{"id":10468,"date":"2020-10-07T20:30:45","date_gmt":"2020-10-07T19:30:45","guid":{"rendered":"http:\/\/blog.intercom.com\/?p=10468"},"modified":"2020-10-07T20:43:08","modified_gmt":"2020-10-07T19:43:08","slug":"how-customer-support-fits-your-business","status":"publish","type":"post","link":"https:\/\/www.intercom.com\/blog\/how-customer-support-fits-your-business\/","title":{"rendered":"Why conversational customer support is a key strategic investment"},"content":{"rendered":"<p class=\"opening_paragraph\">In the not-too-distant past, <a href=\"https:\/\/www.intercom.com\/blog\/defining-customer-support\/\" target=\"_blank\" rel=\"noopener noreferrer\">customer support<\/a> was seen as a hassle, a cost that had to be borne but which was really just a tax on success.<\/p>\n<p>If it wasn\u2019t for those pesky customers with problems, profits would be through the roof, right?<\/p>\n<p>There is no escaping the fact that supporting your customers costs money. But with customers expecting faster and more personalized experiences, providing great <a href=\"https:\/\/www.intercom.com\/blog\/conversational-support-funnel-announcement\/\" target=\"_blank\" rel=\"noopener noreferrer\">conversational customer support<\/a> is no longer optional \u2013 it\u2019s essential to business survival.<\/p>\n<blockquote class=\"pullquote-style-one\"><p>&#8220;Support isn\u2019t just a cost center, but a strategic investment that increases customer retention and reduces churn&#8221;<\/p><\/blockquote>\n<p>Indeed, if you look at the broader financial models of customer support, you\u2019ll see that support isn\u2019t just a cost center, but a strategic investment that increases customer retention and reduces churn.<\/p>\n<h2 id=\"cogs-and-the-real-costs-of-customer-support\">COGS and the real costs of customer support<\/h2>\n<p>The costs associated with providing support to your customers are known as Cost of Goods Sold, aka COGS. For traditional industries such as manufacturing, COGS are made up of the physical costs incurred in selling your product. But as SaaS businesses are treated as service businesses, COGS represent the costs of providing that service to your customers, such as:<\/p>\n<ul>\n<li>Hosting<\/li>\n<li>Other third-party costs e.g. content delivery networks, software, etc<\/li>\n<li>Customer onboarding costs<\/li>\n<li>Support team costs (including personnel)<\/li>\n<\/ul>\n<p><a href=\"https:\/\/wpdevshed.com\/how-to-judge-the-best-web-hosting-companies\/\" target=\"_blank\" rel=\"noopener noreferrer\">Hosting<\/a> and other infrastructure costs are relatively fixed \u2013 each additional customer doesn\u2019t move the needle \u2013 so support costs are the easiest way to increase or reduce COGS.<\/p>\n<p>Here\u2019s a simple way to think about COGS in the SaaS world. If you stopped signing up new customers in the morning, stopped shipping new product, but continued to serve your existing ones, what costs would be incurred in keeping the lights on? That\u2019s COGS \u2013 it\u2019s key to telling you if your business fundamentals are sound.<\/p>\n<p>For today\u2019s SaaS companies, COGS (and by proxy support) is a <a href=\"http:\/\/www.forentrepreneurs.com\/saas-metrics\/\">key component<\/a> of profitability for SaaS companies.<\/p>\n<p><img decoding=\"async\" class=\"small\" src=\"https:\/\/intercom.com\/blog\/wp-content\/uploads\/2016\/09\/How_Support_Fits_Your_Business_Inline_01.jpg\" \/><\/p>\n<p>There are two implications of this.<\/p>\n<ol>\n<li>If you want healthy financials your support team is always going to be busy. No matter how much you value your customers, you can\u2019t cut an open-ended check for support.<\/li>\n<li>Cutting support to the bone to increase profits might look tempting in the short term, but bad support will only lead to increased churn, eroding your profits just as quickly as you increased them.<\/li>\n<\/ol>\n<h2 id=\"calculating-your-support-spend\">Calculating your support spend<\/h2>\n<p>So, how can you better understand your ability to spend on support? Economies of scale, your position in the market, and your pricing should influence the way you think about spending on support. Here are a few examples.<\/p>\n<h3>Pricing<\/h3>\n<p>Why can Apple afford to provide much better support than Dell? It\u2019s price. A similarly specced computer from Apple and Dell will not be priced the same and may even vary by orders of magnitude. Put simply: the more you can charge for your product, the more support you can afford to provide. But figuring out how to charge more isn\u2019t easy. In SaaS specifically, the more you can charge while not negatively impacting your retention rate proportionally, the more you can spend on support.