The success of a brand hinges on how satisfied its customers are. The ideal way to understand customer satisfaction is to measure customer experience metrics. They’re the window to your customer’s perception of your brand and reveal sentiments like potential referrals, the likeness of the brand/product/service, and how likely they are to become and remain loyal.
What are Customer Experience Metrics?
Customer experience metrics, often referred to as CX metrics, are quantitative measures that assess various aspects of a customer’s interaction with a brand. These metrics are essential for gauging customer contentment, loyalty, and overall brand perception.
By tracking and analyzing CX metrics, businesses can iterate their strategies to better resonate with their target audience. For instance, while a business with low customer satisfaction scores may need to improve its customer service or product quality, a business with low brand loyalty scores may need to invest in more marketing and branding efforts.
Why should businesses measure customer experience KPIs?
By measuring business-relevant metrics, brands can understand their customers better. It allows them to deliver exceptional customer services, stand out from the competition, and improve their overall products and services, eventually moving the needle in their business.
For instance, a software company could track customer effort scores to identify challenging areas in the software’s usability. The company could use this information to improve the user interface and make the software intuitive. Here are a few more benefits of measuring customer experience metrics:
- A better understanding of customers: With data-driven insights, businesses can understand their customers well, fill in the satisfaction gap, and improve their likeability and bottom line. 86% of buyers are willing to pay extra for an exceptional customer experience. Notably, PwC research reveals that the more expensive the item, the more inclined they are to do so. For instance, customers willingly pay a premium of up to 13% (or even 18%) for luxury and indulgence services simply because of the exceptional customer experience they receive.
- Measure the impact of change: Once a business has implemented a new strategy or changed its product or service, it can track CX metrics to see how customers respond. This information can be used to determine whether the change was successful and to make further adjustments as needed.
- Analyze customer experience trends: Tracking CX metrics can help businesses identify trends in the customer experience. For instance, a business may notice that customer satisfaction scores are declining. It could be due to slow response to their queries for which they can embed AI-powered Chatbots that assist customers 24×7.
- Improved Customer Loyalty and Retention Rate: Happy customers likely become loyal patrons and brand advocates, contributing to long-term profitability. For instance, a restaurant could track customer feedback to identify areas where it can improve its food, service, or atmosphere. The restaurant could use this information to improve the customer experience and retention rate.
7 key CX metrics
1. Net promoter score (NPS)
NPS is a streamlined approach to understanding and improving customer sentiment. The metric is used to analyze customer satisfaction with the product or service by asking a single question: “On a scale of 1-10, how likely are you to recommend this product/service/company to your friends or colleagues?” Customers are then classified as promoters (scores of 9 or 10), passives (scores of 7 or 8), and detractors (scores of 0 to 6).
Why should brands track NPS?
NPS is an important metric to track because it strongly predicts future business growth. NPS is also a good way to identify areas where a company can improve. For instance, a company with a low NPS score may need to improve its customer service or product quality.
How to Calculate NPS?
NPS is calculated by surveying customers to understand their likelihood of recommending the business/product/service on a scale of 0-10. the responses are then categorized into three groups:
- Promoters (score 9-10): They are highly satisfied and enthusiastic about your offerings, often leading to positive word-of-mouth recommendations.
- Passives (score 7-8): Passives are generally satisfied with your product or service but lack the zeal of promoters.
- Detractors (score 0-6): Detractors are dissatisfied customers who may have encountered issues or concerns with different aspects of a business, such as product quality, customer service, pricing, or other elements of their interaction with the company.
NPS can then be calculated by using the following formula:
NPS = % Promoters – % Detractors
For instance, if you have 70% promoters and 20% detractors, your NPS is 50%.
What can businesses do to improve NPS?
- Providing excellent customer service
- Offering high-quality products and services
- Making it easy for customers to do business with you
- Addressing customer concerns
2. Customer Satisfaction Score (CSAT)
The Customer Satisfaction Score (CSAT) is a valuable metric to assess customer satisfaction with a particular interaction, product, or service. Typically collected through post-interaction surveys, it often features questions like “How satisfied are you with your recent experience?”
