How to Calculate the ROI of Customer Service Knowledge Management

Getting your company to invest in a new customer service tool is a significant first step, but the real work begins afterward. You must prove to the leadership team that the tool is valuable and deserves continued investment. This means demonstrating the return on investment (ROI) of customer service knowledge management (KM), showing how it contributes to the company’s overall success, not just improves customer service.

To effectively demonstrate this ROI, you should connect the tool’s performance to the company’s broader goals. Highlight how the tool impacts things like increased sales, reduced costs, and improved organizational efficiency. Aside from anecdotal reports, let the numbers speak by calculating CS metrics for return on investment. 

But how exactly do you calculate the ROI of customer service knowledge management software? You need to know the standard formula and key performance indicators (KPIs) to measure. Below, we break it down into a few simple calculations you can use to keep senior leadership invested in your KM platform and optimize your ROI over time.

1. Learn The Basic Formula for Knowledge Management ROI

Before we discuss the specific calculations that make up the ROI of knowledge management in customer service, it’s essential to examine the basic formula.

Investopedia defines the calculation of the ROI as “dividing the profit earned on an investment by the cost of that investment.”

When you apply this to knowledge management in customer service, the formula looks like this:

ROI =  (monthly knowledge management savings- monthly maintenance cost)/
  monthly maintenance cost

Here’s an ROI calculation example. Say your monthly savings tied to knowledge management were $42,000, and your monthly maintenance cost for your KM platform was $1,500.

ROI= ($42,000 – $1,500)/$1,500  

  ROI=  $40,500/$1,500=$27

In this example, your return on investment is $27. This means for every $1 your senior leadership invests into your knowledge management system, they get a return of $27. That’s a 2700% return on investment!

If you could share a simplified ROI breakdown, your senior leadership wouldn’t need time to consider keeping your KM platform within budget.

However, there’s a lot more that goes into the ROI of knowledge management in customer service.

2. Identify the KPIs of Knowledge Management in Customer Service

Within knowledge management, you should track a few key performance indicators (KPIs) regarding customer service. By monitoring and understanding these metrics, you can better understand your overall ROI and improve customer support.

Let’s look at some crucial KPIs you should track, broken down into customer and customer support team KPIs. Just remember, each of these KPIs indirectly impacts your ROI. Calculating these will help you accurately estimate the ROI of your knowledge management in customer service.

For Customers

• Average handle time: AHT is the average duration your customer support team takes to help solve a customer’s inquiry. The quicker your agents can find information, the faster they can solve the problem.
• First contact resolution: This is the number of customer inquiries solved within the first contact. Rather than agents regularly transferring calls when they don’t know an answer, they can search for answers in your KM platform and improve your company’s FCR.
• Average hold time: This is the average amount of time customers spend on hold over a phone conversation with CS. The faster agents can find the information they need to assist customers, the less time customers will have to wait on hold.
• After-call work time: It takes CS agents to complete after-call tasks like writing notes about the interaction, scheduling follow-up actions, or updating the knowledge base.

For Customer Support Teams

• Time savings: Customer support teams are at the frontline of every company. When you can reduce their time on customer inquiries, you save the company time and enable your agents to assist more customers. You should be tracking the total time spent on each query. Reduced time per user leads to reduced labor and increased ROI.
• Ticket or Call Deflection: In addition to an internal knowledge base for your customer service team, you can offer your customers a robust external knowledge base. With greater self-service, more customers can find the answers they need directly on your website. This will naturally result in fewer calls to your contact center, giving agents more time to resolve complex issues and optimize the customer service experience.
• Overall NPS and CSAT scores: Your NPS—or net promoter score—is a simple tally of customer feedback responses. Just subtract the percentage of detractors from the percentage of promoters, and you have your NPS. Another similar scoring method is CSAT—or customer satisfaction score. To calculate this, divide the number of happy customers (4 or 5 out of 5 ratings) by the total number of responses.

The customer experience management market is valued at $13.4 billion in 2023, with projected growth of $47.83 billion by 2032. This significant value forecasting makes customer service a worthwhile investment, meaning its profitability measurement exceeds usual metrics. It now covers KPIs of tools that improve agent productivity and efficiency, such as the knowledge management system for customer service.

3. Highlight Knowledge Management Key Targets

In addition to tracking the growth in your customer service KPIs, showcasing the significant improvements in your knowledge management goals is imperative. Specifically, you can make a strong case for keeping your KM platform around and getting the budget you need by showcasing the enrichment in consumed for locating information, employee retention, and work productivity. To check the changes in these knowledge-sharing metrics, consider the following actions.

a. Measure the Reduction in Time Spent Searching for Information

Customer expectations are rising regarding response times. A whopping 60% of consumers consider a response time of fewer than 10 minutes to be the hallmark of “good” customer service. This underscores the need for businesses to prioritize speed and efficiency in their customer interactions.