<\/p>\n<h3>Economies of scale<\/h3>\n<p>Imagine you are running a product management application that sells access to its product on a per seat basis. Each additional seat sold costs you almost nothing from an infrastructure perspective. Assuming you\u2019re using third parties like Amazon Web Services and reserving instances along the way, the more seats you sell, the lower the marginal costs to host each additional seat. As hosting costs per seat decrease, you can increase your support spend per seat while maintaining the same gross profit margin.<\/p>\n<h3>Your place in the market<\/h3>\n<p>It\u2019s a simple fact that larger, more valuable customers will churn less. It\u2019s more expensive and difficult to land them (often with involvement from the sales team, product and engineering teams to answer\/build specific requests, your CEO, etc.), but once you\u2019ve landed them they\u2019re much less likely to quit. Their switching costs are higher. They\u2019ve invested more of their time, money, resources, and reputation to adopt your product.<\/p>\n<p>In contrast, smaller customers adopt the product quickly and cost much less to acquire. However, it\u2019s much easier for them to quit. Their switching costs are much lower, and it\u2019s also statistically more likely they go out of business. This natural difference in retention across markets will completely change your <a href=\"https:\/\/www.intercom.com\/blog\/what-is-customer-acquisition-cost\/\" target=\"_blank\" rel=\"noopener noreferrer\">lifetime value (LTV) equation<\/a> and dictate how much you can spend to support customers.<\/p>\n<p>Said another way, an hour spent with a larger, higher-retention customer makes up a much smaller portion of that customer\u2019s LTV than it does with a smaller customer. If you want to treat all customers as equal go ahead and do it. But be clear about the trade-offs you are making when you decide to do that.<\/p>\n<h2 id=\"conversational-support-as-a-profit-center\">Conversational support as a profit center<\/h2>\n<p>But rather than simply looking at the cost of support, consider how support can actually be a positive force on revenue. Here\u2019s just three ways you can use <a href=\"https:\/\/www.intercom.com\/blog\/conversational-support-definition\/\" target=\"_blank\" rel=\"noopener noreferrer\">conversational customer support<\/a> to grow your business.<\/p>\n<h3>Support to convert<\/h3>\n<p>If you provide support to customers on free trials you need to think about what\u2019s a sales cost and what\u2019s actually customer support. If you are supporting free users to convert them to paying customers then it\u2019s a sales cost. If someone is on a trial of a $25,000 a month plan and they have a question three days in, is that actually COGS or is it a sales cost? It\u2019s sales because if the potential customer doesn\u2019t get what they want they are not going to buy the product. It\u2019s not COGS because you haven\u2019t actually sold a good yet.<\/p>\n<h3>Support to preserve<\/h3>\n<p><img decoding=\"async\" class=\"small\" src=\"https:\/\/intercom.com\/blog\/wp-content\/uploads\/2016\/09\/How_Support_Fits_Your_Business_Inline_02.jpg\" \/><\/p>\n<p>The number one reason customers quit is when they believe a company no longer cares about them.<\/p>\n<p>Through that lens you can start to think of support as something that turns an 18-month relationship into a three-year relationship and doubles your revenues in the process. Basecamp has customers that have been with it for over a decade, since the product first launched. That\u2019s because they\u2019ve built a great product, but also because <a href=\"https:\/\/www.intercom.com\/blog\/podcasts\/basecamps-chase-clemons-on-delivering-better-customer-support\/\" target=\"_blank\" rel=\"noopener noreferrer\">they\u2019ve consistently provided great support<\/a>. Support can increase LTV if it preserves the customer relationship.<\/p>\n<h3>Support to distinguish<\/h3>\n<p>Great customer support can act as a clear differentiator in your sales and marketing efforts. Perhaps <a href=\"https:\/\/anything.zappos.com\/\" target=\"_blank\" rel=\"noopener noreferrer\">Zappos<\/a> is the most famous example of a company that has <a href=\"https:\/\/www.intercom.com\/blog\/real-customer-delight-isnt-over-the-top\/\" target=\"_blank\" rel=\"noopener noreferrer\">prioritized customer delight<\/a>, but there are an increasing number of companies in every industry that are building their brand around excellent customer service. To not prioritize it is to risk your brand becoming synonymous with <a href=\"https:\/\/youtu.be\/aZh9vRGD4fA\" target=\"_blank\" rel=\"noopener noreferrer\">terrible customer service<\/a>.<\/p>\n<h2 id=\"customer-first-culture-builds-value\">Customer-first culture builds value<\/h2>\n<p>Customer support is usually seen as the black hole in the CEO\u2019s wallet. That adversarial view of customers is on the wane and progressive companies consider a <a href=\"https:\/\/www.intercom.com\/blog\/characteristics-modern-customer-support\/\" target=\"_blank\" rel=\"noopener noreferrer\">customer-centric culture a core value<\/a>.