The True Cost of Customer Support: A Complete Guide to Managing and Reducing Costs
Why is the true cost of customer support such a big deal? Because when you can calculate it accurately, it’s a surefire way to keep both your customers and your CFO happy.
You already know that customer experience (CX) makes or breaks brand loyalty. And you know that the quality of your customer support has a huge impact on CX.
So it should be simple right? Throw money at the problem and things will work out...except that's not how it works in the wild.
At ModSquad, we know you need to look at things a little differently, and that the true cost of customer support is a gnarlier calculation than it seems at first glance.
Chances are you’re reading this because you're looking to optimize an in-house team or considering outsourcing. In either case, there are some key metrics you need to keep in mind if you want to get to the bottom of what customer support costs really look like for your business.
This guide is designed to help you calculate the true cost of customer support – and give you the strategies you need to reduce those costs without sacrificing quality.
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Ok, let’s dive in…
How do you Measure the Cost of Customer Support?
Key definition: The cost of customer support is measured by looking closely at three key metrics: cost per ticket, cost per order, and cost per revenue.
Before you can manage customer support costs, you need to understand what drives them.
The beauty of using cost per ticket, cost per order, and cost per revenue is that – when used in combination – they provide a comprehensive view of your customer support expenses.
This view allows you to assess efficiency and profitability, as well as identify areas where you can streamline operations.
1.1. Cost per Ticket
The cost per ticket is one of the most insightful ways to measure your customer support costs as a percentage of revenue.
And that’s not all: it can also give you valuable insight into your team’s efficiency and performance.
It’s calculated as: Total support spending ÷ Number of tickets resolved = Cost per ticket
So say you spend $8,000 on customer support and resolve 1,000 tickets, your cost per ticket would be $8.
That makes reducing the cost per ticket – through workflow optimization, technology, and well-trained agents – one of the best ways to save money without lowering the quality of your customer experience.
It also shows why forward-thinking companies are investing in self-service solutions like knowledge bases or AI-powered chatbots, which can reduce cost per ticket by 50% or more.
1.2. Cost per Order
The cost per order shows how much you’re spending on support per sale. This is an especially important metric for businesses in e-commerce and other high-transaction environments.
It’s calculated as: Total support spend ÷ Number of orders = Cost per order
So if you spend $8,000 on customer support and handle 100 orders, then your full cost of customer support per order is $80.
Getting a handle on cost per order helps you to see how much your customer support cost is tied directly to revenue generation.
Want to lower this cost while enhancing service quality? Invest in tools that actually reduce friction on the customer journey. Things like integrated CRM systems and live chat.
1.3. Cost per Revenue
The cost per revenue helps measure how sustainable your support operations are relative to your overall revenue. And guess what? That’s going to come in really handy when predicting how your support services will cope as your company scales.
It’s calculated as: Net sales ÷ Number of tickets = Cost per revenue
So say your company generates $50,000 in sales and resolves 1,000 tickets. That means your cost per revenue is $50.
Tracking cost per revenue gives you a clear idea of just how much it will cost to continue to support customers efficiently as your company grows – and support scales with it – helping you to build a support program that’s sustainable long-term.
Internal vs Outsourcing Customer Support Costs
The key metrics above are an important foundation. But to pinpoint exactly where you're currently spending – and, crucially, where you can optimize – you need to consider two main components that impact the total cost of customer support: operational costs and outsourcing costs.
2.1. Operational Costs
If you’re thinking of building an in-house customer support team, then operational costs go far beyond the salaries and benefits of your team members – covering things like insurance for full-time employees. But in case you’re interested, customer service agents in the U.S. typically earn between $30 and $40 per hour, according to Working Solutions.
On top of the hourly rate, however, you also need to account for:
Training and Onboarding:
Properly onboarding agents is critical, because no customer wants to speak to someone who lacks the necessary knowledge and expertise to deal with their issue. And a lack of training can lead to lower efficiency and higher ticket volumes.
Technology and Infrastructure:
CRMs, ticketing systems, and communication tools are essential – but they all come with subscription fees and maintenance costs. Which is why Charles IT calculates that running an in-house support team can easily cost upwards of $250,000 annually when you factor in technology and office infrastructure. Then there’s the broader workplace infrastructure to think about. Things like location costs, internet, computers, desks and other office hardware all add up.
2.2. Outsourcing Costs
"It’s easy to see why so many businesses turn to outsourcing customer support costs in a bid to reduce overhead. When you find an outsourcing partner that can cut costs while enhancing quality at the same time, it’s a no-brainer."
Get outsourcing right, and it can cut customer support costs significantly, with rates typically ranging between $6 and $10 per hour according to SaaS Capital, depending on the region and expertise required.