Why should brands track CSAT?
CSAT can provide valuable insights into customer perceptions of products, services, and interactions. For instance, a low CSAT score may indicate dissatisfaction with the quality of the product, the level of customer service, or the overall experience. A high CSAT score, on the other hand, indicates higher customer satisfaction and a higher likelihood of recommendation.
How to Calculate CSAT?
To calculate CSAT, divide the number of customers who indicate satisfaction by the total number of survey respondents and multiply the result by 100. This formula yields a percentage score that quantifies the level of satisfaction among your surveyed customers.
This score can serve as a baseline for assessing and improving specific aspects of your customer experience. The formula for CSAT can be represented as:
CSAT = (Sum of Individual Satisfaction Ratings) / (Total Number of Responses)
How can brands improve CSAT?
- Conduct regular CSAT surveys to track progress over time and identify new trends.
- Segment customers and send targeted surveys. It will ensure more accurate feedback and identify areas of improvement for different customer groups.
- Use different ways to collect feedback. It could include surveys, email feedback forms, and social media.
3. Customer Effort Score (CES)
Customer Effort Score (CES) is a metric used to evaluate the ease with which customers can complete a specific task or resolve an issue. It is typically measured by asking customers to rate the ease of their experience.
Why should brands track CES?
Brands should track CES to find the areas for improving CX. For instance, if a business has a low CES, customers are having difficulty when seeking assistance. It could be due to several factors, such as long wait times, complex customer service processes, or lack of knowledge on the part of customer service representatives.
When customers find it easy to accomplish tasks or resolve issues, they are more likely to positively perceive your brand and remain loyal. According to Gartner, 96% of high-effort service interactions lead to increased disloyalty, in sharp contrast to the mere 9% resulting from low-effort interactions that foster loyalty.
How to Calculate CES?
CES is calculated by surveying customers in real time after they purchase or interact with the business. CES is typically measured on a scale of 1 to 7, with 7 being the highest and 1 being the lowest. A CES score of 7 indicates that customers found it very easy to get their issues resolved. A CES score of 1 indicates that customers found it very difficult to get their issues resolved.
CES is calculated using the following formula:
CES = (Number of customers who agree or strongly agree that it was easy to get their issue resolved) / (Total number of customers surveyed)
How to improve CES?
- Be responsive to customer inquiries
- Be empathetic and understanding
- Resolve customer issues quickly and efficiently
4. First Response Time (FRT)
First Response Time (FRT) is the average response time to a customer’s inquiry. It is one of the most important customer service metrics, as it can significantly impact customer satisfaction and loyalty.
Why should brands track FRT?
FRT can enable brands to identify gaps in customer service. For instance, if a brand has a high FRT, it may be because it does not have enough customer service representatives or because it is not properly trained.
It can also be tracked to analyze the impact of a new initiative, like using AI-powered chatbots or comparing customer performance to competitors.
How to calculate FRT?
To calculate the First Response Time, sum up the response times for all customer inquiries and support requests and then divide this total by the number of responses received. This calculation yields the average time it takes for your business to provide an initial response to customer queries. Monitoring and optimizing this metric can help enhance your customer service processes and ensure timely assistance for your customers.
Average FRT = (Total FRTs during that hour) / (Total number of resolved tickets during that hour)
How can brands improve FRT?
- Have sufficient resources allocated for customer service
- Improve customer care representative’s knowledge about products and services by providing training and resources they need to respond to inquiries quickly and efficiently
- Respond to inquiries on all channels, including phone, email, social media, and chat
5. Churn and Retention Rate
Churn and Retention rates are pivotal metrics in evaluating customer engagement and loyalty. Churn Rate signifies the percentage of customers who discontinued your product or service within a specific time frame. Conversely, the Retention Rate gauges the percentage of customers you successfully retained.
Why should brands track churn and retention rates?
Churn Rate serves as an early warning system, drawing attention to customer dissatisfaction and the potential loss of revenue. A high Churn Rate indicates that customers are disengaging from your brand, which can impact your bottom line.
