ROI of Customer Education: How to Calculate the Value Effectively?

ROI of Customer Education: How to Calculate the Value Effectively?

As a new CSM, do you want to learn how to calculate the ROI of customer education? If yes, this blog is specifically designed for you!

ROI of Customer Education
ROI of Customer Education

There’s no denying the fact that customer education has now become an integral part of every SaaS business. For any SaaS business, customer education is not just about explaining to customers the tough technical details about the SaaS product. It is no more only about differentiating one’s business from that of the competitors. Now businesses are utilizing customer training platforms to deliver exceptional experiences throughout the customer journey.

But, managing customer education as a core business operation is not enough. Measuring Return on Investment (ROI) to educate customers is equally important. If your content or other customer education efforts do not bring your organization’s ROI standards, they need to be modified until the result is achieved. So, you need to educate yourself about calculating the value of customer education for your business.  

The idea of educating customers and then calculating the ROI thereof may seem overwhelming at first. But, it should not be so. Therefore, we have created this comprehensive write-up about calculating ROI on customer education. If you are a new CSM who wants to learn the calculation of ROI of customer education, then this blog is specifically designed for you!

Why Measuring ROI on Customer Education is Important?

You might have a question about the importance of measuring ROI on customer education. So, before we proceed with explaining the ways of measuring ROI, let us have a small discussion as to why we need to measure ROI on customer education.

Knowing Effectiveness of Your Training Program – It takes a good amount of time, money, and effort to create a customer training program. If you don’t have any mechanism to measure the effectiveness of your training program, you might end up wasting your time, money, and effort on useless stuff. Measuring ROI will let you see whether your training program is effective and doing the task it is designed for.

Allocation of Limited Resources – Most of the training managers in the SaaS industry have to work on a limited budget and other resources. If they don’t know which part of the training brings more return, they won’t be able to allocate budgets justifiably. If some part of customer training brings more results as compared to others, they deserve to be provided more budget and attention. This is possible only when you measure ROI on customer education.

Step by Step Guide to Measure Customer Training ROI

Now that we know that it is imperative to measure customer training ROI let us proceed toward the steps involved in measuring it. Measuring ROI for your customer training program need not be a complex task. So, we have broken the entire process into three easy steps for you.

Step 1: Find Out Existing Relevant Customer Success Metrics

For measuring the ROI of your training program, you do not need to start from scratch. You can begin your effort of measuring the ROI with the metrics already available within your business. When you talk to leaders of different departments of your organization, you will know that dozens of metrics are used repeatedly to see customer behavior and judge your business performance. The format of these data may not be exactly the way you need them, but they can be adjusted to suit your needs.

You may benefit from the following pre-existing reports and data from different departments of your business –

  • Repeat purchase
  • Incremental purchase
  • Complimentary or cross-product purchase
  • Support renewals
  • Number of raised tickets or support calls
  • Customer satisfaction ratings
  • Mentions on social media

The above-given list is not an inclusive one. You can check and gather other data that may be relevant to your needs.

Step 2: Evaluate the Metrics based on Trained versus Untrained Customers

Once you have collected different metric reports from various departments of your organization, it is time to evaluate them. To do this, you first need to segregate data based on trained and untrained customers. Any Learning Management System (LMS) can easily provide data about the customers who utilized your training platform.

After segregating the data based on trained and untrained customers, you can easily compare them. For example, you can compare the number or percentage of repeat or incremental purchases done by trained and untrained customers. If the percentage of trained customers doing repeat or incremental purchases is incredibly higher than that of untrained customers, your training program can be said to be working fine. But, if there’s no significant difference between those percentages, you might need to revise your training program.

Step 3: Calculate, Analyze and Predict Customer Training ROI

In the final stage, it’s time to turn your evaluation into measurable units. You need to calculate ROI in numbers. This figure can be achieved by subtracting the cost of training by the total benefit of training and then dividing it by the cost of training.

Once you got the customer training ROI in numbers, you can compare the figure with your organization’s average return on investment. This way, you can see if your training programs generate as much revenue as they ideally should.

You can make the practical changes required in your training program and module based on your current position. And, then you can accordingly predict your future ROI, set your goals, and then measure your progress accordingly.

If you can numerically show the return generated on the investment in customer training, you can confidently request additional funds for customer training if you need. You will no more be seen as a cost center for the organization.

[Note: The above-given steps can be utilized only when you have been running your customer training programs for a while now.]

The Three Stages of Customer Education Evaluation Result

The above-mentioned three steps can be used to calculate and evaluate customer training ROI. But, there’s a big pitfall. Customer Training ROI cannot be properly estimated at the beginning of the training program. You need a minimum of 6-months for your training program to show effective and measurable results.

Keeping this in mind, customer education evaluation results can be divided into three stages. These stages are based on the time frame after you launch your customer training program.

First Stage: First Month to Sixth Month

Within the first six months of launching your customer education program, you do not need to bother about measuring ROI. Start slowly and just pay attention to the courses and programs for which customers are registering. Courses that get more registration indicate the knowledge gap where customers need support.

Paying attention to course enrolment and registration in the first six months gives you an idea of what topics attract customer attention. You may use this information to allocate resources and invest more in areas that attract more customers.

Second Stage: Sixth to Twelfth Month

The second stage requires you to shift to the next level and evaluate your performance. The first stage shows you the areas where your customers are interested. Once you have that data, you should spend your next six months evaluating whether your course module satisfies customers’ needs.

For this purpose, you can see if the number of tickets raised by customers has decreased. If not, your course module may not be fulfilling customers’ needs. You can check if the product adoption rate has increased at this stage. If not, you might need to see where your course module lacks.

Third Stage: Twelfth Month and Beyond

Your calculation of customer education ROI can go on at full speed from the third stage. This is the point from which you need to measure and evaluate your customer training program on various yardsticks and Key Performance Indicators (KPI).

Now you need to measure and evaluate everything from enrolment rate to retention and upsell and cross-sell rates. This is the time when you need to evaluate your performance in the short-term as well as long-term.

Final Thoughts

Customer education is important for every SaaS business. And equally important is the evaluation of the performance of customer education and customer training programs. Customer training has become so crucial for SaaS businesses that they need to be included in core business operations and not seen as a cost center where the business only needs to spend. It is important to measure the return customer training programs can generate for the business in numerical terms.29

You do not need any fancy setup or extra investments to measure the customer education ROI. This can be done simply by putting a little extra effort into analyzing existing data from a little different viewpoint. ROI of customer education should be treated as the returns on any other marketing and advertising efforts.

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