As a business, we know that customer experience is one of the primary driving factors of business growth.
But, why is it so important and how do businesses actually analyze consumer experience in a quantifiable manner?
Let’s see how you can deploy the customer experience metrics mechanism and develop a profitable business.
- What is customer experience?
- What is customer experience (CX) metrics?
- Why do brands measure customer experience?
- Various types of CX metrics
- Futuristic methods of measuring customer metrics
- Tips for conducting good CX metrics
What is customer experience?
In simple terms, customer experience is an amalgamation of all the interactions that client has with the brand including various aspects of business viz. marketing, quality, sales, customer service, etc.
In essence, CX (customer experience) KPI contains within itself every interaction of the customer, no matter how brief even if it doesn’t end in a purchase. All that matters is that a customer or a potential customer engages with a brand.
Customer service on the other hand is a part of the wider ambit of customer experience. Effective and efficient customer services are pivotal for an organization because they form the first interaction between the brand and the end user, and it plays a huge role in developing a positive customer experience.
For example - The My Jio app for Jio SIM users in India is a customer service that is one part of the bigger umbrella of Jio’s customer experience.
What is customer experience (CX) metrics?
Customer experience KPIs’ data includes human factor data in relation to the brand. These metrics are a structure of numbers that are used to collect data regarding the customer experience so as to improve in that area.
Customer metrics represent the feedback of the customers in numbers that point to the gaps between our expectations and customer engagement with our brand.
The CX KPIs are highly intricate methods of gauging customer experience and satisfaction that can be executed to grow as a business.
Why do brands measure customer experience?
Customer experience as a whole is one of the best methods to retain customers as it is a data-driven approach. The metrics, in turn, directly help in identifying the areas where you lack as a business.
An effective collection of CX metrics data helps you to understand the tools, techniques and processes that you need to apply to improve according to what the data is saying about the customer.
63% of the business owners and companies say that CX metrics matter more to them than any other factor for customer retention.Zendesk
One of the primary reasons that these businesses cite is the settled principle that it’s better economically to retain customers and make them loyal to your brand than to aim for new customers every time.
Various types of customer experience metrics
Different organizations across the globe and industries follow their own set of protocols and standards to ensure customer satisfaction.
We are sharing some common CX metrics to get started with the journey.
1. Net promoter score (NPS)
A brand’s growth mainly depends on how loyal its customers are.
One of the most popular and easiest ways to understand is to ask your customers a very simple question - How likely will they recommend a brand's product and service to other people?
You can set up a rating system like 1-5, ranging from 1 being the least likely and 5 being the most likely. Then the formula to collect NPS from this set of data is to remove the neutral voters and subtract the percentage of the detractors from that of the promoters.
It will give you your NPS score. A score above 0 is good, above 20 is better and above 50 is excellent.
Elon Musk says that, for them; customer satisfaction and experience is a priority.
Now we know why Tesla has an astonishing NPS score of 96!
2. Customer effort score (CES)
An individual’s interaction with your customer service should be seamless. This is why it is pertinent to inculcate CES scores in your data analytics report.
CES involves asking your customers the question - How easy was it for you to interact with our brand?
The metrics to ask CES are by giving options: Easy, moderately difficult, and Difficult. The formula to calculate your CES score is to remove ‘the moderately difficult’ ones and subtract the percentage of ‘Difficult’ respondents from the ‘Easy’ ones to give the CES.
CES is comparatively a new and upcoming customer experience KPI.
3. Churn rate
In simple terms, churn rate means the number of customers who have stopped using your products or services.
Calculation of customer churn rate involves counting the total number of lost customers or the percentage of lost customers within a defined time period.
An acceptable churn rate is only 5 – 7%, it is a great benchmark to restrict your loss of business value to 7% of annual business.
For example, if you have a customer base of 1000 clients and churn rate is 5% the loss in value in terms of churn rate is 50 customers.
4. Retention rate
Churn rate and retention rate are two highly related metrics for customer experience’s key performance indicators.
While, on the one hand, the churn rate includes the number of customers lost; the retention rate means the number of customers retained.
The primary reason to actively work on retaining customers is that it is more economical for a business. It is established that loyal customers are 5 times more likely to repurchase your products. They are 4 times more likely to refer your brand to other people and 7 times more likely to try your new offerings.
For example, if your churn rate is 7% out of 1000 customers then your retention rate would be 930 customers i.e. 93%.
5. Customer lifetime value (CLV or LTV)
As the name suggests, CLV or also known as LTV – lifetime value; is a CX metric that involves calculating a reasonable amount of revenue that a customer will generate in their lifetime of future relationships and interactions with the brand.
This customer experience metric involves predicting a customer’s lifespan with the brand in a reasonable manner and then calculating that number with the amount of revenue a customer can generate.