Conversely, a high Retention Rate signifies a robust and loyal customer base, which can lead to sustained business growth.
How to calculate churn and retention rates?
Churn Rate and Retention Rate are essential metrics for measuring customer retention and attrition within a given time. Here’s how to calculate them.
Churn Rate Formula:
Churn Rate is the percentage of customers lost during a specific period. The formula for the Churn Rate is:
Churn Rate = (Number of Customers at the Beginning of the Period – Number of Customers at the End of the Period) / Number of Customers at the Beginning of the Period
Retention Rate Formula:
Retention Rate is the percentage of customers you have kept during a specific period. The formula for Retention Rate is:
Retention Rate = [(Number of Customers at the End of the Period) / (Number of Customers at the Beginning of the Period)] x 100
How to reduce churn and improve retention rate?
- Personalize communication and marketing campaigns
- Introduce loyalty programs
- Keep an open line of communication, even with inactive customers
- Use predictive analytics to identify customers who may be at risk of churning.
6. Customer Lifetime Value (CLV)
CLV is a predictive metric that estimates the total monetary value a customer is anticipated to generate throughout their entire engagement with your brand. It takes into account multiple purchases, interactions, and potential referrals.
Why should brands track CLV?
Beyond just providing a monetary estimate, CLV serves as a guiding star for long-term customer relationship strategies. It informs decisions about how much to invest in customer acquisition, retention, and loyalty programs. By understanding the potential value of different customer segments, businesses can make informed decisions about where to focus their efforts for sustainable growth.
How to track CLV?
To calculate CLV, sum a customer’s total revenue over their entire relationship with your brand. This includes all purchases, subscriptions, and any referrals they may bring in.
Understanding CLV is essential for creating strategies that nurture customer relationships and maximize their value over time, ultimately contributing to the business’s long-term success. The basic formula for CLV is:
CLV = (Average Purchase Value) x (Average Purchase Frequency) x (Customer Lifespan)
Where Average Purchase Value is the average spending per purchase, Average Purchase Frequency is how often customers make purchases, and Customer Lifespan is the average duration of the customer relationship.
For example, if an e-commerce store has an APV of $100, an APF of 4 times per year, and a CL of 5 years, the CLV for a customer would be $2,000. It means the business can expect to earn $2,000 from that customer over their entire relationship.
CLV calculations can become more complex in real-world scenarios, considering factors like customer churn and discounts. Businesses often use advanced models to calculate and utilize CLV for marketing and budget decisions.
How can brands improve CLV?
- Offer loyalty programs and rewards
- Provide excellent customer service
- Personalize the customer experience
- Make it easy for customers to do business with you
7. Visitor Intent
Visitor Intent measurement involves categorizing visitors into specific categories, such as informational, transactional, or navigational. This categorization identifies the primary reason behind a visitor’s interaction with your digital platform.
Why should brands track visitor intent?
Visitor Intent goes beyond basic metrics and reveals customers’ underlying motivations when they visit your platform. It answers questions like “Are they seeking information?” “Do they intend to make a purchase?” or “Are they simply navigating through the site for general exploration?” This knowledge empowers you to optimize content and features accordingly, improving the user experience.
How to calculate visitor intent?
There is no one-size-fits-all formula for calculating visitor intent. However, several factors can be considered, such as keywords, pages visited, time spent on the site, and more.
How to improve visitor experience?
- Make sure your website is easy to navigate
- Use relevant keywords throughout your website
- Create high-quality customer-centric content
- Use calls to action (CTAs) to tell visitors what you want them to do
- Personalize the user experience
Final words
Customer experience is directly tied to your brand’s success. Each of these metrics tells a different story, and it’s ideal to combine several metrics to get a complete picture of your customer’s satisfaction with your brand.
Finally, periodically tracking and analyzing CX metrics will allow brands to identify the most effective marketing and communication channels and customer motivations, enhance customer experience, create targeted campaigns, and, most importantly—reduce churn rate and improve retention rate.
