What are support costs and revenue?
Definition: Support costs are all the expenses related to providing customer support, while support revenue refers to the revenue a business generates from providing support services.
They are two key metrics tracked by businesses that show them the profitability of having a support team and help them understand the impact of their support operations.
Understanding support costs and revenue
Support cost structure:
- Each person on the support team needs to have their salary and benefits paid for, meaning that having more employees increase costs.
- A support team requires technologies and tools to provide their services. These tools can be paid annually/monthly or one-time purchases software.
- New hires require businesses to spend money on training them, while current staff requires further development through courses and programs.
- An operating support team requires overhead expenses like rent, utilities, and appropriate work equipment.
Having a support team provides businesses with four revenue sources:
- Providing customers with quality experiences increases their retention and loyalty, preventing revenue loss due to customer churn.
- Support representatives always look for potential upselling and cross-selling opportunities that increase the revenue generated from a single customer.
- Implementing customer referrals lets customers invite people who can become new paying customers.
- A fast and friendly support team separates the business from the competition and builds a brand reputation.
The Impact of Support Costs on Revenue
Support costs have both a positive and negative impact on the business’s revenue.
High costs lower a business's profitability if the revenue generated can’t balance out all the costs. This leads to businesses limiting their resources and slowing their growth and innovations
Investing in new support strategies and resources is an up-front increase in support costs that can increase revenue and lower all further costs in the long run, positively impacting the business's profitability and customer satisfaction.
On the other hand, underinvestment in support leads to it not being able to keep customers satisfied, which increases customer churn losing the business revenue.
The key is to have costs optimized and in balance with new revenue.
How to balance support costs and revenue?
- Optimizing support processes through proper ticket routing and implementing automation and AI support tools.
- Self-service options like FAQs, knowledge bases, and tutorials reduce the staff needed.
- Training and developing agents make them work more efficiently and reduce customer turnover.
- Monitoring and analyzing support metrics lets teams identify areas for improvement and helps them adjust their support strategies.