A CLV is a highly subjective metric for customer experience KPIs because it varies from industry to industry.
How to calculate Customer Lifetime Value?
Customer Lifetime Value (CLTV) = Average Sale Value x Average Customer Lifespan
For example, Average Sale Value is $100 and Average Lifespan is 12 months, so Customer Lifetime Value will be $1200.
6. Customer satisfaction rate (CSAT)
CSAT is one of the most popular customer experience KPIs. Customer satisfaction rate means how many customers are satisfied with your brand’s products or services.
It considers every purchase interaction that the customer has had with the brand and then employs the formula for CSAT.
The easiest way to calculate the CSAT score is to calculate the percentage of satisfied customers calculated against the total number of customers.
CSAT score above 75% is considered to be an ideal customer satisfaction rate.
Formula for CSAT % is:
CSAT % = Total number of satisfied customers / Total number of responses x 100
For Example, you have 50 satisfied customers out of 70 responses then your customer satisfaction percentage (CSAT) is 71.42%.
7. Customer maintenance cost (CMC)
Customer maintenance cost is a CX metric that involves calculating the total cost a business has to incur to maintain a customer.
In simple terms, customer maintenance cost indicates the minimal cost that the businesses will have to bear to maintain customer experience through customer service.
Another facet of CMC is that businesses should always try to find techniques and methods that reduce customer maintenance costs without hampering the customer service standards. It is a complex process that requires high diligence.
Futuristic methods of measuring customer metrics
(CX) automation inculcates within itself certain technologies that prove as an assistance to the customers in common tasks. These tools are capable of reducing human effort.
The brand uses CX automation tools as a medium of communication with customers. These CX metric automation tools can be your social media account, website, customer service tools, or support.
The main purpose of CX automation tools is to improve efficiency, faster response times, increase engagement, increase retention rate and improve overall customer experience.
Tips for conducting good CX metrics
Each organization has a set of rules and techniques while communicating with their customers.
They then impart these to the new hires and the teams focus on customer experience.
Below are the common tips to achieve good CX metrics.
As a business, it is impertinent to deploy CX metrics consistently from time to time. The best way to improve your consumers’ experience is to be consistent with your CX metric methods.
Deploying CX metrics in your business in a consistent manner will help you identify your business’s weakness and strengths. This will further enable you to stand the test of time when the economic factors are not in your favor.
The dynamics of consumer preferences, consumer psychology, and market principles keep on changing, thus it is important to look for CX metrics with consistency.
The data that is collected through CX metric deployment should be done transparently.
For a business to develop into a profitable endeavor, it becomes relevant to share your data with all the people who are working for you.
This enables them to develop an understanding of who their customers are, and how they have to function in order to keep their customers happy.
Customer service is not always a fruitful endeavor.
You might come across customers who hear no reasons, regardless of the matter.
At such times, you have to stick to your end goal – customer satisfaction, and bring your team members onboard with the same values.
4. Presence of mind
Presence of mind benefits extensively in the long run.
It is the art of dealing with angry customers that you should master to have good CX metrics.
In addition, your metrics should be made available to all the departments of concern so that they can improve by applying their presence of mind at individual levels.
5. In-depth industry know-how
The in-depth understanding of the customers and industry helps everyone to dedicate more effort towards their customers.
Plus, the data driven approach helps the employees to apply their knowledge in an effective and efficient way.
Answering some frequently asked questions about customer experience and its metrics.
How often should I measure CX metrics?
The frequency purely depends on your customer lifecycle and how often they engage with your brand.
However, it is recommended to monitor them at regular intervals, such as monthly, quarterly and even yearly to evaluate your overall performance as a brand.
Is customer experience cross-functional?
Absolutely. Your customer service team is not the only one responsible for delivering good experience.
From product development to marketing, sales and even admin departments contribute to customer experience.
Does pricing matter in customer experience?
Yes, definitely. The right pricing is crucial for CX. If you price your product lower than the industry, you might get more sign ups, combined with doubts on the quality. If you price it higher, then you might be asked to justify it with more offerings.
That’s why the right pricing, so that the customer understands the value you provide, is crucial.
The modern paradigm of the market says that customer satisfaction and experience should be the priority for any business. Consumers pay equal importance to their experience that they pay to the brand’s products and service.
The reason behind that is now the consumers aren’t merely purchasing a product or service but rather an experience. They experience what you are as a brand, and then they choose whether they should keep on purchasing with you or not.
A company having the best products and services in the market will fail if they aren’t up to the mark in its customer experience segment.
We recommend you to explore the CX automation tools and hire a customer experience consultant to stand out in the industry.
Tell us in the comment box – Do you consider customer experience as a part of your purchase decision? According to you, what are the most important CX metrics as of now?