While these numbers may seem high, it’s not all that shocking when you consider your own experiences. Like you, your customers are busy with dozens of distractions vying for their attention every moment. 

Sitting on hold could significantly impact their perception of your organization and your team’s competency. If a provider’s CS reps can’t give you the answers you need quickly, are you sure you can trust them with your data and needs? That’s the same question your customers ask themselves whenever they sit on hold while your team struggles to find information.

However, a KM platform that makes all content searchable will allow service reps to quickly locate answers to customers’ questions and concerns, often without needing to hold time. This fosters better customer experiences, which, over time, can lead to better retention, greater value per customer, and more significant ROI.

How to do it?

The best way to measure a reduction in search time for customer service reps is to calculate your department’s average hold time and average time to resolution before implementing a KM platform. Once your reps have gotten ramped up on the platform, you can measure your department’s average hold time and average time to resolution again. 

If you can show a reduction in the average time it takes your reps to assist customers, that will help you make a solid case for your C-suite that your knowledge engagement software is yielding a return on investment.

b. Monitor Improvements in Onboarding New Hires

Your organization’s onboarding process is critical to employee success and the overall success of your organization. Yet effective onboarding is rare. 

A BambooHR study highlighted the significant impact of effective onboarding. It revealed that employees who experience a robust onboarding process are 18 times more likely to be dedicated to their employer. This heightened commitment leads to improved employee retention and decreased turnover costs.

Furthermore, a bad onboarding experience doubles the chance an employee will start job hunting. This shows how a poor first impression can linger, quickly leading to disinterest and, ultimately, them leaving the company. 

And just as retaining customers is less expensive than chasing new business, keeping employees long-term is more cost-effective than continually training new talent. This is another crucial area of your business where a KM platform can shine.

What to do next?

Instead of a one-week crash course in your company (during which new hires will only retain a fraction of what you share), you can give customer service employees the ability to learn as they go. While this might seem like a strategy that will increase training time, it will actually help you decrease onboarding training time, among many other benefits. 

Not only will they have essential information that sets them up for success (like the answers to commonly asked questions), but they’ll also have access to tacit knowledge and subject matter expertise.

The result? Better employee morale, better company reputation, and, yes, better ROI. And showing results in these areas will undoubtedly improve leaders’ confidence in your platform.

c. Calculate Productivity Savings

Happier, more empowered employees don’t just stay with their employers longer—they’re also more productive and profitable. According to Gallup data, highly engaged teams drive a 21% increase in profitability.

Conversely, unhappy employees cost companies as much as $282 million annually for median S&P 500 companies. This study highlights the significant costs associated with employee turnover and disengagement.  Losing valuable employees not only creates a financial strain but also leads to substantial productivity losses.

A knowledge management platform will help support productivity and ROI by giving your customer service team the tools they need to provide a more efficient, streamlined customer experience. When employees feel prepared, they’ll be able to solve problems and answer questions faster—which means shorter call times and more calls per day.

Bonus: Difference Between Hard and Soft ROI

To provide a holistic view of your platform’s value, you must track both hard and soft returns on investment. We’ll explain the differences below.

Hard ROI

Hard return on investment refers to quantifiable benefits with a specific financial value. For example, you may discover that having a KM platform cuts down on call time, increases the number of daily calls handled per employee by 15%, and saves the company an additional $500,000 annually.

Soft ROI

Soft return on investment refers to benefits that aren’t as easily quantified but still offer value. For example, you may find that your knowledge-sharing platform boosts employee morale, which results in better customer experiences.

While most senior leaders want to see hard ROI data, including a few soft ROI points to illustrate the platform’s more holistic value to your organization is helpful.

Making a case for investing in a knowledge management platform can seem difficult. But once you’ve learned how to calculate the return on investment by monitoring the right metrics and aligning your results with organizational goals, the value will be crystal clear.

Measuring ROI Beyond Cost Savings

In customer service, knowledge management is a strategic investment with returns that go beyond cost efficiency. It’s about empowering agents, optimizing resources, and fostering a knowledge-sharing culture that drives continuous improvements. Use the insights above as a practical guide to calculating and maximizing the benefits of knowledge sharing, paving the way for exceptional customer experiences and sustainable business growth.

This blog post was originally published in March 2020. It was most recently updated and expanded in November 2024.

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