Customer Experience KPIs
According to Zendesk’s 2021 Customer Experience Trends Report, 75 percent of customers will spend more to buy from a company that offers a good customer experience (CX). As such, it’s well worth the time and effort for businesses to invest in initiatives to improve their CX.
CX metrics are the key performance indicators (KPIs) that help businesses understand how satisfied and loyal their customers are. Tracking these metrics will help you gauge whether your customer experience initiatives are successful and identify areas for improvement.
The 8 Best Customer Experience Metrics to Track in 2022
Here are eight metrics that you can use to measure the impact of your customer experience management programs.
Net Promoter Score (NPS)
Net Promoter Score (NPS) is a widely used metric and has gained popularity since it was introduced in 2003 due to its transparent and straightforward methodology. It is estimated that two-thirds of Fortune 1000 companies use NPS to measure their customers’ satisfaction (Fortune).
NPS consists of a single survey question asking customers to rate the likelihood that they would recommend an organisation, product, or service to a friend or colleague. NPS typically uses a scale of 1 (not at all likely) to 10 (extremely likely). NPS surveys sometimes also include an additional open-ended question to provide additional context.
The NPS score is calculated by subtracting the percentage of detractors (those who scored between 0-6) among your surveyed customers from the percentage of promotors (those who scored a 9 or 10). For example, if 20 percent of respondents are detractors, 10 percent are passives, and 70 percent are promotors, your NPS score would be 70-20 = 50.
What is a good NPS score?
An NPS score below 0 indicates that your business has several issues to address. NPS scores between 0-and 30 are acceptable but suggest room for improvement. Companies with NPS scores over 30 are doing well and have more happy customers than unhappy customers.
NPS is valuable to measure CX and customer loyalty since it reflects a customer’s overall perception rather than that of a single transaction. It is often referred to as a brand or relationship metric.
Customer Satisfaction (CSAT)
Customer Satisfaction (CSAT) is another common and helpful metric a company uses in determining the level of satisfaction a customer has with its products, services, and brand. CSAT combines a customer’s positive and negative reactions after interacting with your product or service. This is generally gauged via a customer-completed survey done as close to the interaction as possible.
CSAT is typically measured using a scale of 1 (very unsatisfied) to 5 (very satisfied). CSAT is helpful to measure whether a customer is satisfied with a one-time interaction, such as customer support or customer service. To calculate your CSAT, divide the satisfied customers by the total number of responses and multiply by 100. For example, if 40 customers were satisfied out of the 50 responses received, your CSAT is 80%.
CSAT is simple to implement, and it’s typically easy for customers to respond to.
Customer Effort Score (CES)
Customer Effort Score (CES) measures a customer’s perception of the ease or difficulty of doing business with a company based on a specific transaction. This is important since 94 percent of customers report that encountering an effortless experience makes them likely to repurchase vs. only 4 percent of those whose experience required a high level of effort. (CEB)
CES surveys typically ask customers to respond to a statement such as “[Name of company] made it easy for me to handle my issue” using a rating system ranging from 1 (strongly disagree) to 5 (strongly agree). The CES score is calculated by averaging all of the responses.
(sum of responses) / (number of responses) = CES score
If your CES score is high, it means that you’ve provided an effortless experience for your customers. If it is low, it means that customers find your process to be difficult.
Customer Churn Rate
Customer churn rate measures the rate at which customers stop doing business with a brand or company. It is often expressed as the percentage of service subscribers who discontinue their subscriptions within a period of time. Understanding and addressing your churn rate is important because it’s generally much less expensive to retain existing customers than acquire new customers.
To learn more about the value of focusing on retaining customers download our whitepaper Customer acquisition vs. customer retention: a post-pandemic inflection point.
To calculate the churn rate, determine the specific period you want to measure, such as a month or a year. Next, identify the number of customers that churned during that period and divide it by the number of customers you had at the start of that period.
(Number of customers lost) / (Number of total customers started with) = Churn rate
It’s important to regularly analyse your business’s churn rate to determine whether it is increasing or decreasing, understand why you’re experiencing churn, and determine what you can do to reduce churn.
Customer Retention Rate
Customer retention rate measures whether a business retains customers during a specific period. It is the inverse of churn rate – the higher the retention rate is, the lower the churn rate is.
This metric is calculated by subtracting new customers from total customers at the end of the time being measured. Then, this number is divided by the number of customers at the beginning of the time being measured, multiplied by 100.
Customer Lifetime Value
Customer Lifetime Value (CLV) represents the total amount of money a customer will spend with a company or brand during their lifetime. An increase in a customer’s CLV results in increased customer retention, increased revenue generated per customer, and a reduction in the cost spent attracting new customers.
