Key Takeaways
- Customer service is becoming increasingly expensive, while draining companies’ revenues.
- Better knowledge management is the key to substantially reducing CS costs.
- A smarter AI-powered knowledge base improves AHT and FCR rates, while also providing better customer experiences.
- A small investment into a better knowledge management system will quickly pay off with ROIs that continue to grow every year.
Why Customer Service Costs Keep Rising and Where the Knowledge Gap Fits In
For most businesses, customer service is a costly hassle. CS doesn’t drive revenue, and at best prevents customer churn, but is absolutely essential for any company selling products and services. Ideally, an operation should be looking to reduce customer service operational costs whenever possible.
Unfortunately, the opposite tends to be true: customer service costs keep going up, eating further into companies’ profits.
Why? There are several big reasons:
- As knowledge bases continue to grow, searching them for answers becomes more difficult, driving up average handle times (AHT).
- Customers are more impatient, expecting instant solutions and demanding freebies for even minor inconveniences.
- Customers are also more willing to change companies in response to bad CS, leading to high levels of churn and the need for more costly customer-retention strategies.
- Training new hires can take weeks, in a department that typically sees much higher turnover than other areas of a business.
- Poorly-trained agents giving incorrect answers to complicated questions, reducing first-call resolution (FCR) rates.
- Complicated ticketing and documentation processes that slow down CS workers.
As a result, even a well-optimized CS system in a large company can easily cost 5% of revenues. Smaller companies, or those with poor CS, can see their CS eat up 10% or more of their revenues.
However, there’s a solution: Better knowledge management. All of these issues can be mitigated with a smarter AI-powered knowledge base. Properly implemented, a modern KB can lead to significant customer service cost reduction.
The Hidden Cost of a Weak Knowledge Base
Poor CS stemming from a weak knowledge base is endemic across numerous industries. According to numbers compiled by Zendesk:
- 60% of service workers say that a lack of access to customer data leads to poor customer experiences.
- 30% of agents say they struggle to access necessary information.
- 40% of agents report customers becoming angry if they can’t self-solve problems.
- Customers will start looking for other companies/providers after only two poor CS experiences.
- More than half of customers with a bad CS experience won’t even bother to complain; they’ll just switch to a competitor.
In other words, the cost of poor knowledge management is real. When CS agents are unable to do their jobs quickly and reliably, customers will quickly notice and look for other options. Customers also want more ability to do things for themselves, without having to deal with CS at all.
Considering that new customer acquisition is typically at least five times as expensive as customer retention, the cost-benefit analysis is clear. Relatively small investments into better knowledge base systems can lead to significant contact center cost reduction AND improve customer retention as well.
7 Ways a Smarter Knowledge Base Reduces Customer Service Operational Costs
A smarter, AI-powered knowledge base can bring across-the-board improvements to your customer service operations.
As a few examples:
1 – Smarter Call Routing
Customers hate being transferred between multiple departments, or having to repeat their information multiple times. AI systems can look at the customer’s account, past call history, and other provided information to make highly accurate predictions about where to route calls. This reduces workload, as well as reducing customer stress.
2 – Easier Information Discovery
AI agents can parse your entire knowledge base, as well as other information sources such as email chains, to provide comprehensive answers to natural-language questions. Or, they can act as a smarter search engine, referring human agents to the best KB articles to get a job done. Either way, workers spend less time searching for information.
3 – Automated Ticket Handling
Much of the busywork of creating and documenting tickets can be offloaded onto AI systems. This frees up CS agents to focus on taking calls, meaning more people overall available to answer phones and reducing hold times – another major pain point for customers.
4 – Reduced Training Times/Costs
When your knowledge management system also includes integrated onboarding and training systems, you get a twofer: your new hires train on verified information straight out of the KB, while getting hands-on experience with the same software they’ll be using on the job. This could potentially slash training times by 50% or more, while creating better agents.
5 – Self-Serve Portals
Many customers would rather avoid contacting CS at all, if they can help it. By integrating AI-powered self-service customer portals, you can open up parts of your KB for customers to utilize. They can look up information for themselves or even – potentially – use the self-serve system for simple account management tasks such as updating phone numbers. The cost benefit here is obvious: you aren’t paying for calls that customers don’t make.
