Measuring call center costs
Tutorial Series

Module 1 - Determining the cost of providing customer service

The Call Center Learning Center is proud to present a tutorial series focused on measuring the cost of customer contacts in a call center. This three-part tutorial series will pull from Prosci's research-based toolkits and best practices reports. This module addresses how to determine the cost of providing customer service.  Module 2 will identify principles for benchmarking your center's cost metrics.  Module 3 will conclude the series with methods to improve your cost metrics.
 

What are cost metrics?

Cost metrics provide information about the expenses associated with each customer contact.  Cost metrics can be calculated in order to:

1. Determine the cost of providing customer service
    
2. Identify how different variables raise or lower costs
    
3. Compare the cost-effectiveness of different communication channels
    
4. Establish benchmarks, both internally and externally, that can be used to compare against other companies

The cost calculations listed below present three options for measuring cost per transaction or cost per minute.  The type of cost measurement you choose will be dependent on the requirements and objectives of your customer service center.

Cost metrics can include:

• Cost per call
   
• Cost per contact (applies to email, fax, IVR, textchat, etc.)
   
• Cost per minute

Each of these three cost metrics will be addressed in this module.

Average cost per call

Average cost per call is calculated by taking the fully-loaded costs for your customer service center and dividing by the total number of calls within a specified period of time.

The calculation for average cost per call is as follows:

In the calculation, "V" equals total call volume and "T" equals total costs to operate a customer service center.  These costs can include:

• Payroll and benefits
  • Managers
  • CSRs
     
• Overhead
  • Building and facilities
  • Maintenance
     
• Network/long distance charges
   
• Equipment
  • Software
  • Hardware
  • Technical support
     
• Capital expenses
   
• Human resources
  • Recruiting
  • Hiring
     
• Outsourcing
   
• Networking

Cost per contact

Cost per contact is an adaptation of cost per call calculations, and is used for alternate contact media.  To figure cost per contact, take the cost per call calculation and simply substitute the numbers for each contact channel used.  Email, fax and IVR costs per contact calculations are as follows:

As more communication channels are added, it becomes more difficult to separate out operating costs by channel (more information on this will be available in Module 3). 

Cost per minute

An alternative to cost per contact calculations is cost per minute.  Cost per minute provides several benefits, including:

• It can be used regardless of the different contact channels implemented by your customer service center.
   
• This calculation allows customer service centers to benchmark across industries and against other centers with different handle times.

The calculation of cost per minute includes the following variables:

T = total cost to operate a customer service center within a specified timeframe

WL = workload: total minutes of agent service, within a specified timeframe (handle time in minutes * call volume)

The following example demonstrates how this calculation can be adapted for multiple contact channels:

Determining the best method for your call center

The differences between cost per call and cost per minute are more clear when these two cost metrics are applied to the same set of data (See Table 1).  Because this metric is broken down into minutes, rather than contacts, it factors out the need to benchmark only with those centers that have similar handle times.  Table 1 demonstrates how cost per call can be dramatically different between the two centers, whereas cost per minute is only slightly different (difference of $7/call vs. $0.25/minute).  Labor costs will contribute to the differences in the cost per minute measure.

The best method for you to use to measure costs in your call center depends on the cost data you have available and the number of different contact channels you use in your center, in addition to the objectives and requirements of your call center. 

Still to come

Now that you know how to conduct cost measurements in your call center, it is important to understand how to benchmark your measurements and how to improve your cost performance.  Stay tuned for the remaining two modules in this tutorial series to discover this important information.

If you would like to begin measuring, benchmarking or improving your costs immediately, take a look at the recommended resources below to help you get started or email an analyst with your questions.