6 Most Popular Customer Experience Metrics And KPIs Explained Simply – Lumoa (2022)

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According to The State oftheCustomer Experience survey that we did earlier in 2018, all companies track customer experienceusing one or severalofthe6 worldwiderecognizedcustomer experience metrics: Net Promoter Score (NPS), Customer Satisfaction (CSAT), Churn rate, Retention rate, Customer Lifetime Value (CLV)orCustomer Effort Score (CES).

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You can easily see that NPS is the most common CX metric:almost two-thirds of companies followit.Thechurnorretention rateisusually used to understand the connection betweencustomer experience management anditsmonetaryvalue.

Let’s dive deeper intoeach of them.

Three Customer Experience Metrics

TheCustomer Experience Metrics are the KPIs the business follows that involve customers’ input. Thesemetrics help youinunderstandinghow loyal or satisfied your customersare. Themost popular customer experience metrics include NetPromoterScore, CustomerSatisfaction, andCustomerEffortScore.Use anNPS survey totrackcustomer loyalty over time, sendoutCES surveys to understand how easy it is for customers to get the support they need,or distribute CSAT surveys to understand how satisfied customers are afterkeytouchpoints in the customer journey.

Net Promoter Score (NPS)

As you could clearly see from the graph,NPS is thefavoritecustomer experience metric among Nordic companies.The same applies alsoglobally. Abouttwo-thirds of all companies are using it to define where they stand in terms ofthecustomer experience. Since 2003, when the metric was first introduced, NPS has been gaining popularity. Now, most Fortune500 companies, incl. Apple,andotherglobal market leaders,incl.Airbnb,benefit from the metric. Why?

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NPS is short and simple forthecustomers to answer and it is very easy to track for companies. NPS consists of only two questionsandit gives that one customer experience-related numberyour leadership needs for target setting and bonuses. NPS is often used to rate a brand, service, or product in general.

How to calculate NPS?

  1. Calculate the percentage of promoters among your surveyed customers

  2. Calculate the percentage of detractors

  3. Subtractthe detractor percentage from the promoter percentage

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In short, why should you use NPS?

  • fast, simple, and easy both for customers and companies

  • open text feedback allows us to dive deep and see the big picture

  • industry-standardmetric:it is widely understood and benchmarks exist(beforebenchmarking, read what NPS score you should aim at here)

  • an increase or decrease in NPS helps youtopredict futurerevenuegain or loss

  • NPS is alsoutilizedto measure word-of-mouth marketing strategies

If you want to know more about NPS, check thiscomprehensive guide to the Net Promoter Scorefor more details.

Customer Satisfaction (CSAT)

CSAT, together with NPS, is one of the most used CX metrics. It has many forms and scales, but the most common is a scale from 1 to 5. Google or Facebook ratings are a good example of CSAT.

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CSAT is a very good tool if you want to measureifa customer is satisfied with one-time interaction.Itis most often used in customer service (or customer support). CSAT can also easily adapt to the particular needs of your organization.

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Whyuse CSAT?

CSAT is a very simple and efficient customerexperiencemetric to implement. Just astheNPS, it’s typically very simple and fast for the customers to answer. It is often asked from a customer afteratransactionor customer support ticket to evaluate the efficiency of the customer service department. CSAT is a great way to see what your customers think about you right now.

To read more about customer satisfaction – check out this article: The Importance of Customer Satisfaction

Customer Effort Score (CES)

Customer Effort Score is the third most popular customer experience metric that involves the customer’s input. CES is a pure transactionalmetric andittypicallyassessesthe simplicity of a single solution.

CES typically answers “how easy was it to solve your problem with today?” and hasa5- or 7-point scale system. Below, there are some examples ofCESimplementation.

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CES is different from NPS or CSAT because,in order tomake sense of it, you need to follow both the average score and the distribution of scores. Analyzing distributions could help youinidentifyingwhichofyourcustomers experience effortless service and,more importantly,find those that struggle toduring the process. By proactively helping and reaching out to thosewho are struggling, you can effectively decrease churn.

Whyuse CES?

CES helps you to analyzethecomplexity of the service. Why is it important?94% of customers going through an effortless experience are likely to repurchasevs. only 4% of thosewhowent through a high level of effort. According to the same research, 81% of customers going through a high level of effort are likely to share their bad experiences with friends vs. only 1% ofthosewho went through an effortless experience.An interesting discovery is summed up in HBR article “Stop Trying to Delight Your Customers“ – companies create loyal customers not by “wowing“ them, but by providing an effortless experience.

