ROI Analysis and Calculation

Calculating ROI

Return on investment (ROI), is an approximate measure of investment profitability and an important measure in evaluating the benefit of an investment or to compare alternative investments.

At next4biz we provide three main enterprise product lines:

• Customer Relationship Management – next4biz CRM
• Customer Service Management – next4biz CSM
• Business Process Management – next4biz BPM

As attested by our customers, we are confident that in terms of architecture, features, support and licensing structure we provide an unbeatable value proposition across these areas. But what we will do in this article, is to demonstrate how this can be quantitatively shown utilising ROI.

We will take next4biz CSM as the product for this demonstration. As customers have come to be recognised as the most valuable asset of organisations, CSM has received increased interest as the most important tool for customer satisfaction and retention. Customers increasingly view high quality service as an integral part of any product. Many well-known organisations of the recent past have disappeared as a result of not understanding the implications of this shift. This is why investing in next4biz CSM might be the smartest decision your organisation ever makes.

How is ROI Calculated

Return on investment, is an approximate measure of investment profitability. It is a widely employed way to evaluating the benefit of an investment or to compare alternative investments.

ROI is calculated as the ratio of the difference of net returns minus the cost of an investment, to the cost of investment:

To exemplify, if a decision were to be made of $1 Million and the $3 Million were earned as a result of this investment ROI would be calculated as:

This ROI calculation does not take into account the holding period of the investment. Formula for calculating annualised ROI are also available, and are particularly useful in comparing investments with different time-spans.

Staying with the basic definition, the two constituents of ROI need to be pre-determined: Net return on investment and cost of investment.

Let’s exemplify the process by estimating the ROI for an investment. Specifically, let’s calculate the ROI for an investment in next4biz Customer Service Management.

We will analyse the basis of net return of investment calculation by understanding the facets of next4biz CSM value proposition.

9 facets of the next4biz CSM value proposition

1.Save on market research costs with real-time analysis.

Eliminate periodic market/customer research costs and enjoy the benefits of on-demand analysis: Marketing teams conduct periodic market research, at least once a year, with the aim of taking the pulse of markets and customers. That is, except market teams of companies employing next4biz CSM. They have all the data at the tip of their fingers. The categorical organisation of next4biz CSM data makes in-depth on-the-fly analysis of customer needs, problems, expectations, recommendations and perspectives regarding the competition a breeze.

2. Eliminate R&D and P&D Losses

There is an uncertainty associated with both the research and product development processes which has a cost. Some of it is inherent in execution. Successful outcomes cannot be guaranteed. But a large quotient of uncertainty and the associated cost, is due to missing the target with objective selection.

Indeed, failing at achieving the right development target is generally much more costly than succeeding at the wrong one. The latter case has a much longer investment tail and substantial opportunity cost.

With this capability at hand, next4biz CSM users confidently invest in R&D and P&D. Previously taken investment decisions are continuously re-evaluated and measured against emerging conditions. The success of completed investments are monitored, and proactive measures taken. All without employing third-party resources.

3. Profit from Agility and Flexibility

Agility (the ability to respond quickly and smartly) and flexibility (the ability to change easily) are two prised attributes of modern organisations. Unfortunately, many mission-critical business systems less agile and flexible than the organisations that make use of them. Reflecting organisational changes in these systems is typically a painful exercise involving coders, third party consultants, new software and plenty of man-hours. High execution costs aside, the drag caused by this process severely reduces agility and flexibility of the organisation which constitutes the real cost.

next4biz CSM eliminates most of the execution cost and all of the organisational cost with its no-code adoption method: Organisations get on with responding to the challenges of their business environment and next4biz follows with simple do-it-yourself customisation – no IT involvement, no migrations, no coding, no third parties.

4. Transform Service Centres into Profit Centres

To put it another way, the omni-channel experience has become a customer attraction and revenue generator in its self. A Forrester Research study points to providing true omni-channel experience as an investment that pays-off in an average of 12.8 months!

The process-based architecture of next4biz CSM makes the solution of customer issues manageable through 2nd and 3rd level process and service level targets. In this manner it becomes easy to provide effective solutions to customer solutions directly from the expert.

It has been observed that customers are most receptive to upselling just after their issues have been resolved. Next4biz agent scripting provides an ideal platform to transform the support process into new revenue in this way. Next4biz agent scripts guide call centre customer representatives to capture new/cross sales opportunities during customer dialogs, ensuring the right questions and suggestions are inserted in the conversation at the correct point – again, with no code.

5. Cost Effectively up Security

Security is a big headache for all organisations, and costly too. Thanks to Next4biz’s international standards compliance and security certifications this risk and cost is minimised. Next4biz is able to simultaneously monitor inbound customer issues on all communication channels, alert you to possible exploits and risks, and help you to prevent security breaches.

6. Enhance Customer Confidence

Leverage customer trust and a growing reputation to improve bottom-line: Brand experience is the totality of sensations, cognitions, and behavioural responses to brand-related stimuli such as brand design and packaging. Positive brand experience induces increased customer satisfaction, loyalty and trust.

