How to Calculate the ROI of Digital Customer Engagement

December 8, 2022
Calculating the ROI

When it comes to your digital engagement channels, many brands want to get a better understanding of their return on investment. 

But calculating the ROI of digital customer engagement can prove pretty challenging. 

After all, no two customer interactions are ever identical. 

So, what’s the real value that digital engagement channels bring to your website? Can you even quantify their ROI at all? 

In this blog, we’ll show you how. We’ll cover: 

  • How to understand the value of customer engagement 
  • How to calculate your ROI 
  • The takeaway on the cost and benefits of engaging more customers 

Let’s get started. 

Shifting mindsets: Understanding customer engagement value

Imagine you’re the owner of a brick-and-mortar store. 

You’ve hired customer assistants to help serve at the tills, replenish stock, and serve customers with queries.

Each of these assistants has countless interactions with customers during the day. 

So, how can you quantify the ROI that each of these interactions has? 

The truth is, answering that question is pretty hard. Why? 

Because the value each of these interactions brings is incremental. 

With so many different shoppers visiting the store - all at different stages of their buying journey - each interaction has different purposes, goals, and outcomes. 

It’s the same on your website, app, and social media too. 

And as with customers in-store, some digital customers will be browsing your site. They won’t be ready to buy. 

Some will want to ask a question and make a decision later. 

And some will be ready to buy right then and there. 

But even so, regardless of their stage in their customer journey, each of these customers has one thing in common: 

If they receive prompt, personalized, and helpful service, they are a lot more likely to make a purchase. 

They are a lot more likely to return again and again too. 

So, just as you wouldn’t leave a store unstaffed, you shouldn’t do the same with your online audience. 

Because where will your customers go if they can’t have their questions answered? 

How to calculate your ROI

Now that we’ve established the best mindset to have when approaching your ROI for digital engagement, let’s dive into the calculation itself.

Measuring the ROI of a digital sales team is all about understanding the incremental change in profitability versus an equivalent "base case", i.e. a world without a system in place to engage customers.

In practice, this can be very difficult to measure accurately, but here’s a useful framework for approximating ROI.

At a high level, ROI is a simple calculation:

ROI = [A. Additional Revenue] + [B. Cost Savings] - [C. Cost to Deliver Service]

Let’s break these sections down a little further. 

A. Additional Revenue

Additional revenue can comprise of:

- direct incremental sales

- intangible benefits (brand, CSAT, loyalty, PR)

Measuring direct incremental sales can be achieved in a few ways:

1. Measuring the change in top-line revenue. Pros: measure what matters. Cons: hard to separate correlation from causation, many other factors may have caused a change in profitability e.g. macroeconomic changes, product issues, change in web traffic, etc.

2. Measure the number of interactions on key sales pages and assign a value to each interaction. Pros: simple. Cons: hard to put together an accurate value per chat/call/interaction

3. Match order history with website sessions and interactions, typically by correlating chat name/email with order name/email. Pros: accurate in the sense of only counting orders, even across sessions. Cons: you need to collect the customer/name email and match the order info.

4. Use GA tracking to match interactions with conversion events. Pros: accurate in the sense of only counting orders. Cons: will not reliably identify returning visitors e.g. a customer chats today then buys from a different device tomorrow.

We suggest a combination of 3. and 4. listed above will give a reasonable approximation of incremental sales.

Intangible benefits are notoriously harder to quantify but you should be able to measure customer CSAT through your engagement platform.

B. Cost Savings

Cost savings typically comprise of more efficient contact resolution. 

Measuring cost savings can be achieved by measuring overall agent hours spent handling interactions.

Introducing new more efficient channels should reduce the amount of time spent responding to multiple emails and phone calls.

C. Cost to Deliver Service

Cost to deliver service comprises of:

- any addition in total agent cost, plus;

- cost of software service

If you are introducing additional channels, this may increase overall agent hours. Obviously, if this is the case, you are typically also speaking to more customers, which should lead to an increase in [A. Additional Revenue].

If you have multitasking agents, it's important to only measure the time spent in the system. 

The cost of the software service is typically simple to calculate.

Calculating ROI: an example

Here is a quick example that you can use as a guide for better understanding and calculating your ROI.

Say a retailer has:

£6M in revenue

100% of its revenue is from online sales

1,000 contacts per week (phone/email)

10 staff handling customer contact (phone/email)

Currently no chat

The retailer adds in Talkative (or any other engagement system).

ROI = [A. Additional Revenue] + [B. Cost Savings] - [C. Cost to Deliver Service]

A. Additional Revenue

- Each preceding month the retailer sees £490K, £500K, then £505K in online sales

- Since adding chat, sales go up £510K then £515K then £520K in the first two months

- Using a combination of the methods described previously, we see:

1. an average increase of 3.3% in overall sales. 

2. there were 300 chats, and phone/email reduced to 750 per month. Through agent tagging, 45% of these chats were product/sales related.

3. 10% of online conversions had a Talkative interaction in the same session.

4. 8% of revenue had a shared email with a Talkative interaction by looking at the CRM.

While these numbers seem positive, there could be many factors at play.

The 3.3% overall increase in sales is worth ~£16K/month.

The company tried various A/B tests and found that, all else being equal, customers that were offered chat converted 1.5% more, which equates to approximately £7.5K per month.

B. Cost Savings

Overall agent time spent handling all interaction types actually went up by 5%.  No new hires were made.

No cost savings.

C. Cost to Deliver Service

5% increased cost, even though no new hires were made, we can assume the following additional cost.

Current monthly all-in cost of 10 sales support staff: £30K/month

Additional cost of 5% added overall work: £1.5K/month

Software = £500/month

Total monthly ROI: £7.5K + 0 - £2K = £5.5K positive 

Or, as a ratio, 3.75 ROI = 275% return

The takeaway: calculating ROI of your digital engagement

So there you have it - our take on how to calculate the return on your digital customer channels. 

Still, when it comes to this topic, we always think it’s best to consider the long-term and your customer experience overall. 

Your website, app, and social media channel are no longer a static billboard for your products and services. 

These days, your digital touchpoints are a hugely crucial part of your customer journey. 

And if you sell anything online and attract customers to your site, you’re going to attract questions too. 

So, what’s the best way of ensuring you answer those questions and turn those interactions into sales? 

Getting Talkative. 

Book your demo today, and learn how you can increase your sales and service success by getting Talkative. 

Engage more customers in just three minutes

Get your weekly three minute read on making every customer interaction both personable and profitable. Sign up to the Talkative newsletter now.

Smiling customer on a smartphone

Ready for the future of customer service?

Download The 2024 Inner Circle Guide to Chatbots & Conversational AI

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.