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Published October 2nd 2012

How to Prove the ROI of Customer Service in Social Media: Part 1

If customers are unhappy and have complaints, they should call us or send us an email, right? For most of you reading this blog post, it’s no longer a secret that our customers are pretty verbal about their purchase experiences, sharing both the positive and the negative.

And these voices have long gone beyond the company’s normal inbound channels such as phone and email, and have reached the space of countless forums, review sites, social networks and blogs.

It might sound logical to most of us that having a monitoring and engagement function in place to identify and solve these public mentions is a good idea. However, in most organisations, being just ‘a good idea’ doesn’t always justify a budget spend.

That’s why we’re tasked with justifying the value of doing customer service in social media channels to those who control our budget.

I spent two years working as Head of Social Media for a medium sized organisation, and part of my initial social media audit for the brand showed that we had a vibrant online community on various third party forums.

Good was mixed with bad; sometimes it consisted of incorrect information, but sometimes it was relevant and productive feedback .

I knew we had to get our people involved, but I needed to prove my case in order to get the budget for buying a social media monitoring tool and allocating a number of hours from our normal customer service staff.

But how do you prove the ROI (Return on investment) of customer service in social media channels?

Let’s start by looking at the ROI formula. R is the Return and I the Investment:

ROI = ((Gains-Costs)/Costs)*100

Your job is to find out where the gains are. As much as I’ve read about the value of a Facebook fan and the Return on Engagement, that stuff wouldn’t hold any water with my budget owners. I’d need to show them things with a real monetary value – theoretical of course, but totally possible and justifiable cases.

The costs will be very easy to accurately calculate, so we can start with identifying and estimating the gains from customer service in social media channels.

Gains are split into cost savings and revenue streams. Let’s look into a few ways customer service outreach can both cut some of your costs, and give you new revenue streams:

  • Inbound call deflection (Cost saving)
  • Direct sales (Revenues)
  • Reduced amount of lost sales (Revenues)
  • SEO back links (Cost saving)

Inbound call deflection (Cost saving)

Reducing the number of inbound calls your customer service contact centre needs to handle is a cost saving exercise. Inbound calls may be emails, live chat or phone calls. They each have a fixed average handling cost; if you lower  the number of them, you save money.

To estimate the call deflection (the amount of inbound calls you could reduce, i.e. deflect) from social media channels we need the following information:

  • Number of issues resolved on social channels
  • Estimated reach of those issues
  • Call deflection rate
  • Average cost of a call

Counting the number of resolved mentions across all of your social media channels should be pretty straightforward. If you use a social media monitoring tool like Brandwatch you can easily count the total number of resolved issues thanks to the in-built tagging system.

The audience is harder to accurately measure. But Brandwatch has good in-built support for estimating the reach. You can for example look at: forum thread views, Twitter followers of the mentioner, Facebook fans and so on. All of these give an indicationof your possible mention audience.

Call deflection rate is the average number, that you need to first estimate, then benchmark over time. An industry standard from Dr.  Natalie Petouhoff is 10%, however this is taken directly from P2P customer service forums (such as Uservoice, GetSatisfaction and Salesforce).

Based on my own experience, I’d start out much smaller and calculate around 5% in call deflection rate, or even lower than that. Again, the key will be to do your own benchmarking.

Number of deflected calls = Total mention audience * 0.05

Your number of deflected inbound calls are calculated by looking at your total estimated mention audience for the relevant channel. This will undoubtedly differ if you compare Twitter followers versus website views on a particular forum thread.

The only way to get your real call deflection rate (here set to 5%) is to measure and benchmark it over time. If there a visible trend in deceased inbound calls compared to the number of resolutions in social channels, then this is your call deflection rate.

Cost savings are naturally calculated by  taking the number of deflected calls, multiplied by the average cost per call.

Cost savings = Number of deflected calls * average cost per call

End of part 1. Join us tomorrow for part 2, to learn about how customer service in social media can affect revenue streams.

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