Customer experience is tricky, but you can clear the way to success with the right metrics. Zero in on the essentials — like customer satisfaction and churn rates — to discover how likely buyers are to return or spread the word about your business. By understanding these key performance indicators (KPIs), you can find key strategies to take your customer experience to the next level.
1. Customer Satisfaction (CSAT)
Customer satisfaction is a customer experience optimization metric that identifies how satisfied customers are with your product, service or interaction. This metric is useful because it lets you see whether your company meets customers’ needs and expectations. From there, you can understand which customer journey touchpoints are causing the most dissatisfaction.
To measure CSAT, create a survey that gathers insights about satisfaction levels. Have consumers rate on a scale of one to five, ranging from “very dissatisfied” to “very satisfied.” Implement this survey for feedback on various interactions customers have with your business. For example, you can ask about their satisfaction while purchasing. To calculate CSAT, add the total number of the ratings and divide it by the number of responses, then multiply that number by 100.
2. Customer Retention Rate (CRR)
The customer retention rate tells a business how good it is at keeping its customers returning. This metric is important because finding a new buyer can be five times more expensive than keeping a current one. Plus, committed consumers often spend more over time.
To figure out the retention rate, you start by picking a period — say a month. Then, count how many customers you had at the start and end of the month.
Start with the total customers at the month's end and subtract the number of customers gained within that period. Then, divide that number by how many customers you had at the start of the month and multiply that by 100. Your calculation will be a percentage tied to how many customers have stayed.
3. Customer Effort Score (CES)
Customer effort score measures how easy it is for customers to do what they need when interacting with a company. For example, it could be to find out how simple it is to purchase something, get help or fix a problem. It is an excellent tool because it tells businesses if they are making things smooth for shoppers or putting up roadblocks.
To find out about the CES, companies ask a question after an interaction, like “On a scale from ‘very hard’ to ‘very easy,’ how easy was it to handle your issue?” Once consumers have answered, the scores are averaged out. A higher average means they can do what they need with less hassle. Aim for a high CES because when things are more accessible, the customer experience increases, making them more likely to return for more.
4. Net Promoter Score (NPS)
The net promoter score measures the amount of customer satisfaction and loyalty to your brand. It does so by asking buyers their likelihood of recommending a product or service to someone else using a scale of zero to 10.
The NPS metric is an essential way of measuring or finding out how much people like or dislike your products or services. A great way to calculate this metric is by segmenting your customers into three classes:
- Promoters (if the total score is 9-10): Customers are very satisfied and most likely to recommend your company to others.
- Passives (if they add up to 7-8): Customers are satisfied but may not recommend you.
- Detractors (if their total is 0-6): Customers are dissatisfied and are not likely to recommend your brand.
To determine a net promoter score, take the number of Detractors from Promoters for a score between -100 and 100. A higher score means more happy customers who can attract new ones by spreading the word.
5. Customer Churn Rate (CCR)
Customer churn rate tracks how many customers a business has lost over a certain period. It is the opposite of customer retention because it focuses on the people who leave or stop buying instead of those who stay.
This metric is useful because it gives clues about problems with the product or service, or if the competition is doing something better. To keep a business healthy, you want this rate to be as low as possible.
Calculate CCR by choosing a period — like a month, quarter or year. Look at how many customers you had initially and how many stopped being customers by the end. Then, take the number of customers who left, divide it by the number you started with and multiply by 100 to turn it into a percentage.
6. Customer Lifetime Value (CLV)
Customer lifetime value is how much revenue you expect the customer to bring to your business during their time as a customer. Companies use this metric to determine how much they should spend to get a new customer and how much they should invest to keep one. Plus, it boosts loyalty and helps to reduce churn.
To calculate CLV, you multiply the average sale by the number of times the consumer buys each year. Then, multiply that number by how many years they are likely to remain loyal. So, if a shopper spends $50 every visit, shops 10 times a year and you expect them to keep doing this over five years, here is how the calculation would look — $50 x 10 x 5 = $2,500.
7. First Response Time (FRT)
First response time is a metric tracking how fast a business gets back to a buyer after they reach out to customer support. It is a key part of customer service since the quicker a rep responds, the happier the person will be. It makes them feel like a high priority, which sets the tone for their whole experience.
Measure FRT by recording the time it takes your business to reply from the time your customer makes contact. Add all the response times and divide your total by the number of customer inquiries to get the average. That way, you will know if you need to improve your response times to a quicker and more helpful service.
8. Average Resolution Time (ART)
The average resolution time measures how quickly a business can solve a customer’s problem completely. While quick response times are crucial, solving customer issues quickly and efficiently is just as important. Therefore, the faster the ART, the better it is for customer satisfaction.
Calculate the ART by adding up the total time to fix all customer issues within a certain period and divide that by the number of cases resolved. For instance, if a business solved 100 problems in a week and it took 400 hours to fix them, the average time to resolve an issue would be four hours.
Improve the Customer Experience by Measuring These Metrics
Keep track of customer experience with these top KPIs to understand and enhance your consumers’ journeys. Businesses can use these metrics to identify weak spots, streamline processes and provide training where necessary. Continual monitoring and improvement will guide you in delighting shoppers, so stay committed to measurement and watch customer satisfaction soar.