Organisations that listen to their customers across the spectrum of communication channels and effectively analyse customer data, are best placed to enhance their reputation and brand recognition through solutions that meet actual customer needs. This is the forte of next4biz CSM, as is the use of AI to monitor customer responses and rapidly identify improvement opportunities: next4biz is the platform for nurturing successful brands that attract constantly widening communities of customers.

7. Lower Costs

Lower costs and increase measurability through institutionalization: Most organisations have customer service departments staffed by a workforce of diligent individuals working hard to ensure customer satisfaction. What many lack, is a way to institutionalise customer interaction. The lack of standard practices in customer communication makes measurement of customer responses impossible.

With Next4biz CSM “agent scripting” customer dialogs c be standardised to conform to a brand image and measured for effectiveness. Existing solutions may be reliably bought to the fore in response to customer issues; responses can monitored and analysed; and improvements proposed and enacted. The rise in effectivity is coupled a corresponding decrease in issue processing costs.

8. Benefit from Increased Efficiency

Any part of the customer service process that requires non-standard handling is an unwanted cost source. Organisations must ensure that accumulated knowledge is leveraged to maximum extent in the customer service process, and that when this fails, ensure that the insight gained in solving the issue be fed-back to enrich this store accumulated knowledge.

Next4biz CSM enables knowledge to be captured in different ways. Next4biz CSM “Knowledgebase” is a repository of information available to users and/or customers to eliminate a large portion of issues. Managing issues with defined processes is another way which allows the tracking of issues, detection of delays, management of escalations and monitoring through automatic warnings and root cause analyses.”

In this way organizational efficiency is subjected to continuous scrutiny and improvement which drives cost down.

9. Benefit From Holistic Cost Advantages

Facets of the Next4biz CSM value proposition are all drivers of cost reduction. Together they interact to deliver further costs:

• • Next4biz CSM’s omni-channel architecture along with facilities to de-duplicate customers and combine issues, reduces the number of trivial issues and associated issue processing costs. Taking for example 2% of an annual 100K issues as duplicates opened through different communication channels by the same customer; de-duplication and combining 50% of these produces around 40,000 units of annual savings.
  • Next4biz CSM’s process-based platform minimises customer dissatisfaction due to lost, delayed or untracked issues. This increases customer retention and lifetime value. It also reduces costs associated with customer issue tracking. For example, if 5% of all issues are resolved at the 3rd level, that corresponds to 120,000 units saved from issue tracking.
  • The no-code adaptation feature of Next4biz CSM allows making adjustments without third party technical and consultancy input or IT department technical support. The exception being for integration with (rare) third party systems not previously encountered by the next4biz team. This provides savings of around 100 experts/day in relation to customisations well as eliminating the time needed to implement change requests.
  • Next4biz CSM’s cloud platform architecture reduces additional costs such product feature development, updates and security protocol renewals. Any user with access authorization may access the application directly and from any location through a web browser without the necessity of client software installation.
  • The budget-friendly licensing model of Next4biz offers progressively lessening unit costs as user seats increase.
  • Next4biz CSM’s ready-made self-service portal enables customers to self-input and track issues, thereby reducing 1st level issue-registering costs. The knowledgebase and associated search engine feature significantly reduces the number of “question” type issues and associated costs.
  • The “agent scripting” module of Next4biz CSM causes the rate of first call resolutions to increase dramatically, thereby reducing issue costs. Increased efficiency in issue resolution slows staff growth rates for call-centres, and reduces training times and costs for call centre customer representatives.
  • The Next4biz CSM AI module reduces the risk of operational mistakes through automatic categorization, thereby reducing communication and processing effort, resolution times. This reduces overall cost as well as causing a leap in customer satisfaction.
  • Automatic notification messages issued by Next4biz CSM significantly reduces the number of follow-up calls and issues on the same topic from different channels, together with associated processing costs.
  • Rapid response and turnaround times of the next4biz team in support of CSM users is minimises risks and costs associated with support for the CSM system.

Quantifying the Model

Now that we have an understanding of how next4biz CSM increases revenue and reduces cost, let’s try to generate some figures for our ROI calculation.

First some assumptions.

We will take customer issues raised per month to be 100K and that the distribution of these issues by channel are as follows:

We will assume the composition of the customer service organisation as follows:

We will assume the composition of the customer service organisation as follows:

Further, we will take the following performance indicators to reflect the current state of customer service operations:

Let’s say that the table below shows the outputs of our key performance indicators.

Taking into consideration the savings, efficiency, customer acquisition/retention, operational risk management, and para-fiscal effects – which are the impact areas of Next4biz – the following ROI curve is obtained.

Conclusion

Next4biz CSM provides a way to make you invaluable to your customers. Simply calculate your ROI in next4biz CSM to eliminate any remaining doubts about the benefits of joining hundreds of organizations who have chosen the Next4biz way to success.

Gürkan Platin

Gürkan Platin, a graduate of Hacettepe University Management and Organization, worked as a manager in various positions at Mensan, Citibank, Garanti Bank and Credit Registration Bureau, respectively. Platin has been blogging since 1996 and his articles are published in various national and international publications.