But outsourcing isn’t just about saving money – it’s about finding a partner that can maintain your brand voice and deliver seamless CX. And who has the experience to build a customer support process that works as it should and saves you time.
And to do that, you need to choose very wisely.
Choose the wrong partner and you’ll quickly start incurring another type of ‘hidden’ cost: the churn that comes from having inferior customer service agents set loose on your customers.
So you need to find a partner who can provide quality at scale. And one that uses data to optimize your costs as they learn more about your needs over time.
Our complete guide to customer support outsourcing dives deeper into the benefits of customer support outsourcing and what to consider when choosing the right partner.
Strategies to Reduce Customer Support Costs
Now for the tricky bit: cutting customer support costs without compromising service quality.
Tricky, yes. But also very achievable. You just need the right blend of strategy, technology, and insight.
Let’s take a look…
3.1. Self-Service Solutions
You’re much more likely to have heard of ‘generation mute’ than to have heard from one of their ranks. Because guess what: they don’t like to talk to customer support agents.
They’re far more likely to be found scouring your site for self-service tools like knowledge bases and FAQs – or typing away to one of your AI-driven chatbots – than they are picking up the phone to call one of your support staff.
It’s just one of the many reasons why empowering customers to solve issues on their own is becoming more and more popular. Not to mention the huge reduction in the number of tickets that agents need to handle.
In fact, studies show self-service is up to 8 times more cost-effective than live chat or phone support.
We’re big fans of self-service options. So check out our thoughts on implementing self-service in our detailed customer support automation guide.
3.2. Efficient Use of Data & Technology
"A great way to reduce costs is by streamlining your support technology. Tools like omnichannel support platforms, live chat, and social media integration not only speed up response times but also reduce the burden on human agents."
AI-powered systems can handle routine inquiries, allowing your team to focus on stuff that delivers greater impact.
Beyond the makeup of your tech stack, taking a data-driven approach to your customer support services will also help you to reduce costs. The right data analysis should – over time – reveal areas that you can optimize, allowing you to power continuous improvement across your customer support program.
That’s where we come in. Our technical experts can help make sure you’re squeezing the most from your CRM and find ways to make your workflows more efficient. Learn more and book a consultation.
3.3. Choosing the Right Outsourcing Partner
And then we have outsourcing: one of the most effective ways to reduce operational costs.
But only if done right.
When outsourcing, it's crucial to partner with a provider that understands your industry, aligns with your brand – and can maintain the quality of customer interactions. Taking a data-driven approach is a key to achieving that consistency while optimizing costs over time.
ModSquad’s flexible SourceUp model lets you scale in real time while ensuring you only pay for results, not rigid staffing models.
Balancing Cost and Service Quality
There’s a fine line between cutting customer support costs and cutting corners.
Your challenge is walking that tightrope: keeping your customer support costs under control while continuing to deliver excellent service.
There are two areas you should stay aware of to make sure you get the balance right...
4.1. Maintaining Customer Satisfaction
Let’s get one thing clear: lowering support costs doesn’t have to mean lowering service quality.
In fact, by investing in automation, hiring well, and having impactful orientation processes for your agents, you can reduce response times and ticket volumes – while making sure you don’t turn off your customers by having agents that just read off scripts and sound like they couldn’t care less. Get this right and you’ll improve both customer satisfaction and your bottom line.
But don’t make the mistake of lowering the quality of your service. Because poor service leads to increased churn.
And with customer churn costing businesses an average of $243 per lost customer according to HubSpot, cutting costs the wrong way can hurt way more than it can help.
4.2. Long-Term Impact of Cost Strategies
While cost-saving strategies might bring immediate relief to your budget, their long-term effects must be carefully managed.
That means continuing to keep a keen focus on: preventing churn, increasing CSAT, building loyalty via repeat buyers, and growing word-of-mouth through positive reviews.
All the while, getting the balance right between human touch and technology. Nailing these things is key to lasting success.
Calculating the True Cost of Customer Support
The true cost of customer support extends beyond the visible, direct expenses. Hidden costs such as opportunity costs (what you could have gained by investing in other areas) and the cost of customer churn can significantly impact your profitability.
Time and Opportunity Costs:
It’s important to think holistically when thinking about customer support costs. Because allocating resources to customer support might limit what you can invest in other growth-driving areas like marketing, product development, or sales.
Customer Retention and Acquisition:
Nailing your customer support should increase retention and reduce acquisition costs, as it’s more cost-effective to keep an existing customer than acquire a new one. So businesses should measure customer lifetime value (CLV) in relation to their support investments to understand the true ROI of their customer support efforts.