The Financial Impact Low First Contact Resolution Is Having in Customer Experience


When McKinsey & Company talks about customer experience (CX), businesses should pay attention. They recently emphasized that contact centers must prioritize performance excellence by focusing on CX, cost optimization, and revenue maximization. CX encompasses all customer interactions throughout their relationship with a business, from initial awareness to post-purchase support. In today’s fiercely competitive landscape, customers say that the experience a company provides is as important as the product or service you offer. However, while 80 percent of firms believe they provide superior customer service, customers only agreed a mere eight percent of the time. Even worse, failing to deliver a positive customer experience puts you at significant risk of losing customers. Forbes reports that a staggering 96 percent of customers will leave a company due to bad service.

When it comes to measuring the success of CX, an important metric that businesses often utilize is called First Contact Resolution (FCR). FCR is a key performance indicator in customer service that measures the percentage of customer inquiries or issues that are successfully resolved during the initial interaction with a customer support representative or through self-service options. It plays a critical role in evaluating how efficiently and effectively a company’s customer service operations are performing. Companies must strive for an FCR rate of 80 percent or higher to be considered exceptional, while a rate below 70 percent is considered poor.

When your FCR rate falls below 70 percent, the financial impact can be devastating, especially when you consider that 96 percent of customers who are dissatisfied with the service they receive will leave for a competitor. The stakes have never been higher, and it’s time to focus on refining your customer service approach and prioritizing FCR enhancement.

Let’s thoroughly examine the importance of first-contact resolution for your business.

The Importance of First Contact Resolution 

In this era of self-service, customers are more inclined to resolve issues independently when possible. However, when they encounter more complex problems that require extra help, your customers have elevated expectations for prompt and effective resolution. The figures back this up, with Salesforce reporting that 83 percent of customers expect to solve complex problems by speaking to one person.

First contact resolution is a critical metric when it comes to evaluating customer satisfaction in the realm of customer experience. It reflects how well a customer service representative can address and resolve a customer’s issue during the initial interaction without the need for speaking to multiple agents, repeating information, or additional follow-ups. Customers value having their concerns resolved immediately, and improving FCR can improve customer perception. A 1:1 correlation exists between FCR and customer satisfaction scores (CSAT). What does this mean exactly? Well, for every one percent increase in FCR, your business can expect a one percent increase in CSAT.

Businesses that measure FCR have greater insights into whether they are handling issues effectively. They will also know which areas they can improve. When FCR rates are higher, it indicates that customer support is successfully meeting customer needs right from the initial interaction without the need for transfers, and it has a multiplier effect. According to Forrester, customers are 2.4 times more likely to stay when their issues are resolved quickly and ten times more likely to recommend when employees answer all customer questions. Elevated FCR rates also boost agent morale and productivity, provide a competitive edge, and lead to cost reductions.

A high FCR rate is critical for delivering a positive customer experience and improving business performance, but what is the impact of low FCR rates, and what’s causing it?

The Cause of Low First Contact Resolution Rates

If you’re wondering about the impact of low FCR rates on your contact center, the reality is far from favorable. Many customers have to contact support agents multiple times before their issues are finally resolved, leading to a sense of frustration. This frustration will grow if customers are transferred to different departments that operate on different communication platforms, forcing them to repeat their concerns over and over. Such blind spots lead to customer dissatisfaction, as they expect efficient resolution from a single agent, especially for complex matters. Unfortunately, this subpar customer service has far-reaching consequences. It results in fewer referrals, diminished customer loyalty, negative reviews, and affects revenue.

When faced with low FCR rates, businesses need to proactively address the underlying inefficiencies in their customer support process. However, it’s essential to first identify the root causes before implementing such solutions. Let’s delve into these factors and explore the reasons behind them.

