Customer Experience Metrics are Key

What if the secret to skyrocketing your business growth lies in how well you understand and enhance your customers' experiences? How might your company transform if you focused not just on transactions but on building lasting relationships?

Companies that prioritise customer experience have seen remarkable results. Research indicates an impressive 80% increase in revenue for businesses focusing on customer experience. Moreover, customer-centric brands report profits that are 60% higher compared to those neglecting customer experience. Consequently, 80% of leaders plan to increase customer service budgets over the next year.

Across various industries, 90% of businesses have made customer experience their primary focus and 80% expect to compete mainly based on customer experience. A significant 73% of customers now consider customer experience the top factor when deciding whether to purchase from a company, with consumers willing to pay a 16% price premium for superior experiences.

Customer experience drives over two-thirds of customer loyalty, surpassing the influence of price and brand. Moreover, improving customer experience can reduce customer support costs by up to 33%.

Having a closer look at key customer experience metrics help businesses understand how customers perceive and interact with their products, services and brand.

The Future Belongs To Companies That Create Incredible Customer Experiences (Blake Morgan, Keynote Speaker & Author)

Here are some key customer experience metrics:

Net Promoter Score (NPS)

Measures the likelihood of customers to recommend your product or service to others with scale (e.g. 0 to 10).

Good: NPS scores above 5 are generally considered excellent, indicating a high level of customer satisfaction and loyalty. Scores between 3 and 5 are considered good.
Bad: NPS scores below 0 or in the negative range suggest significant issues with customer satisfaction and may indicate a high likelihood of customers speaking negatively about the brand.

What steps can you take to turn your detractors into promoters and how can you leverage your promoters to amplify your brand’s reach?

Customer Satisfaction Score (CSAT)

Assesses customers' satisfaction with a specific interaction, transaction or experience, often measured through surveys with a scale (e.g. 0 to 10).

Good: CSAT scores above 80% are typically considered excellent, indicating that the majority of customers are satisfied with their experience.
Bad: CSAT scores below 50% indicate widespread dissatisfaction among customers and may signal the need for immediate improvements.

How do you currently measure customer satisfaction and what changes could you implement to ensure you are addressing the needs of your customers effectively?

Customer Effort Score (CES)

Evaluates the ease of a customer's experience when interacting with your company, often measured by asking customers how much effort they had to put forth to resolve an issue or complete a task (e.g. 0 to 10).

Good: Lower CES scores indicate that customers find it easy to interact with your company and are generally satisfied with the experience.
Bad: Higher CES scores suggest that customers encounter difficulties or obstacles when interacting with your company, leading to frustration and potential churn.

Are there specific points in the customer journey where you can reduce friction and make it easier for customers to interact with your brand?

Retention Rate (RR)

Measures the percentage of customers who continue to use your product or service over a specific period, indicating loyalty and satisfaction.

Good: High retention rates, typically above 90%, indicate that customers are loyal and continue to use your product or service over time.
Bad: Low retention rates, especially if they are declining over time, indicate that customers are leaving at a higher rate than they are being acquired, which can be detrimental to the business.

What strategies do you have in place to engage and retain your customers and how can you further strengthen their loyalty?

Churn Rate (CR)

The percentage rate at which customers stop using your product or service within a given period. High churn rates may indicate dissatisfaction or problems with the customer experience.

Good: Low churn rates, typically below 5% annually, indicate that customers are satisfied and see value in continuing to use your product or service.
Bad: High churn rates, especially if they are increasing over time, indicate that customers are leaving at a higher-than-desirable rate, which can negatively impact revenue and growth.

What insights can you gather from customers who have churned and how can you use this information to improve your offerings?

Customer Lifetime Value (CLV)

Calculates the total revenue a business can expect from a single customer over the entire relationship, helping to assess the long-term value of each customer. Put into scale in comparison with other companies or industry benchmark (e.g. 0 to 10).

Good: High CLV indicates that customers are valuable to the business over the long term, often resulting from repeat purchases, referrals and loyalty.
Bad: Low CLV suggests that customers are not generating sufficient revenue to justify the cost of acquisition or retention efforts, potentially leading to negative ROI.

How well do you understand the long-term value of your customers and what actions can you take to enhance that value over time?

Customer Loyalty Index (CLI)

Measures the level of loyalty and commitment customers have toward your brand, often combining metrics like repeat purchase rate, advocacy and retention. The index can be brought to scale (e.g. 0 to 10).

Good: High CLI scores indicate strong customer loyalty and advocacy, which can lead to increased customer retention, positive word-of-mouth and sustainable growth.
Bad: Low CLI scores suggest that customers are not deeply committed to the brand, leading to higher churn rates and lower customer lifetime value.

What initiatives can you introduce to foster a deeper emotional connection with your customers and increase their loyalty to your brand?

First Response Time (FRT)

Measures the time it takes for a company to respond to a customer inquiry or support request, impacting customer satisfaction and perception of responsiveness (e.g. in hours).