Voice of Customer (VOC)
Voice of Customer (VOC) programs capture your customers’ feedback about their experiences with and expectations for your products or services. This data is a powerful analytical tool made up of user behavioural data, recorded phone conversations between your frontline staff and customers, direct customer feedback, discussions on social media, and more. It can provide honest insight that can be used to solve previously unidentified problems and aid in identifying actions to take to improve products and services.
It’s crucial to assess where experience starts – with employees. Overwhelming research supports that enhancing employee experience directly enhances customer experience, with studies showing that companies with highly engaged employees outperform by up to 147 percent.
Ask your employees if they are satisfied with their jobs on a scale of 1 to 10. Generally, employees that are satisfied with their jobs will deliver better customer service.
Choosing the right CX metrics to track
Most large organisations with revenue of more than $1 billion (or the equivalent) use more than 50 CX metrics—some use as many as 200. With such an extensive list of possible metrics, how should you decide which CX metrics to track?
To decide on which metrics matter most in terms of relative impact on the customer, companies need to employ a 4-step process.
Step 1: Audit
The first step to evaluating which CX metrics to employ to enhance customer experience is to audit all the customer experience metrics currently being used across the entire organisation. The purpose of doing this is to find what is being measured, how each metric is calculated, and who is accountable for improvement.
A thorough audit will take you beyond the departments that first come to mind i.e., marketing, customer service, operations, sales, and supply chain. Keep in mind that digital commerce, HR, logistics, billing, procurement, and finance also track a variety of CX metrics that you should be analysing.
When your audit is complete you will have gathered a large number of metrics. It may feel overwhelming. To help make managing the data more manageable, most organisations will group the metrics into four categories:
- Customer Satisfaction
- Customer Loyalty/Retention/Churn
Step 2: Build a Hierarchical Dashboard
Different departments within an organisation tend to focus on different CX metrics. However, if a business is going to enhance or improve its overall customer experience, it’s important for personnel throughout the organisation to have visibility into the experience customers are having with all departments. By doing so employees will gain a complete understanding of the customer experience and how it may or may not impact their specific interactions.
To provide this bird’s eye view of the customer experience, companies should combine all the relevant metrics into a customer experience dashboard. A CX dashboard captures the entire customer experience from as many different viewpoints as possible.
These dashboards typically have one or two high-level metrics at the top that the operating committee are interested in, such as overall customer satisfaction score. They then waterfall down to include the operational metrics relevant to the customer’s experience.
Step 3: Cull the Herd
Once the hierarchical dashboard is filled out, review each metric from the perspective of your customer. Next, sort them in order from most critical to least critical when it comes to evaluating the customer experience.
The natural tendency for most organisations is to think from the inside out. When they do, they have a greater chance of relying on CX metrics that are not truly assessing the customer experience. This can result in initiatives that exist to satisfy a business goal such as lowering costs rather than a customer experience goal such as aiding the customer in buying or owning a product or service.
Think outside in. Think like a customer first and you’ll be able to clarify with colleagues when a metric is not a CX metric.
Step 4: Avoid Focusing on Executive-Level Customer Experience Metrics
Board level executives tend to focus their attention on metrics that summarise the overall customer experience; metrics such as Customer Satisfaction (CSAT), Net Promoter Score (NPS), or Customers Effort Score (CES). So, it makes sense for a CX executive to do the same, right?
The time it takes for average organisations to climb to the top of their industry, or those that are poor to average is about four to five years. As a result, a CX executive is more likely to generate short-term wins by focusing their attention on improving several lower-level CX metrics.
By having multiple specific metrics to improve, you spread out the risk i.e., they form a portfolio of projects that spread the risk of failure. More importantly, the cumulative effect of making small improvements tends to result in the top-level CX metrics improving, too.
Move from analysis to improvement
There are numerous metrics that you can use to track your customer experience, but the main goal of capturing this data is to drive improvement. Thus, select KPIs that are actionable.
For example, suppose an insurance company’s CES score for the process to update a customer’s beneficiary information is low. In that case, the insurer may choose to digitise the form and ensure it is pre-populated with customer data to reduce the amount of effort it takes for customers to complete that action.
Turn happy customers identified by your VoC program or Promotors from NPS surveys into advocates for your products and services. Satisfied customers are often willing to give good reviews or participate in a case study or testimonial.
Capture customer feedback from your VoC program on product features and functions to uncover new product and service opportunities.
It’s crucial to invest the time and resources to measure your customer’s experience to gain actionable insights on how you can improve your products and services to ultimately improve the customer experience. As organisations allocate time and resources to improve their customer’s experience, it’s critical to track and measure the results of their efforts. Using some of these fundamental KPIs and taking action to address the findings will set your business up for CX success.