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 gauge that success. Brands should measure various metrics, 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, knowing whether those strategies make a difference in revenue, customer satisfaction and sales is imperative.
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. That is a powerful concept for business leaders planning their growth strategies.
CX teams should use a combination of many different customer experience metrics to better understand CX success and identify areas for improvement.
One challenge that CX teams often deal with is identifying which customer experience metrics to measure, when and why they should measure them. Let's look at 10 customer experience metrics and what they measure.
1. Net Promoter Score
The Net Promoter Score (NPS) is a widely used metric for measuring customer loyalty to a company. Organizations issue a single-question survey to collect this information 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.
- Passives (score of 7-8). These are generally satisfied customers, but they're 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 vendors or survey tools, such as those from Qualtrics, SatisMeter and Retently. It's 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.
2. Customer satisfaction
Like NPS, the customer satisfaction (CSAT) score is also calculated with survey data. Whereas NPS measures how likely a customer would be to refer a peer to a company, the CSAT score asks questions about 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 the 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.
3. Customer effort score
The customer effort score (CES) measures a customer's experience regarding 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 was it 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.
4. First response time
First response time (FRT) is a customer experience metric that measures the elapsed time between a customer's initial inquiry and the moment they receive the first response from a company's customer support team. This metric is vital in evaluating the efficiency and effectiveness of a company's customer service operations. FRT reflects the organization's commitment to promptly addressing customer needs and concerns, significantly influencing customer satisfaction and loyalty.
To calculate FRT, ensure that a timestamp is present at the time of the initial submission, and the timer begins until the initial response from the customer success representative. It is important to exclude auto-responses from this calculation to accurately represent the initial inquiry and initial response from a live agent, not a chatbot.
Monitoring and improving FRT can enhance customer satisfaction, increase loyalty and create a more positive brand image, making it an important metric for businesses delivering exceptional customer experiences.
5. Average resolution time
Average resolution time, also known as time to resolution or mean time to resolution, represents the average duration customers spend engaging with a company's customer support, helpdesk or service team until their problem is successfully addressed. This metric also uses timestamps to capture the interactions from the initial inquiry and all the touchpoints between the company and the customer. This metric encompasses the time customers spend waiting for an initial response and additional waiting periods between interactions. The timer stops when the customer's issue or query is resolved and the support interaction concludes, using a timestamp of when a support ticket is closed or the customer's interaction ends.
To calculate this, divide the total time to resolve all requests by the number of requests received over the evaluated period. Ensuring this metric is evaluated and prioritized as an area to continuously improve, businesses can enhance customer satisfaction, reduce customer churn and demonstrate their commitment to providing timely and effective solutions to their customers' problems.
6. Churn rate
Churn rate is a simple calculation that displays the percentage of customers who do not renew or cancel their contracts with a company in a given time. Many companies with a recurring revenue business model care about churn rate because acquiring new customers is harder and more costly than keeping existing ones.
Ideally, brands should constantly measure churn rate but at least calculate it quarterly and annually. This ensures that CX teams receive better forecast information for the following periods. 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 identify the time period they want to measure against.
Customer churn rate = (lost customers ÷ acquired customers) x 100
7. Retention rate
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. 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 of overall turnover.
Customer retention rate = ((number of customers @ end of period - number of new customers within that period) / number of customers at start of period) x 100
8. 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 success teams can directly affect customer lifetime value by helping to solve problems or offering recommendations that encourage customers to stay loyal. When combined with a company's retention and churn rates, this metric is also important for forecasting growth.
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 multiplying it against the average deal size.
9. Visitor intent
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. Understanding why customers engage with a brand and what they seek is important. There are two types of intent: informational and transactional. Informational intent refers to someone coming to a site or store to learn something, while transactional intent refers to someone who wants to perform a specific action, such as making a purchase or downloading something.
The easiest way to measure this is with single-question surveys that provide multiple answers a user can choose from. A common question might be, "Which of the following best describes the primary purpose of your visit today?"
Determining visitor intent can eliminate the guessing game a marketing team might perform regarding why someone visits a website. It can also help develop a better picture of the visitor's needs. This behavioral metric can help optimize a company's channel offerings.
10. Customer referral rate
Customer referral rate (CRR) is a valuable metric for customer experience and an important metric for sales and marketing teams. CRR measures the percentage of customers who refer or recommend a company's products or services to others within a specific period. It reflects customer satisfaction and loyalty and the effectiveness of a company's offerings and customer service in inspiring customers to become advocates and brand promoters.
To determine a company's CRR, referrals from customers to other companies need to be identified during a specific period and a count of total customers. The calculation divides those referrals by total customer accounts and then multiplies them by 100 to get the percentage. A high customer referral rate indicates customers are delighted with the company's offerings and services, leading them to actively promote the brand. Positive word-of-mouth generated through referrals can significantly impact new customer acquisition and brand reputation, making CRR a vital metric for businesses that foster customer loyalty and drive organic growth.
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 customer's shoes and think about how the company can make overall improvements based on the data. For example, a brand that received negative feedback about its onboarding or implementation process should spend time evaluating those pain points. If a company receives 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 create such loyal customers, then begin implementing those strategies across the department.
CX teams 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 increase 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.