<\/p>\n<p>As we\u2019ve seen good customer support isn\u2019t easy. It costs time and money. But putting your customers front and center pays off in the long run \u2013 it retains customers, transforms customers into advocates for your business, and delivers a competitive advantage.<\/p>\n\n","protected":false},"excerpt":{"rendered":"<p>Good customer support costs time and money. Learn how support can become a strategic investment that increases customer retention and reduces churn.<\/p>\n","protected":false},"author":127,"featured_media":10483,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"category":[3],"tags":[175,142,134,45],"coauthors":[380],"class_list":["post-10468","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-customer-support","tag-business","tag-customer-support","tag-finance","tag-saas"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v27.3 (Yoast SEO v27.3) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Why Conversational Customer Support Is a Key Strategic Investment<\/title>\n<meta name=\"description\" content=\"Good customer support costs time and money. Learn how support can become a strategic investment that increases customer retention and reduces churn.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.intercom.com\/blog\/how-customer-support-fits-your-business\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Why conversational customer support is a key strategic investment\" \/>\n<meta property=\"og:description\" content=\"Good customer support costs time and money. Learn how support can become a strategic investment that increases customer retention and reduces churn.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.intercom.com\/blog\/how-customer-support-fits-your-business\/\" \/>\n<meta property=\"og:site_name\" content=\"The Intercom Blog\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/intercominc\" \/>\n<meta property=\"article:published_time\" content=\"2020-10-07T19:30:45+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2020-10-07T19:43:08+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.intercom.com\/blog\/wp-content\/uploads\/2016\/09\/How_Support_Fits_Your_Business_Logo-2.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1968\" \/>\n\t<meta property=\"og:image:height\" content=\"932\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Bobby Pinero\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@bobbypinero\" \/>\n<meta name=\"twitter:site\" content=\"@intercom\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Bobby Pinero\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"6 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/www.intercom.com\\\/blog\\\/how-customer-support-fits-your-business\\\/#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/www.intercom.com\\\/blog\\\/how-customer-support-fits-your-business\\\/\"},\"author\":{\"name\":\"Bobby Pinero\",\"@id\":\"https:\\\/\\\/www.intercom.com\\\/blog\\\/#\\\/schema\\\/person\\\/a64402c1ccd9c0d8054ae3c56ed2e734\"},\"headline\":\"Why conversational customer support is a key strategic investment\",\"datePublished\":\"2020-10-07T19:30:45+00:00\",\"dateModified\":\"2020-10-07T19:43:08+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/www.intercom.com\\\/blog\\\/how-customer-support-fits-your-business\\\/\"},\"wordCount\":1218,\"publisher\":{\"@id\":\"https:\\\/\\\/www.intercom.com\\\/blog\\\/#organization\"},\"image\":{\"@id\":\"https:\\\/\\\/www.intercom.com\\\/blog\\\/how-customer-support-fits-your-business\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/www.intercom.com\\\/blog\\\/wp-content\\\/uploads\\\/2016\\\/09\\\/How_Support_Fits_Your_Business_Logo-2.jpg\",\"keywords\":[\"business\",\"customer support\",\"finance\",\"SaaS\"],\"articleSection\":[\"Customer Service\"],\"inLanguage\":\"en-US\"},{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/www.intercom.com\\\/blog\\\/how-customer-support-fits-your-business\\\/\",\"url\":\"https:\\\/\\\/www.intercom.com\\\/blog\\\/how-customer-support-fits-your-business\\\/\",\"name\":\"Why Conversational Customer Support Is a Key Strategic Investment\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/www.intercom.com\\\/blog\\\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\\\/\\\/www.intercom.com\\\/blog\\\/how-customer-support-fits-your-business\\\/#primaryimage\"},\"image\":{\"@id\":\"https:\\\/\\\/www.intercom.com\\\/blog\\\/how-customer-support-fits-your-business\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/www.intercom.com\\\/blog\\\/wp-content\\\/uploads\\\/2016\\\/09\\\/How_Support_Fits_Your_Business_Logo-2.jpg\",\"datePublished\":\"2020-10-07T19:30:45+00:00\",\"dateModified\":\"2020-10-07T19:43:08+00:00\",\"description\":\"Good customer support costs time and money. 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