How to measure and analyze Customer Experience

7 min read

Providing a great customer experience is vital for any business, but it can be difficult to measure customer experience directly. However, by tracking key performance indicators related to customer experience, we can get a good idea of how our customers are feeling. By regularly measuring these factors, we can identify areas where the customer experience could be improved. And whilst measurement is not the goal, it is a valuable tool for tracking the progress of our customer experience initiatives.

In fact, according to research conducted by Dimension Data, companies that worked on improving customer experience saw a 92% increase in customer loyalty, an 84% uplift in revenue, and a 79% cost savings.

In this article, we review the top metrics you can use to measure and analyze your customer experience.

Customer Effort Score (CES)

The customer Effort Score (CES) is a key performance indicator that tells you how much effort your customers need to put in to complete a task. This could be anything from finding the product or service you are looking for to getting an issue resolved by a customer support agent.

CES data is collected by surveying customers in real-time after a single action, for example after they placed an order online or interaction like calling customer service for help with a product. The survey can be presented directly on a website, or be emailed as soon as the action is completed. Typically, customers are asked to rate the ease of their experience through a numerical 1-5 or 1-7, with one being very difficult and five or seven being very easy.

To calculate your score, calculate the average score to see how much effort a certain process requires of your customers.  A high CES score means that your company provides an effortless experience for customers, while a low CES means that people find your processes difficult.

Understanding your CES will allow you to understand where the customer experience is smooth and where there are friction points that need your attention.

Customer Satisfaction Score (CSAT)

Customer Satisfaction Score (CSAT) tells you how happy, or unhappy, a customer is with your overall service. CSAT is a measurement of short-term customer satisfaction with a product or service such as having a support ticket resolved or returning a product.

It is measured with a short survey immediately after a customer’s interaction with your business or a certain area of your product, asking them to rank how satisfied they were on a scale of 1 – 10.

Answers are frequently expressed on a rating scale. CSAT scores are usually reported on a percentage scale of 0 to 100, where 100% is the obvious holy grail of complete customer satisfaction. To calculate the score, take the sum of the scores and divide the number by the total number of respondents.

You can use CSAT responses to figure out which parts of your product customers are satisfied or unsatisfied with and target those areas with necessary improvements.

Net Promoter Score® (NPS)

Net Promoter Score® (NPS) tells you how many of your customers are likely to recommend your business to a friend or colleague. Usually, this will be on a scale from 1 to 10.

Respondents are split into three categories: detractors, neutrals, and promoters.

Promoters - 9 to 10: Customers who love your brand, and will recommend it to their friends and colleagues. They're loyal and will make future purchases. They are likely to share valuable user-generated content on social media.

Passives - 7 to 8: Customers who are fairly happy with your brand, but will avoid recommending or criticizing their experience. Their loyalty isn't as strong, and if they find a better product, they're likely to switch to a competitor.

Detractors - 0 to 6: Customers that don't like your brand and are highly likely to share bad reviews or post comments on social media comments, causing damage to your brand's reputation.

To calculate NPS, subtract the total number of detractors from your promoters.

% Promoters – % Detractors = NPS

If 70% of your customers are promoters and 10% are detractors, your NPS score will be 60%.

A high NPS means that you have a healthy relationship with customers who are likely to act as evangelists for the brand, fuel word of mouth, and generate business growth.

Customer lifetime value (CLV)

Customer Lifetime Value (CLV) is the CX metric that shows how much a customer is worth to your business over the entire relationship while taking into account costs associated with the customer, like the cost of acquisition and retention and the cost to serve them.

High CLV is likely to indicate good experiences. After all, there’s a reason why customers are staying loyal. While low or diminishing CLV can be a sign that experience with your company, product, or service is not great.

To calculate the CLV, you need to estimate the average sale value, the average number of transactions, and how long a relationship with an average customer lasts. Also take into account the cost of customer acquisition, and retention by adding the average gross margin to this formula.

Average sale value x transactions x retention period x gross margin = CLV

Improving CLV is highly dependent on your ability to retain customers in the long term, so you always need to keep an eye on CRR.

Customer retention (CRR)

The Customer Retention Rate (CRR) metric helps you understand how loyal your customers are. A high Customer Retention Rate indicates that your customers are loving your product or service and are likely to continue doing business with you.

The higher your customer retention, the lower your churn rate. For example, if your churn for a year is 20%, you’ve got 80% happy customers who remained loyal to your brand. Your retention rate equals 80%. The 80% can be considered loyal customers.

Increasing your customer retention rate by 5% can increase your profits by 25-95%. And loyal customers are 5x more likely to purchase again and 4x more likely to recommend your brand.

Customer churn rate (CCR)

Your Customer Churn Rate (CCR) is an important metric that indicates how many customers you’ve lost, over a specific time period. To calculate Customer Churn Rate divide the number of lost customers by the number of customers you started with at the beginning of your specified time period.

For example, you had 100 customers at the start of Q2, and at the end of Q3, you only have 80 left, your churn rate is 20%.

This CX metric is critical. According to the Harvard Business Review, winning new customers can cost 5 to 25 times more than retaining existing ones.

First Contact Resolution (FCR)

First Contact Resolution (FCR) tells you how many of your customers had their issues resolved completely within one interaction. It can include customer support calls, pricing queries, quotes, etc. FCR is a valuable metric for measuring customer satisfaction. If your customers need to contact customer support repeatedly to resolve an issue, then you should be worried that they are not having the best experience and are likely to become detractors… remember NPS?

FCR rate varies by industry, that said, if your FCR rate is in the above 65% category, then you’re doing a good job.

You can calculate FCR like this:

# issues resolved in first contact / # of interactions = FCR

A study shows for every 1% increase in FCR, there’s also a 1% increase in CSAT and a 1% decrease in support operating costs. So there’s plenty of incentive for you to solve as many customer issues as you can within the first contact.

Average Resolution Time (ART)

Average Resolution Time (ART) tells you how long it takes to solve a customer’s issue, on average. This metric indicates the efficiency of your support teams. Overall this metric may be high for some support inquiries, and low for others.

To calculate ART, take the total amount of time it takes to resolve all issues and divide this by the number of calls or support tickets you receive over a given time period.

The time it takes to resolve issue / # of calls or tickets = ART

Average Resolution Time has a direct impact on your company’s CSAT score. After all, customers do not want to call multiple times, wait on hold, have long back and forth with the support agent, provide the same information multiple times, etc.

To improve this metric, consider why your customers are calling. Some of the recurring issues can be solved through your product, or by adding convenient customer self-service options, like online warranty or return forms as well as a robust knowledge base.

Final Thoughts

Every company can benefit from measuring customer experience metrics. While you do not have to measure all the Customer Experience KPIs, tracking at least a few of them constantly will provide you with actionable insights into the best ways to enhance your customer journey.

The more you learn how your customers are interacting with your business, the more positive changes you can deliver. And the more positive changes you provide, the more delightful you make your customers’ experiences.

Victoria
I love to write with one goal in mind - to help you build amazing customer experiences. Our content is tailored to help you understand your customers, design great products and deliver world-class customer self-service. I share my knowledge and experience through my articles, videos, podcasts, templates, and more - so you can take your customer experience to the next level.‍

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