Providing a positive customer experience is crucial for today's brands, but it can be difficult to determine the success of a CX strategy.
Customer experience metrics are critical to gauging that success. There are a variety of metrics that brands should measure, however, so it's important to understand each option to determine which metrics to prioritize.
The importance of customer experience metrics
There are many activities a company can do to ensure a positive customer experience, such as having dedicated representatives to service customers' needs, regular email communication with new updates or offerings, customer referral programs, and incentives and customer appreciation offers. After having those in place, it's imperative to know whether those strategies are making a difference on revenue, customer satisfaction and sales.
Acquiring a new customer can often cost up to five times more than retaining an existing customer and increasing customer retention by only 5% can lead to significantly higher profits. For example, if a company can decrease its churn rate by 25%, it could hit its revenue targets without selling any new business at all. That is a powerful concept for business leaders that are planning their growth strategies.
CX teams should use a combination of many different customer experience metrics to get a deeper understanding of CX success and identify areas for improvement.
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One challenge that CX teams often deal with is the ability to identify which customer experience metrics to measure, when to measure them and why they should measure them. Let's take a look at seven customer experience metrics and what they measure.
Net Promoter Score
The Net Promoter Score (NPS) is a widely used metric when it comes to measuring the loyalty of customers to a company. To collect this information, organizations issue a single-question survey where respondents assign a number value between 0 and 10. This customer perception of your brand is measured with one question: "How likely is it that you would recommend [company/product/service] to a friend or colleague?"
Respondents get organized into three buckets:
- Detractors (score of 0-6). These unhappy customers have the potential to tarnish a brand through word of mouth or online through social media and other means.
- Passive (score of 7-8). These are generally satisfied customers, but they are vulnerable to offerings from other competing companies in the industry.
- Promoters (score of 9-10). These customers are extremely satisfied and loyal enthusiasts who continue buying from a brand or even provide growth opportunities from their referrals.
NPS is calculated by subtracting the percent of detractors from the percent of promoters.
To collect the data, companies can send out their NPS surveys using different companies or survey tools, such as those from Qualtrics, SatisMeter and Retently. It is always best to send an NPS survey within 30 days of a new customer acquisition and then, again, every three months to customers. This will help CX teams gain potentially actionable insight throughout the customer journey.
Like NPS, the customer satisfaction (CSAT) score is also calculated with data collected from surveys. Whereas NPS is used to measure how likely a customer would refer a peer to a company, the CSAT score asks a series of questions, all centered around rating the experience with the company's product or service. CX teams can let customers respond in ranges from 1-5 or 1-10. Companies can then calculate the average percentage of these survey responses.
A big advantage of using this customer satisfaction survey is that it can pertain to any interaction a customer has with a brand, making this versatile metric one that can determine the short-term changes in customer approval before or after different touchpoints. Some of the best times to perform surveys include leading up to a service, the recent launch of a new product and after services were rendered. Brands can often deploy CSAT surveys more frequently than NPS surveys.
Customer effort score
The Customer Effort Score (CES) measures a customer's experience with a service or product as it pertains to the overall effort required to use the product or service. A customer effort score can also gauge how likely a customer is to continue paying for that product or service. A seven-point rating scale from "very difficult" to "very easy” gives survey senders the ability to tailor these questions based on many variables. For example, CX teams can ask, "How much effort it was to get a resolution from customer service/support?" or, "How much effort did you personally have to put into onboarding or training your team?"
Businesses can deploy a CES survey in a few different areas:
- Immediately following an interaction with customer service.
- Immediately after an interaction with a product or service.
- Any time the company wants to measure the aggregate experience someone has with the brand, product or service in general.
Churn rate is a simple calculation that displays the percentage of customers who do not renew their contract or those who even cancel their contracts with a company in a given time period. Many companies with a recurring revenue business model care about churn rate because, as mentioned earlier, it is harder and more costly to acquire new customers than to keep existing ones.
Ideally, brands should constantly measure churn rate, but they should at least calculate churn rate on a quarterly and annual basis. This ensures that CX teams receive better forecast information for the periods following. If brands can predict customer churn from historical data, they can better plan customer marketing and retention activities against new business initiatives. There is an easy calculation for getting a churn rate, but first, businesses should make sure they identify the time period they want to measure against.
Customer churn rate = (lost customers ÷ acquired customers) x 100%
The retention rate of customers is the opposite of churn rate; it focuses on customers with a positive brand perception who are likely to stay with a company's service or product. This metric calculates the percentage of customers a company has retained over a given period of time. Retention rate is also a good predictor of brand loyalty, customer engagement and emotional connection to a brand.
These, often-annual, evaluations give the business good comparison data against the churn rate and start to paint a better picture for overall turnover.
Customer retention rate = ((# customers @ end of period - # new customers within that period) / # of customers at start of period) x 100%
Customer lifetime value
Customer lifetime value (CLV) is often at the top of the list of important metrics to measure as a growing company. This metric is the total revenue a business can reasonably expect from a single customer account. The longer someone continues to purchase from a company, the higher their lifetime value.
Throughout the customer journey, the company's customer support or customer success teams can have a direct effect on customer lifetime value by helping to solve problems or offering recommendations that encourage customers to stay loyal. This metric is also important for forecasting growth when combined with a company's retention and churn rates.
To calculate CLV, take the average purchase value -- for instance, an annual subscription -- and multiply by the average purchase frequency -- how many years the average customer renews for. Companies can get to the root of their lifetime value by averaging customer lifespan and then multiplying against the average deal size.
When creating a digital experience for customers, companies can't always greet them at the door and ask them what brought them there, but that information is still crucial. It is important to understand why customers are engaging with a brand and what they may be looking for. There are two types of intent: informational and transactional. Informational intent refers to someone coming to a site or store to learn something; transactional intent refers to someone who wants to perform a specific action, such as make a purchase or download something.
The easiest way to measure this is with single-question surveys that provide multiple answers a user can choose from. A very common question asked might be, "Which of the following best describes the primary purpose of your visit today?"
Finding out visitor intent can eliminate the guessing game a marketing team might perform as to why someone visits a website but also helps develop a better picture of the visitor's needs. This behavioral metric can help optimize a company's channel offerings.
How to turn metrics into results
Brands that have measured customer metrics should know how to use the information to create results. Sometimes there is science behind this -- just as there is science behind collecting the data -- but at the same time, brands still must build human-to-human relationships.
CX leaders should put themselves in the shoes of the customer and think about how the company can make overall improvements based on the data. A brand that received negative feedback about its onboarding or implementation process, for example, should spend time evaluating those pain points. If a company received negative feedback about a return policy, it should consider making widespread changes that could turn that opinion around for the masses. Even if a company gets positive feedback about a certain customer service representative, it should find out what that employee is doing and how they are creating such loyal customers to then begin implementing those strategies across the department.
CX teams that are interested in the science behind what to do with these numbers should look at them all together -- alongside what they mean to the business -- and see where the most opportunity for change exists to improve the customer experience.
A positive customer experience will lead to increased revenue from lower churn rates, more referrals, increased customer retention and higher lifetime value. Sales and marketing efforts should not end with the close of net new business; brands should focus similar efforts on the satisfied audience that has already chosen to do business with them.