Good: Short FRT indicates that customers receive prompt responses to their inquiries or issues, leading to higher satisfaction and perception of good customer service.
Bad: Long FRT suggests that customers experience delays in getting their issues addressed, leading to frustration and potentially negative perceptions of the company.

How can you streamline your response processes to ensure that customer inquiries are addressed as quickly as possible?

Average Resolution Time (ART)

Tracks the average time it takes to resolve customer issues or requests, reflecting efficiency and effectiveness in customer service (e.g. in hours).

Good: Short ART indicates that the company efficiently resolves customer issues or requests, leading to higher satisfaction and loyalty.
Bad: Long ART suggests that the company takes too long to address customer issues, leading to frustration and potentially increased churn.

What common issues are taking longer to resolve and how can you improve your processes to enhance overall customer satisfaction?

Customer Churn Prediction (CCP)

Utilises data analytics to predict the percentage how many customers are likely to churn in the future, enabling proactive measures to retain them.

Good: Accurate churn predictions enable the company to proactively identify at-risk customers and take preventive measures to retain them, leading to lower churn rates and higher customer retention.
Bad: Inaccurate churn predictions may result in missed opportunities to retain valuable customers, leading to higher churn rates and potentially lost revenue.

How can predictive analytics inform your customer engagement strategies and what proactive measures can you implement to reduce churn?

These metrics provide insights into various aspects of the customer experience, helping you to identify areas for improvement and measure the effectiveness of efforts in delivering exceptional customer satisfaction and loyalty.

"The best advertising you can have is a loyal customer spreading the word about how incredible your business is." - Shep Hyken

Developing a Customer Experience Score

To develop a formula that determines a company's strength in providing customer experience (CX) based on the metrics provided, we can use a weighted scoring system. Each metric will be normalised and given a weight based on its importance to CX.

Customer Experience Score (CEScore) = (w1*NPSnorm) + (w2 CSATnorm) + (w3*(1 - CESnorm)) + (w4*RRnorm) - (w5*CRnorm) + (w6*CLVnorm) + (w7*CLInorm) - (w8*FRTnorm) - (w9*ARTnorm) + (w10*CPPnorm)

Where:

wi (i = 1 to 10) are weights assigned to each metric, reflecting their relative importance to your business. (You'll need to determine these weights based on your specific priorities).
NPSnorm, CSATnorm, CSATnorm, etc., are the normalised values of the respective metrics.

Note: Ensure all metrics are on a comparable scale (e.g., convert percentages to decimals) but also that the same measurable metrics are used for each company to achieve objective and comparable results.

Sample Calculation

Let's assume a company prioritises customer loyalty and efficient service but also values positive word-of-mouth (reflected in NPS). Here's a sample calculation:

Metric	Value	Normalised	Weight
NPS	7 (out of 10)	7	w1: 0.2 (high importance for loyalty)
CSAT	6 (out of 10)	6	w2: 0.15 (moderate importance)
CES	2 (out of 10)	2	w3: 0.1 (moderate importance)
RR	92%	0.92	w4: 0.2 (high importance for loyalty)
CR	4%	0.04	w5: 0.1 (moderate impact)
CLV	6 (out of 10)	6	w6: 0.15 (moderate importance)
CLI	6 (out of 10)	6	w7: 0.1 (moderate importance)
FRT	4 hours	4	w8: -0.05 (negative impact)
ART	1 day, 4 hours	28	w9: -0.1 (negative impact)
CCP	30%	0.30	w10: 0.1 (moderate importance)

Calculation

CEScore = (0.2*7) + (0.15*6) + (0.1*2) + (0.2*0.92) + (0.1*0.04) + (0.15*6) + (0.1*6) + (0.05*4) + (0.1*28) + (0.1*0.30)

CEScore ≈ 1.4 + 0.9 + 0.2 + 0.184 + 0.004 + 0.9 + 0.6 - 0.2 - 2.8 + 0.03

CEScore ≈ 3.028

This company's CEScore is approximately 3.028, which (depending on the chosen weight scale) indicates a strong customer experience. The high weight on NPS and retention reflects the positive impact of loyalty on the score. However, areas for improvement might include reducing FRT and ART (negative weights).

Track your CEScore over time to identify trends and assess the effectiveness of customer experience initiatives.

“Our focus is on the customers and improving their experience. We believe that if we do that well, competition, prices, and profits will all take care of themselves.” - Bhavish Aggarwal

Prioritising customer experience can significantly enhance your business's success and profitability. As you implement and monitor key customer experience metrics, remember that continuous improvement is essential. Regularly assess your metrics and adjust your client-centric strategy based on customer feedback and behavior.

As you reflect on the customer experience metrics discussed, ask yourself: How can you take actionable steps today to create unforgettable experiences for your customers? What small changes can lead to monumental shifts in customer loyalty and satisfaction?

Encourage a culture of empathy within your organisation; understanding your customers' perspectives will help you create more meaningful interactions and lasting relationships. Embrace the journey of refining customer experiences, as it not only drives loyalty but also positions your business for sustainable growth in an increasingly competitive landscape.