  • Inadequate Agent Tools Resulting in Lack of Access to Data: One of the main factors that influence first contact resolution is the lack of customer information and comprehensive product or service data. Data plays a vital role in running an effective contact center as it provides helpful insights into customer preferences, enabling the delivery of a superior experience. Without a centralized system connecting front-line agents with back-office subject matter experts, agents may find themselves navigating through numerous applications or systems to access the necessary information. These blind spots can lead to errors, inconsistencies in customer interactions, and slower resolution of customer inquiries. Without a 360-degree view encompassing customer support requests, purchase history, and previous interactions with your business, it often results in transfers or the need for the customer to call again. 
  • Lack of Sufficient Agent Training: The impact of inadequate agent training can significantly impact your agent’s ability to handle complex calls, which can greatly reduce FCR rates, and will only be exacerbated if your company sells a complex product or service. Insufficient training will also lead to a decline in service quality and unsatisfactory customer experience, with agents relying on scripts and providing generic answers that fail to address the customer’s specific issue. This can lead to frequent transfers between agents, hindering the company’s ability to consistently provide high-quality customer service. As a result, customer satisfaction and retention rates will suffer. Poor training also contributes to a high turnover rate among agents. According to PR Newswire, 47 percent of managers identify high agent turnover and absenteeism as the most significant challenges while operating a contact center.  
  • Lack of Context: A lack of context can significantly impact both CX and FCR rates. When there is a lack of clarity about the customer’s journey and interactions with the brand across different touchpoints and channels, it becomes increasingly difficult to route them to the most suitable service agent. This can result in customer frustration as they are transferred between representatives who may not have the necessary knowledge or expertise to address their specific problems. Without a comprehensive understanding of prior engagements, including preferred communication methods and past interactions, agents struggle to provide personalized and efficient resolutions. It’ll leave customers feeling undervalued and misunderstood, eroding their trust in the brand. Neglecting to incorporate context into customer interactions jeopardizes your company’s ability to meet customer expectations and anticipate their needs, resulting in dissatisfied customers and potential loss of business. 
  • Complexity of the Call & Ineffective Routing System: Every person who calls your business has a unique need, and the complexity of their call directly impacts the likelihood of transfers or subsequent calls. When customer inquiries or issues are more problematic, it requires additional time and effort from agents to address them, especially if they lack context. This can lead to longer resolution times or customers contacting the support center multiple times. Difficult calls often involve multiple departments, adding to the complexity and increasing the potential for errors. The effectiveness of your call routing system also plays a role in FCR. Interactive voice response (IVR) systems direct callers based on their needs, product knowledge, language, and location, ensuring they reach the most suitable agent without unnecessary transfers. However, a poorly implemented IVR system can create bottlenecks and barriers that impede the seamless resolution of customer inquiries and reduce the likelihood of achieving “world-class” FCR rates.

Now that we’ve established the importance of first contact resolution and what’s causing low rates, it’s time to examine the financial impact it could be having on your business.

Low First Contact Resolution and the Financial Impact on Your Business 

Every interaction with a customer, whether it’s over the phone, email, or chat, carries a cost. The longer it takes to resolve an issue, the higher the cost incurred. When customer service agents cannot effectively address customer problems, valuable opportunities for upselling or cross-selling additional products or services are missed, leading to lost revenue. Recent data highlight the significant impact of poor customer service, estimating the cost to businesses ranging from $75 billion to $1.6 trillion annually, a substantial figure that will adversely impact even the largest contact centers.

Keep this in mind – the cost of a poor customer experience due to low first contact resolution is more than lost sales or angry customers – it can also significantly impact employee morale, company reputation, and long-term viability.

Let’s dive a little deeper to examine what makes up the high cost of poor customer service.

Increased Operating Costs 

If your business is looking to scale back costs, one of the first areas it should examine is the FCR rates of its contact center. A low FCR rate can result in increased company operating costs because of the need for additional resources to address customer problems that weren’t resolved in the first interaction. This can lead to a domino effect of longer call times, longer queue times, and increased customer wait times, all of which can lead to a decline in customer satisfaction.

When your front-line agents can resolve customer issues on the first exchange, there isn’t a need for follow-up interactions. This reduces the overall volume of customer contacts and the workload and resources necessary for customer support operations. It also frees your agents to focus on more complex tasks that might require extra empathy. It’s important to note that a mere 15 percent improvement in first contact resolution leads to a 57 percent drop in repeat call numbers!

