- 67% of customers who had a great experience with an employee said they would buy again from that organisation, compared to 11% who had a bad experience.
- 63% of customers who had a great experience with an employee said they would recommend that organisation, compared to 10% who had a bad experience.
ROI Toolkit
Investing in service increases the lifetime value of customers.
The methodology
The following outlines the recommended steps to implement this methodology:
- Configure average customer lifetime value (CLV): Start by calculating the average annual spend per customer and the typical length of time a customer stays with your organisation.
- Establish lifetime value formula: Multiply the average revenue per customer by their average lifespan (or divide by churn rate) to get the total revenue a customer is expected to generate over their relationship with your business
- Implement a service improvement strategy: Introduce a targeted initiative designed to enhance customer experience (e.g. improved frontline training).
- Monitor changes in customer behaviour: Following implementation, track changes in customer spend and retention. A successful strategy should result in customers spending more and staying longer.
- Calculate the impact on CLV: Re-calculate CLV using updated figures post-implementation.
- Determine ROI: Subtract the cost of the service investment from the increase in CLV to determine the return on investment.
An example of how an organisation might use the Customer Lifetime Value metric
A national retailer implemented a new customer care training programme focused on empathy and resolution skills. Over the next 12 months, repeat purchases increased by 15%, and average customer retention rose by one year. Using updated CLV calculations, they estimated an increase of Ā£1.2M in lifetime value across their customer base ā significantly outweighing their Ā£300K training investment.
Things to consider
Itās a long-term metric, so while extremely valuable, it may not offer immediate ROI visibility.
Precise tracking of spend and retention is critical to calculating CLV meaningfully.
To isolate the effect of the service improvement, use a test-and-control group model.
Increased CLV should support your strategic growth and customer retention objectives.
Key research/insight from us
Research from post card
The Customer Knows (2016)
The Customer Knows (2016)
Building the Service Nation
Building the Service Nation
The research is based on interviews with senior executives (including Chief Executive Officers, Chief Operating Officers and Customer Service or Customer Experience Directors) and online surveys with 751 employees in a variety of roles, across organisations and sectors, 929 consumers and 500 young people aged between 16 and 21. The research was conducted between December 2022 and February 2023.
Around 67% of UK employees spanning a wide range of roles, departments or functions, spend significant amounts of time in their job dealing with customers. Therefore, for many organisations, the profession of customer service is about embedding a service culture to deliver the organisationās commercial and customer experience objectives, as well as developing appropriate skills in specific roles.Ā The research identifies that there is a growing requirement for broader and more advanced skills and lays out in detail what these skills and capabilities will be.
Customer service provides a challenging and rewarding career with genuine pathways to develop skills and experience but potential employees are not always aware of the breadth of career opportunities and many are more likely to see customer service as a foundation for other careers than a respected profession offering good career opportunities.Ā The research presents 5 main pathways for careers in customer service.
To conclude, our research highlights 9 areas to improve the perception and recognition of roles and careers in customer service as well as practical recommendations to aid organisations in addressing them.
The Customer Service Dividend Revisited
The Customer Service Dividend Revisited
This research examines the relationship between customer satisfaction and business performance over the 5 years.
The research showed that companies with customer satisfaction at least one point above the sector average achieve significantly stronger results, with 20.3% EBITDA, 7.4% compound revenue growth, and Ā£717,739 revenue per employee. In contrast, companies with customer satisfaction at least one point below the sector average perform much worse, with only 10.5% EBITDA, 0.1% compound revenue growth, and Ā£297,025 revenue per employee.