6 – Improved Management
Proper forecasting is critical when trying to reduce customer service operational costs. The more accurately you can predict call volume on a given day, the easier it is to ensure proper staffing – enough agents to handle the calls, without letting them sit around getting paid for nothing. AI-powered KMS provides robust data analytic features that make cost-focused management easier to achieve without reducing customer experiences.
7 – Reduced AHT and Improved FCR
Perhaps most importantly: a smarter knowledge base will improve your two most important call metrics. Empowered agents will be able to resolve customer problems more quickly, and more often on the first call. This is the ideal for a well-run CS system, where every call is resolved using the minimum amount of time. You win and the customer wins.
How Do You Calculate the ROI of Your Knowledge Base Investment?
In general, the formula for calculating ROI looks like this:
ROI = ((Total Gains – Total Investment) / Total Investment) * 100
The investment side is, of course, the cost of the new knowledge base. Total gains can be calculated by comparing some key before-and-after metrics measuring the effectiveness of the new system. These would include:
- Overall drop in call volume, and resulting cost savings
- Overall reduction in call times as cost savings
- Cost savings from self-serve deflection rates preventing calls
- Reduction in customer churn, in terms of customer acquision cost savings
- Managerial efficiency – such as staffing numbers – before and after
Add up your cost savings, plug them into the formula, and there you go.
Or, for a quick “back of a napkin” estimate for potential cost savings from a modern AI-powered knowledge management system, KMS Lighthouse has an ROI calculator that only takes a minute or two to run, based on our own customer success stories.
What Should You Look for in a Knowledge Base Built for Contact Center Cost Reduction?
There are five key features you want in a new KMS,
- AI-Powered Search: AI is becoming a necessity for quickly searching and summarizing rapidly-growing knowledge bases. Agents should be able to instantly get the information they need.
- Real-Time Content Updates: No matter how large your operation, any new verified information added to the knowledge base should instantly be available across all offices and departments.
- Self-Service Capabilities: Let customers do as much for themselves as is realistically practical. Every call handled by a chatbot on the website results in huge cost savings compared to a CS call.
- Robust Analytics: You need proper oversight to manage a call center while reducing costs. Your KMS should have robust data-gathering and AI-powered analysis to aid in business decisions.
- App Integrations: Be sure your new KMS can integrate with all the software tools you already utilize, such as Office 365, Zendesk, or AWS. Look for MCP compatibility as well for integration with other AI apps.
Frequently Asked Questions
Numbers vary depending on industry, ranging from $5-$10 at a bare minimum to $100+ for highly specialized or technical fields. No matter how much you’re spending per call, a better knowledge base will lower AHT and improve FCR, reducing those numbers.
Almost immediately. A new KMS can be implemented in an afternoon with minimal retraining needed. Then the first time an agent asks the system a question and instantly gets the correct answer, your cost savings begin.
Cost reduction refers to implementing policies and procedures that decrease the costs for each call. Cost avoidance means there are no significant costs at all, such as when a customer utilizes a self-serve portal rather than calling CS.
Knowledge base cost savings can extend to both, although it’s best to reduce calls entirely, from a cost-savings standpoint.
In short: Add up all your cost savings, subtract the investment costs, then divide that by the investment costs, and multiply the result by 100.
This ROI calculator makes it easy to work out the basics.
Absolutely! In fact, smaller organizations typically tend to see higher CS costs as a percentage of their revenues. A growing business that implements a powerful KMS early on will see substantial CS cost savings over the years, giving them a leg up on competitors.
In Conclusion: Reduce Customer Service Operational Costs With Better Knowledge Management
Your CS department shouldn’t be any more of a drain on your revenues than is absolutely necessary. Implementing a better AI-powered KMS will bring nearly instant cost savings across the department, while also improving knowledge-handling operations in other aspects of your company as well.
Businesses around the world trust KMS Lighthouse to make this happen! We have a proven track record of success, cutting CS costs and improving customer experiences thanks to our cutting-edge AI-driven knowledge management tools.
Contact us to learn more, or just schedule a free demonstration.
