Want to Reduce Customer Service Costs? Do these 5 things.

Customer service is a $350 billion dollar industry1. But even though companies are funneling all of this money into customer care, it still represents a substantial business risk: poor customer service is losing businesses $62 billion per year2.

Why is this? Companies are struggling to manage the increasing number of tickets on an increasing number of channels. As a result, customers’ expectations for convenient, effortless support are not being met. This leaves customers frustrated enough to stop doing business with a company – which 82% of people report having done in the last 12 months. When you consider, it costs companies 5X more to attract a new customer than to retain customers, the economic impact of underperforming customer service departments is even more significant.

Because customer service now represents a real business risk, companies have to address the shortcomings with urgency. They have two choices: hire many more agents or find a more creative solution.

The opportunity is now for AI to help reduce customer service costs across the landscape 

Increasingly, the creative solution that companies of all sizes are adopting is artificial intelligence (AI). AI is the most cost-effective way to scale high-quality customer service as it allows companies to automate resolutions to repeatable tickets, while simultaneously boosting agent productivity. McKinsey has reported that 29% of customer service agent duties now have the potential to have automated customer service with technology.

Leveraging human and AI agents is the best way to improve customer service operations while not growing the resources devoted to customer service.

Five Ways AI Can Reduce Customer Service Costs

1. Reduce Agent Attrition:

Customer service has one of the highest attrition rates of any industry, with turnover rates between 30-40%3. This is because human agents: 

    • Report feeling stressed, and are on the lower end of the compensation spectrum  
    • Are dealing with increasingly frustrated customers who are harder to please 
    • Have to access many complex systems concurrently to resolve tickets
    • Are under increasing pressure to resolve more tickets faster

With agent turnover rates high, companies are drowning in resources related to hiring and training replacement workers. According to the Society for Human Resource Management, “the organizational costs of employee turnover are estimated to range between 100% and 300% of the replaced employee’s salary4.” The cost, though, goes beyond dollars spent towards interviewing, hiring and training. Companies also see customer satisfaction (CSAT) fall when the agents are new, bringing less consistency and increasing resolution times. With reports that it takes up to eight months to get a new hire working at full productivity, the impact on CSAT is measurable4.

Reduce Customer Service Costs

Agents and managers alike report seeing employees more fulfilled with AI in the workforce. AI can manage the mundane, repetitive tasks, enabling the agents to focus on high-touch activities that require high-level thinking. As a result of leveraging AI, it’s anticipated that there will be a decrease in agent attrition.


“AI takes tasks away from agents, not jobs” – Gartner


2. No Costs associated with new hires.

Companies that leverage AI to scale customer service efforts will save on hiring new agents to manage the increased volume and 24/7, omnichannel demands of the modern customer. The average salary for customer service agents is $35,437 in the U.S. (5) The cost of an employee, though, is not solely a salary. You also have to consider: 

    • Employment taxes: Employer-paid Social Security and Medicare taxes for a $35K salary are $2,677 annually, and this doesn’t include State, Federal or Local taxes. If a company hires 1,000 additional agents to manage increased demand, the tax bill could easily exceed $2,677,5006
    • Benefits: Health and other benefits average $2,000 for an individual, and $6,000-7,000 for a family7
    • Office space: Furnishing an 8′ x 8′ cubs runs $2,000 at a minimum7.
    • Equipment: Computers, software seats, phones over $2,0007.

For new hires, there are also costs associated with paid time off, sick days and shrinkage, which quickly increases costs associated with new hires.

3. Proactive customer service gets out in front of issues:

Leveraging predictive analytics, AI can help companies anticipate issues before they happen. By acting on signals from back-end systems like logistics, CRM and order management systems, an AI Agent can preemptively reach out to intervene before a customer opens a ticket, which has an associated cost. Examples of issues which AI can anticipate include issues with a delivery, i.e. it is delayed due to a weather event, rebooking a person on a flight who is stuck in traffic (this requires access to individual contextual signals), or letting a person knows than an item in their order is now out of stock.

Over a 12 month period, proactive customer service can lead to a 20-30% reduction in call center calls — lowering call center operating costs by as much as 25%8.

Offering proactive service also helps keep CSAT high. Customers will think that companies are looking out for them, even if delivering undesirable news like a delayed delivery. Based on the specific circumstance and profile of the customer, companies may also want to offer an incentive or reward in-the-moment to keep the customer happy.

4. Decrease First Reply and Resolution Time:

AI Agents can resolve over 50% of tickets within seconds, without any human intervention. For other issues, AI can recommend responses to human agents or pull data from various systems to help agents make a decision faster. This decreases resolution time significantly, which equals cost savings. McKinsey reports that if companies reduce average handle time by up to 40%, employee costs can be cut by up to $5 million9.

5. Offer Competitive-Edge Service:  

After a bad customer service experience, 39% of customers will avoid a company for two years. On the other hand, customers are willing to pay up to a 16% price premium on products and services for good customer service (10). This also leads to increased loyalty and future spending. By simply providing convenient, effortless support on a person’s channel of choice, companies can directly impact bottom-line revenue. When thinking about superior service, companies need to think omnichannel. Leverage a single AI brain across customer support email, chat, messaging and voice (an emerging support channel) to offer anytime, anywhere support.

AI can now successfully perform knowledge-based work. It can help companies reign in excessive customer service costs, while also scaling higher-quality support that incentivizes long-term loyalty and repeat purchasing.

Companies that weren’t born digital are going to take twice as long to implement digital innovation (i.e. AI) into their organization. Whether you’re first looking to implement AI or are further along, Netomi’s AI is easy to implement with very no risk and no retraining.

Special Offer: Can we run a free analysis of your data to see what percentage of customer service tickets we could automate with AI? Get in touch.

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Emily Cummins

PR and Content Writer

Emily has worked in the AI industry for many years. She loves researching and writing about evolving trends in AI in customer service. She graduated from the College of Charleston.

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