Customer Experience
Article written by Mathew Maniyamkott
Regular contributor to various magazines. Passionate about entrepreneurship, startups, marketing, and productivity.
17 min read
31 May 2024
How well do you truly understand your customers? Decoding these actions is pivotal in a world where every click, like, and share can signal a customer’s sentiment. Customer experience isn’t just about making a sale; it’s about understanding the journey behind it. By diving deep into crucial metrics, we gain numbers and narratives.
There has never been another time when customer experience had been as necessary as now. Providing exceptional customer service no matter the kind of obstacles that you face is imperative. It is impossible to survive without having a customer experience strategy in place. If you cannot keep them happy, satisfied, and delighted, they will go to someone who plans to keep them that way.
Let’s look at 6 major customer experience metrics that can transform your business insights from guesswork to game-changing. But, before that, let’s start with the basics.
Customer Experience (CX) Metrics are measurements businesses use to gauge how well they are meeting the needs and expectations of their customers throughout all stages of the customer journey. By tracking these metrics, companies can identify areas for improvement and measure the success of their customer experience strategies.
Measuring customer experience (CX) is paramount for businesses as it directly impacts customer retention, financial performance, and brand reputation. In an era where products and services can be quite similar across competitors, a superior customer experience can be a decisive differentiator.
Continuous assessment of CX provides invaluable feedback, enabling businesses to adapt to evolving customer needs, foster innovation, and ensure long-term growth. Moreover, positive experiences can propel word-of-mouth referrals, while identifying areas of dissatisfaction allows for timely rectifications, ensuring businesses remain relevant and esteemed in the eyes of their clientele.
It’s time to know your customer service metrics and play alongside them. We have listed the six crucial customer experience metrics you should know.
It is one of the most important customer experience metrics because it shows the probability of a customer recommending your product to their friends and family. It is a simple metric to judge for both the customer and the company.
Here is what the NPS question looks like:
“How likely are you to recommend our product to a friend or a family?”
The answers are given based on a scale of 0 to 10, with 10 being the highest. The higher the number, the more likely they will recommend the business to others.
The respondents are divided into three groups:
Promoters– They respond with a score of 9 or 10. These customers are not only your most loyal customers but also the ones who will promote your brand to everyone with great enthusiasm.
Passives– They respond with a score of 7 or 8. These customers stay with you because you meet their minimum expectations and will churn as soon as they see a better option.
Detractors– Respondents who give you a score between 0 and 6. These customers have had negative experiences with your brand, so they say they will not recommend it to anyone else. They will go out of their way to discourage others from buying from you.
One of the biggest advantages of using NPS to measure customer satisfaction is that it is simple. It can be used at all stages of a customer’s journey. It is also an indicator of the company’s overall experience and helps you to segment your customers who will be churning and the ones who are on the verge of leaving you. Even finding out your loyal customers is a huge advantage as you can get them to be a part of your loyalty program to reap greater rewards.
Your NPS score can range anywhere from -100 to +100.
Any score above 0 is considered good. But there’s a catch, though: your score and its relevance depend on the industry that you are in.
Since NPS is a leading indicator of growth, it is a great metric that you can use to learn about customer experience. Use NPS with other metrics to gain insights across various points in the customer journey.
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Customer Satisfaction Score is the most popular transactional metric out there. How? Because it asks a customer who has just completed a transaction how satisfied they are with it. Since the interaction is fresh in the customers’ minds, they are more likely to give the most accurate representation of what they have in mind. CSAT is highly customizable and flexible according to the needs of the business.
While we would suggest you keep a simple survey, you can also ask a series of questions and then take an average of the scores to get a final CSAT score. Giving an open-ended question lets your customers tell you which part they were satisfied or dissatisfied with.
The CSAT question would be like this:
“How would you rate your satisfaction with the services you received?”
Respondents are given the following scale:
The results from different respondents are then averaged to get a composite CSAT score. CSAT scores are expressed as a percentage scale.
CSATs are often used after a customer interacts with a live agent. It helps measure the latest interaction your customer had with one of your agents. You can also use it to see if there are employees who need more training on how to handle customers based on the survey score.
CSAT is also great to use, especially when you are making incremental changes to your product. Track results using the CSAT score. Ask your customers how they felt before the change and how they feel now. If they feel there is a difference, then send them a question where you ask them an open-ended question.
CSAT, like NPS, is a measure of customer satisfaction. Its effectiveness depends on what you do with the score in your hand. The scores should be used with other research so that you can take effective action to improve the various areas in your business pertaining to customer satisfaction.
It is a purely transactional metric used to measure customer experience, and it only assesses the effectiveness of a single solution. In simpler words, it measures how much effort a customer has to exert when trying to get an issue solved, get a product purchased, get a reply from a customer service executive, etc. The idea of CES is that customers are more loyal to a business where the service or product is easier to use.
Finding an answer for this metric is pretty simple as it asks a straightforward question, and the answer is also simple. Instead of asking a customer how satisfied they are, you ask them to rate the ease of their experience during a particular transaction. You can ask the CES question for different circumstances and across all channels.
Here’s what a CES question will be like:
How easy was it to solve your problem with your company today?
The question is either asked on a five or 7-point scale.
CES can be used to track over time and is best for measuring customer loyalty. It should be used with NPS, as CES alone doesn’t fully explain what is happening. Why? CES is based on a single interaction, while NPS is all about the overall feeling of your customer towards your brand. If you were to concentrate only on the CES score where someone had one bad incident but is usually fond of the company, then it gives you the wrong picture.
When to use Customer Effort Score?
