Customer Experience Metrics and KPIs

My last article, measuring the Emotional ROI can be challenging, several tools can indirectly gauge customer sentiments such as Net Promoter Score (NPS), Customer Effort Score (CES), Customer Satisfaction (CSAT) Score, Customer Lifetime Value (CLV), Customer Churn Rate, Customer Retention Rate, Customer Journey Analytics, and Customer Support Tickets are also valuable metrics to consider.

We will talk about these tools or metrics, that are widely used in the CX market.

Net Promoter Score (NPS)

What is NPS?:- Net Promoter Score is a valuable KPI for tracking customer loyalty and satisfaction. It looks at how likely your customers would be to refer your business to a friend or another customer.

How to calculate NPS:- Calculating NPS is simple enough. It requires companies to ask their customers to rate on a scale of 0 to 10 how likely they would be to recommend them. After receiving responses through automated tools or surveys, companies can then calculate their NPS score with categorization.

• Scores of 0 to 6 are rated as “detractors”
• While scores of 7 and 8 are “passives.”
• Scores 9 and 10 indicate a “promoter” or an advocate for the brand.

To calculate NPS, you’ll subtract the detractor percentage of customers from the promoter percentage to get your final score. Some tools can help companies manage and monitor this KPI automatically, which can integrate with CRM and contact center tools.

Here's a step-by-step example calculation:

1. If you survey 100 customers and get the following responses:

• Promoters (score 9-10): 60 customers
• Passives (score 7-8): 20 customers
• Detractors (score 0-6): 20 customers

2. Calculate the percentages:

• Percentage of Promoters: (60/100)x100 = 60
• Percentage of Passives: (20/100)x100 = 20
• Percentage of Detractors: (20/100)x100 = 20

3. Calculate the Net Promoter Score:

• NPS = 60% ? 20% = 40

In this example, the Net Promoter Score is 40, which is considered a positive score indicating a relatively high level of customer loyalty and satisfaction.

Customer effort score (CES)

What is CES?:- Customer Effort Score (CES) is a metric used to measure the ease with which customers can accomplish a specific task or goal when interacting with a company or using its products/services. It is commonly used in customer experience and satisfaction research to evaluate how much effort customers have to put forth to resolve an issue, complete a transaction, or achieve their objectives.

How to calculate CES? :- The calculation of the Customer Effort Score typically involves asking customers a specific question related to their experience, such as:

"On a scale from [1 to 7, or another numerical scale], how easy was it for you to [complete a task, resolve an issue, etc.]?"

The scale may vary, but it usually ranges from "Very Difficult" to "Very Easy." Customers then provide a numerical rating based on their perceived level of effort.

To calculate the overall Customer Effort Score:

• Add up the scores: Sum the numerical ratings provided by customers.
• Calculate the average: Divide the total sum by the number of responses to get the average score.

For example, if you received responses from three customers with scores of 5, 6, and 7, the calculation would be:

• CES = (5+6+7)/3=6

In this case, the Customer Effort Score is 6.

A higher CES indicates that customers found the experience easier, while a lower score suggests that customers perceived more effort in their interactions. Monitoring CES helps organizations identify areas where they can reduce friction and improve the overall customer experience.

Customer satisfaction score (CSAT)

What is CSAT? :- Customer Satisfaction Score (CSAT) is a metric used to measure the overall satisfaction of customers with a particular product, service, or interaction. It is a straightforward and widely used method to gauge customer contentment and gather feedback. CSAT is often measured using a survey that asks customers to rate their satisfaction based on a specific interaction or experience.

The typical CSAT question is:

"How satisfied are you with your experience with our [product/service/interaction]?"

How to calculate CSAT? :- Customers respond by selecting a rating on a scale, commonly ranging from 1 to 5 or 1 to 7, with options like:

• Very Dissatisfied
• Dissatisfied
• Neutral
• Satisfied
• Very Satisfied

To calculate the Customer Satisfaction Score:

1. Assign numerical values to responses: If using a scale from 1 to 5, assign values as follows:

• Very Dissatisfied: 1
• Dissatisfied: 2
• Neutral: 3
• Satisfied: 4
• Very Satisfied: 5

2. Calculate the average score: Sum up all the numerical scores and divide by the number of responses.

For example, if you received responses from five customers with scores of 4, 5, 3, 4, and 2, the calculation would be:

• CSAT = (4+5+3+4+2)/5=3.6

In this case, the Customer Satisfaction Score is 3.6, which falls between "Neutral" and "Satisfied" on a scale from 1 to 5.

CSAT scores are valuable for tracking customer satisfaction over time, identifying areas for improvement, and assessing the success of specific initiatives or changes within a business. It provides a quick and easy way to measure customer sentiment based on their recent experiences.

Customer lifetime value (CLV)

What is CLV?:- Customer Lifetime Value (CLV or CLTV) is a metric that represents the total revenue a business expects to earn from a customer throughout their entire relationship. It is a crucial measure for businesses to understand the long-term value of their customer base and guide decisions related to marketing, customer acquisition, and retention strategies.