Even minor FCR improvements can drastically reduce your operating costs. For example, a contact center employing 500 agents, each taking 100 calls per day, at a 70 percent FCR rate, working 20 days per month, costing $5.00 per call, translates to 50,000 calls daily. At that rate, your contact center experiences operating costs of $250,000 per day. With a meager one percent improvement in FCR rates, it can help you regain $15,000 each month and $180,000 each year! Now, imagine what a 30 to 50 percent increase could mean for your bottom line.

Increased Customer Churn

Another negative impact of low FCR is increased customer churn, which is defined as the rate customers cut ties with your business during a given period. If your agents can resolve customer issues quickly and efficiently during their first interaction, they’re more likely to remain loyal to your business. However, if your customers have to contact customer support several times to resolve their issue or endure multiple transfers before they get an answer, they might become frustrated and give their business to your competitor. Data supports that statement – 80 percent of customers who shifted to a competitor wouldn’t have left if their issue was resolved on the first contact.

Brand Damage

If increased operating costs, customer churn, and reduced sales opportunities weren’t bad enough, low first contact resolution could also impact your brand’s image, something you may have spent decades building. If your customers are forced to contact your business multiple times to resolve one problem, or they’re transferred between agents and repeating their information, they’ll grow increasingly frustrated. This can lead to a negative perception of your brand, and that frustration will cause them to lose faith in your organization, question its competency, and share their poor experience with friends, colleagues, or on social media. All of this can further reduce sales opportunities.

Poor Employee Experience (EX)

Low FCR rates and dissatisfied customers can have wide-ranging consequences for your business, including significant impacts on your employees. Customer service teams often face the brunt of customer frustration, leading to increased stress and burnout. Dealing with angry customers and recurring issues can result in dissatisfaction among support teams, contributing to high turnover rates and incurring costs for recruitment and training. As previously mentioned, many managers consider high agent turnover the primary challenge contact centers face.

Even worse, when employees spend excessive time resolving recurring issues, it leaves them with less capacity to handle complex tasks or those requiring empathy. As a result, work backlogs can arise, leading to potential missed sales opportunities. This cycle can further diminish employee satisfaction and productivity, ultimately impacting your bottom line. Low FCR rates and frustrated customers create a damaging loop that incurs financial losses and depletes valuable human resources.

Lower Repeat Sales Opportunities 

Data from Salesforce shows that 94 percent of customers are more likely to purchase again after a positive customer service experience. Delivering an elevated customer service experience has always been a point of emphasis for businesses. However, with the rise of online reviews and social media, organizations are under increased scrutiny to deliver a world-class experience. As was discussed above, low FCR rates can cause your team to miss opportunities to upsell or cross-sell, which can lead to a loss of sales and revenue for your company. Data from Zippia shows that 78 percent of customers have backed out of a purchase due to a negative customer experience, and 60 percent of customers would stop shopping with a brand they once loved due to several poor customer service experiences.

A Modern Approach to Improving First Contact Resolution

Are you concerned about the challenges your contact center faces? Are you currently searching for ways to improve your bottom line? What if we told you there was a way to reduce operating costs, churn, and improve sales opportunities, employee experience, and customer satisfaction? It might sound hard to believe, but it exists. There’s a modern solution that provides context to agents and equips them with a deeper understanding of the customer’s issue, leading to more personalized and effective service and improved CX, and you can learn about it by downloading our eBook.

By accessing our free eBook, A Modern Approach to First Contact Resolution, you achieve instant access and useful insights into the secrets modern contact centers are utilizing to improve their FCR rates and cut costs without the need for additional staff. It has the answers you’ve been searching for, and it breaks down how a potent combination of Unified Communications as a Service (UCaaS) and Contact Center as a Service (CCaaS) can provide quicker access to information, connect subject matter experts in the back office to agents in real-time, streamline communication channels, and improve efficiency, allowing customer service representatives to resolve issues quickly and effectively. Our eBook will guide you through the process of integrating these technologies and creating an exceptional customer experience. Don’t miss this opportunity to take your customer service to the next level.

Download the eBook A Modern Approach to First Contact Resolution.