After an interaction with a customer service agent: Using a CES after an interaction with your support staff is one of the most common places at which it is used.
It is best to send CES surveys only at specific touchpoints. There is no specific score for CES, but a higher score indicates that you don’t let your customers go through a lot of trouble. A positive CES score means your customers find the product or service user-friendly.
It is the percentage of customers who stop being your customers or cancel their subscriptions (if it is a recurring service). It measures how happy and satisfied you keep your customers because the ones who are happy will not leave you, while the ones whose expectations are not met will surely leave you. It is the opposite of the retention rate.
The churn rate is an important metric for companies that have customers who pay on a recurring basis.
Let’s calculate the churn rate for a SaaS company that acquired 1,000 customers in the first quarter. The company lost 100 customers because of poor customer experience policies, or they found better products that were more suited to their budget. So, the churn rate can be calculated by dividing the number of customers lost (100) by the 1000 customers who were acquired in the quarter.
So, 100 divided by 1000 is 0.10.
Customer Churn Rate= 10%
You can calculate your churn at different time frames- monthly, quarterly, bi-annually, and annually. Calculate churn rate even during specific promotions to measure the success of it. You can also measure churn rate by customer type, subscription plan, and the specific stage at which the customer was in the customer journey.
Customer Churn Rate is the percentage of customers who you lost in a period of time. Revenue churn is the percentage of revenue you have lost in a month.
If your Revenue Churn Rate is negative, you are gaining revenue that month.
Here’s another thing that we would like you to know: Customer Churn is not equal to Revenue Churn. Why? Because there are different lines of products whose prices are not the same. With revenue churn, you will be able to gauge the financial performance of your company, while customer churn will help you figure out why customers are leaving.
Customer Lifetime Value is the worth of a customer to the business over their entire lifetime. This metric helps brands understand how much money they should invest in marketing, acquisition, and customer experience. Each customer’s value is linked to the ROI of the investment in customer experience activities as well as the revenue of the company.
While CSAT, NPS, and CES are great customer experience metrics to track, if there is one thing that tells the brutal truth, it is the revenue at the end of the day, which you get only from calculating CLV. If you spend truckloads of money on customer experience but you have nothing to show on the revenue front, then you are not helping yourself.
CLV is the best metric that you can use for long-term planning for your business. It helps you identify high-value customers and gives you scope to increase the value of your other customers. Also, CLV is based on legacy data which means that it will help you with planning. You will know where to invest your precious marketing budget and what things you need to boost margins.
When you judge your customer experience through CLV, it helps you find opportunities that can improve your current customer experience strategy. Think of CLV as a diagnostic tool. It provides financial health and the value that a product provides, which are things that can be used for making decisions.
CLV is dependent on the average customer lifespan and the estimate of future profits. Customer lifespan is the amount of time in which a customer purchases from your business. Measuring this will depend on your revenue model. As in, do you have recurring payments made by customers, or do you have a one-time fee and yearly upgrades?
If you are a subscription business, then the average customer lifespan is calculated according to the churn rate.
Next is finding out expected revenue profits. For a subscription-based business, your future revenue depends on how well you decrease the customer churn rate. If your business is in the retail sector, where the purchasing decisions do not happen at regular intervals, then you need to approximate the value of your future transactions.
Having loyal customers is incredibly alluring for brands. You can do so much with the help of loyal customers. You can track this metric by measuring how often people return to make another purchase. Loyal customers are always known to come back and purchase from you again because they liked the experience of buying from you and are also satisfied with the product. In this time and age when a million brands are vying for users’ attention, finding loyal customers can be a game-changer for your business.
Also, getting a new customer is 3-4x costlier than keeping an existing customer. Your old customers who are satisfied with you will be more than happy to pay a premium for your products. They will be easier to close when you try to upsell or cross-sell your products.
Having a customer loyalty plan in place will help your case, too, if you are bent on improving the existing relationship with your customers and not just including them in something to make it look exclusive. Maybe there were times when you could buy the loyalty of your customers with freebies, discounts, incentives, and so on.
While customers are not averse to the concept of getting incentives, it takes much more than that to get repeat purchases from them these days. Today’s customers are driven by what is relevant to them. They want highly personalized products and are not shy about asking from you.
You can only deliver personalized products by using data-driven technology to drive your loyalty platform. Some of the most powerful loyalty programs in the world today thrive because they offer extra value to their customers by finding data on an individual level, understanding motivations, behaviors, triggers, and so on.
Instead of having stand-alone loyalty programs, create ones that can be used to enhance the customer experience. Create loyalty programs within the context of the user journey. Include free consultation time, discounts, personalized offers, incentives at specific touchpoints, and so on. It is all about sending relevant messages to your customers based on the data that you have.
Do you have to measure all these metrics? Of course not. All you need to do is find out which ones are the most relevant to you. Lumoa’s State of Customer Experience Report says that companies average 2.5 customer experience-related KPIs. For your business, find the most relevant business KPIs; based on this, you can find the customer experience KPIs. Here are some of the other customer experience metrics you can consider: Social Listening, Referral Rate, Cart Abandonment Rate, Stock Price, Task Completion, Churn Rate, First Contact Resolution, etc.
Strong customer experiences are driven by having a close relationship with your customers and understanding them after a series of deliberations. If you don’t point key customer experience metrics into contention, you won’t be able to get the full picture of the progress you make in the game.
Remember that no single metric will define your company’s customer experience success. Many variables are involved, which will help you draw actionable insights. Don’t rely just on these actionable customer experience metrics; make sure that you combine them with human insights that will give you a view of your customer journey and the steps that you can take to improve it.
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