virtually zero. During this period, agents are still learning the ropes and are not yet fully effective. The company is essentially paying for training for the trainers and the trainees without getting much value in return.

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Furthermore, the average turnover rate for customer service representatives is less than a year, sometimes leaving as early as during the training period, which means that the company is constantly having to train new agents. This can be a significant expense.

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Office space is also a significant indirect cost. The company sometimes provides office space for each agent, along with the necessary equipment, such as desks and chairs. This can add up quickly, especially if the company is growing and needs to expand its customer support team

The Lost Revenue of Non-Perfect CSAT

The final component of the true cost of customer support is the lost revenue of non-perfect customer satisfaction scores (CSAT). The higher the CSAT, the more likely customers are to return for repeat purchases and to give positive reviews. Conversely, low CSAT scores can lead to higher customer acquisition costs (CAC) and lower customer lifetime value (LTV).

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According to the Harvard Business Review, high CSAT can lead to over x2 increase in revenue over poor CSAT and over 60% increase over average CSAT