How to calculate CLV? :- The formula for calculating Customer Lifetime Value can vary slightly based on business specifics, but a common formula is:

Here's a breakdown of the components:

• Average Purchase Value: The average amount of money a customer spends on each purchase. This is calculated by dividing the total revenue by the number of purchases.
• Purchase Frequency: The average number of purchases a customer makes in a given time period (e.g., per month or per year).
• Customer Lifespan: The average duration a customer continues to make purchases from the business. It is essential to choose a time unit that makes sense for your industry (e.g., months or years).
• Retention Rate: The percentage of customers retained over a specific period. It is calculated by subtracting the number of new customers acquired from the total number of customers at the end of a period and then dividing by the number of customers at the start of the period.

Let's illustrate this with an example: Suppose you have an online subscription service with the following metrics:

• Average Purchase Value: $30
• Purchase Frequency: 2 purchases per month
• Customer Lifespan: 24 months
• Retention Rate: 80%

CLV = \frac{{30 \times 2 \times 24}}{0.8} = $900

In this example, the estimated Customer Lifetime Value is $900. This means, on average, each customer is expected to contribute $900 in revenue over the 24-month period, taking into account the average purchase value, purchase frequency, and retention rate.

It's important to note that while CLV calculations provide valuable insights, they are estimates based on assumptions and historical data. Businesses should regularly review and adjust these calculations to reflect changes in customer behavior and market conditions.

Customer churn rate

What is the Chrun rate? :- Customer churn rate, also known simply as churn rate, is a metric that measures the percentage of customers who stop using a product or service over a given period of time. It is a crucial indicator for businesses to assess customer retention and understand how well they are retaining their customer base.

How calculate the Churn rate? :- The formula for calculating customer churn rate is:

Here's how to break down and use the formula:

1. Number of Customers Lost during a Period: This refers to the total number of customers who have stopped using or subscribing to your product or service during a specific time frame. This can be determined by counting the customers who have canceled, unsubscribed, or otherwise discontinued their relationship with your business.
2. Total Number of Customers at the Beginning of the Period: This is the total number of customers you had at the start of the period for which you are calculating the churn rate.
3. Multiply by 100: The result is usually expressed as a percentage by multiplying the ratio by 100.

For example, let's say you start with 1,000 customers at the beginning of the month and lose 50 customers during the same month. The churn rate would be calculated as follows:

Churn?Rate=(50/1000)×100=5%

In this example, the churn rate is 5%, indicating that 5% of your customer base was lost during that particular month.

A high churn rate may suggest that your business is struggling to retain customers, which could have negative implications for revenue and growth. Monitoring and managing churn rate is important for businesses to identify areas for improvement in customer satisfaction, product/service quality, or overall customer experience.

Customer retention rate (CRR)

What is CRR?:- Customer Retention Rate (CRR) is a metric that measures the percentage of customers a business has retained over a specific period. It provides insights into how well a company is able to keep its existing customers and build long-term relationships. A high customer retention rate is generally a positive sign, indicating customer satisfaction and loyalty.

How to calculate it? :- The formula for calculating the Customer Retention Rate is:

Here's how to break down and use the formula:

1. Number of Customers at the End of a Period: This is the total number of customers you have at the conclusion of the time frame for which you are calculating the retention rate.
2. Number of Customers at the Start of the Period: This is the total number of customers you had at the beginning of the same period.
3. Multiply by 100: The result is typically expressed as a percentage.

For example, let's say you started with 1,000 customers at the beginning of the year, and by the end of the year, you had 950 customers.

CRR=(950/1000)×100=95%

In this example, the Customer Retention Rate is 95%, indicating that you retained 95% of your customers over the course of the year.

A high Customer Retention Rate is generally desirable, as it suggests that the business is effectively retaining its customer base. It's important for businesses to continually monitor and improve customer retention strategies to ensure long-term success and sustained revenue.

Customer Journey Analytics

What is Customer Journey Analytics?:- Customer Journey Analytics refers to the process of collecting, analyzing, and interpreting customer data at various touchpoints across the entire customer journey. It involves tracking and understanding the interactions customers have with a business, from their initial awareness of a product or service to the post-purchase experience. The goal is to gain insights into customer behavior, preferences, and pain points, allowing businesses to optimize their processes and improve the overall customer experience.

How to calculate Customer Journey Analytics?:- Well since this includes a lot of things so there are several steps to calculate the Customer Journey Analytics. It includes

• Identify Key Touchpoints
• Data Collection
• Integrate Data Sources
• Customer Segmentation
• Map the Customer Journey
• Analysis and Insights
• KPIs and Metrics
• Continuous Monitoring and Optimization

It's important to note that there isn't a single formula for calculating Customer Journey Analytics. Instead, it involves a holistic approach to data analysis and interpretation. Businesses may use a combination of analytics tools, customer feedback, and qualitative research to gain a comprehensive understanding of the customer journey and make informed decisions to enhance the overall customer experience.

In conclusion, as businesses navigate the landscape of customer experience, the utilization of diverse tools and metrics becomes indispensable. Whether it's gauging loyalty through NPS, assessing effort with CES, or understanding satisfaction via CSAT, each metric contributes a unique perspective. Furthermore, delving into the holistic approach of Customer Journey Analytics ensures a comprehensive understanding of customer interactions. As businesses embark on this journey, the integration of these tools becomes paramount, paving the way for informed decisions and continuous enhancements in the pursuit of an unparalleled customer experience.