SueDuris, Director of Marketing and Customer Experience atM4 Communications, strongly believes in the connection of CES, loyalty, andthe direction the company is going.“CES isatransactionalmetricand should be used after service interactions and other key moments of truth like after purchase. Loyalty is about whether a company can deliver – does it meet/exceed expectations? Reducing effort has been found to drive loyalty.WhatCES does is thatit measuresanability to reduce friction/improve ease of use. That’s why I believe CES is the best metric to predict loyalty.”

CES isa good metric for revealing detraction drivers.With NPS and CSAT you most likely get a more balanced view: not only your weaknesses but also your strengths.Using any one of themis useful to understand the customer experience.

Churn rate

The customer churn rate reflects how many of your customers have stopped using your products or services. Generally,customer churn rate countsthetotal number of lost customers or the percentage of lost customers withinadefinedtime period. Sometimes, the customer churn rate is calculatedas a lost business value.

For example, you have signed 1000 long-term contracts ofavalue of€100at the beginning of the year, but now only 800 of those customers keep using your services. Depending on different ways to count your churn rate, it could be either 20%, 200 customers, or€20000.

Followingthecustomer churn rate iscritical because generally,it is muchless expensive  to retain existing customers than it is to acquire new customers.

Reading recommendation:
What customer churn is and how to calculate it
3 Ways to balance between acquisition and retention

Retention rate

Customer retention rate  is the measurement of how a business retains customers over a specific period of time. The metric is highly connected to the churn rate:the highertheretention is, the lowerthechurn rate would be. For instance, if your churn rate is 10% over a year, that means that 90% of customers stayed with your company. Thus the retention rate is 90%.

If it doesn’t make youwork on your retention strategy just yet, think about this: loyal customers are 5x as likely to repurchase, 5x as likely to forgive, 4x as likely to refer, and 7x as likely to try a new offering,according toTemkinGroup.

Reading recommendation: How to measure and improve customer retention

Customer Lifetime Value (CLV)

Customer Lifetime Value (CLV) is a prediction of the net profit attributed to the entire future relationship with a customer. CLV could be calculated both as a business value that the customer brings during the whole time of the relationship with a company or as a value over a defined period of time (a year, 5 years, or anything else that makes sense to the particular company). It is usually looked at as an average. For example,it might be easier to calculate the whole CLV for a wedding planning company (people don’t get married too often) but it makes more sense to calculate a year CLV for a sodaproducer.

Check this article by Hubspot to find out more about calculating CLV.

Customer Experience-related business KPIs

Understandingthecustomer voice isacrucialsteptoward buildingasuccessful customer experience managementapproach. At the same time, all CX metrics need background informationonthe operations. When youcanlink the customer experience metric results towhat happened in the transaction,youcan better assess which levers to pull to influence the happinessof yourcustomer.

The operational KPIs could be anything from typical customer engagement metrics or speed of service to the average queue time in the shop–anythingthatcan affect your customer.

It is good to stay on top of your key operational measures. Just keep in mind that you also need tolisten to the customer to really understand how they experience the situation.The queue time can have a strong impact onhow people perceive your customerservicebut it is not the only determining factor.

In addition to the customer voice and the related customer experience metrics, it is crucial to understand how the customer experience impacts customerbehaviorand – because of that – your business. To understand this, companies typically measure some criticalbehavioralloyalty metrics, most typically the churn, retention, or customer lifetime value.

Should you measure all the metrics?

The answer is no. You should measurethe onesrelevanttoyour business. Also, you should not ask your customers to give youfeedback before you understand what you would do with it.

Most companies measure on average 2.5customer experience-relatedKPIs. For your business development, we recommendyouunderstandyour business metrics (churn or retention and CLV) and the appropriate customer experience metrics.Inpractice, find the metrics that do make sense to your business.Most companies are best off when they choose onecustomer experience metric and one related behavioral metric. Adding more complexity doesn’t typically add value. On the contrary, having a simple survey design, and a simple set of targets and metrics to follow up helps the organization to focus on things that matter: fixing issues and improving the results.

Read here about how to establish customer experience goals and targets for your company.

Nate Jones, Director of Customer Support atSimpleNexusstates the common problem among the businesses: over-measuring.”Nomatter which metrics you choose to use, make sure they are predictive of the outcome you are trying to avoid or promote. Too many businesses gather the metrics because they feel like they are supposed to and don’t understand how to get the value out of them.”

The advice is clear.Don’t measurefor thesake of measuring. Measure to grow your business.

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