The most impactful CX metrics and how to use them
Customer experience is more important than ever to an organization’s bottom line, and the right metrics can make all the difference.
As the macroeconomic environment creates uncertainty for nearly every business, customer experience (CX) professionals are challenged to shift their strategies to stay attuned to buyers' expectations—which is no small feat.
Supply chain disruptions, prolonged inflation, and a looming recession are factors largely out of an organization’s direct control. Yet, customers still expect a stellar experience from their products or services amid these conditions. Add budget pressure and changing post-pandemic consumer preferences, and CX professionals can get easily overwhelmed trying to determine the best path forward.
The good news: Understanding, implementing, and acting on customer experience metrics and insights can provide a reliable roadmap for CX success, regardless of outside circumstances.
Three key metrics every CX professional should know
There are a lot of customer experience (CX) metrics at our disposal, making it difficult to discern the right insights to capture. Often, this is because there is a lack of resources—managing one or two metrics is all one person or team can handle.
Other times, too many choices can be overwhelming, and we end up not implementing any new programs whatsoever. However, understanding these key metrics will help an organization achieve the competitive advantages that a robust CX program provides.
Net Promoter Score® (NPS)
NPS is a foundational CX metric that evaluates customer loyalty by determining how likely they are to “promote” the company to people they know.
Net Promoter Score (NPS) asks the question:
- “How likely are you to recommend [product/company] to a friend or colleague?”
The respondent ranks their likelihood on a scale of 0 to 10—0 being highly unlikely, 10 being extremely likely. You can also add an option for the respondent to leave a comment and explain their rating. On the rating system, people who select 9 or 10 on the NPS survey are considered Promoters, 7 or 8 are Passives, and 6 or below are Detractors.
To calculate the NPS score, you subtract the percentage of Detractors from the percentage of Promoters:
- Percent Promoters – percent Detractors = NPS
NPS is an essential metric because there is a high correlation between a company’s NPS score and its revenue. Increases in NPS can signal more robust growth and profitability ahead. This metric can also provide year-over-year benchmarks and industry comparisons with competitors.
CX professionals can use NPS effectively at milestone marks in a customer journey, such as after onboarding or before a membership renewal process. NPS is also a valuable tool to use after direct customer interactions, including customer service calls, complaint resolutions, and surprise & delight initiatives.
Customer Satisfaction Score (CSAT)
Customer Satisfaction Score is another standard metric for all customer experience departments. While NPS often measures a customer’s opinion of the company overall, CSAT measures satisfaction with a specific product or service.
Customer Satisfaction Score (CSAT) is expressed as a percentage of customers satisfied with a company’s product or service out of the total number of survey participants. People respond to a single survey question:
- “How would you rate your overall satisfaction with the product (or service) you received?”
Respondents answer a scale with a rating assigned to each level of satisfaction:
- Very Unsatisfied
- Very Satisfied
Using this scale, a company calculates the score by dividing the number of satisfied customers:
- Number of 4 and 5 responses ÷ the number of total responses x 100 = % of satisfied customers
When used in tandem with NPS, the results help CX professionals measure specific experiences. For example, suppose a company has a high Net Promoter Score but receives a low Customer Satisfaction Score on a new product.
In that case, teams can discern that resources should be devoted to product improvements. If no action is taken to improve CSAT, collective customer dissatisfaction could drag down NPS.
CSAT is an effective gauge of areas of improvement. Companies can use it to get product feedback, especially when a product has just launched, or an existing product has been updated. The Customer Satisfaction Score can also be used for service-oriented measurements to better understand a specific moment, such as after negative press or significant industry news.
Customer effort score (CES)
CES goes hand in hand with CSAT; a customer will unlikely be satisfied if they have to expend significant effort to buy or use a product or service. CES can help identify areas of friction so companies can work toward providing seamless experiences.
A CES is the total number of customers who agree that their interaction with a product or service was easy, divided by the total number of respondents. The score is measured on a seven-point scale, with seven as the highest number. Agreement is considered a ranking of five, six, or seven. Strategically implemented, CES surveys can pinpoint high-friction areas in an experience, which can ultimately detract from CSAT and NPS.
For example, if a major retailer wants to decrease the number of abandoned online shopping carts, the company could institute a CES survey at checkout. If the score is low, an organization could follow up to learn more through qualitative feedback.
The results may uncover confusion regarding product categories or frustration with an inability to ask questions at purchase. Adding a chatbot and updating the site with more detailed product descriptions could reduce customer effort to understand, select, and buy products.
Using CX metrics to bridge the gap between departments
With NPS, CSAT, and CES knowledge and expertise, customer experience professionals can layer in cross-collaboration metrics to align a company’s products, revenue, and marketing strategies with the customer experience.
Retention and churn
Retention and churn are two sides of the same coin. A retention rate refers to a company’s ability to keep its customers without losing them to competitors. It is measured by evaluating the number of customers at the start and the end of a period, accounting for new customers acquired during that time. If a company has an 80% retention rate in three months, it had a 20% customer churn rate.
Imagine a company with a high Net Promoter Score and Customer Satisfaction Score with a particular product but also a high churn rate. This misalignment can provide clues to help a company further investigate the source of dissatisfaction or friction.
For example, the company may realize that the churn rate was specific to customers obtained through a recent campaign. This information allows marketing, sales, and customer success teams to partner with CX to implement changes in strategy and improve retention.
Cross-selling and upselling
CX professionals know that acquiring a new customer is costlier and takes more effort than retaining an existing customer. It’s also true that retained customers tend to buy more products and spend more once they’re loyal to an organization.
Cross-selling and upselling are avenues to market to existing customers. Put simply, cross-selling is the method of introducing customers to additional product lines, services, or affiliates, while upselling encourages customers to choose higher service tiers or product options.
When product and sales teams collaborate with customer experience departments to develop cross-sell and upsell programs, they are more likely to achieve revenue targets and high CX scores.
Customer lifetime value
Customer lifetime value (CLV) measures the expected revenue from a customer throughout their relationship with a company. Its simplest measurement is:
- Customer value x customer lifespan
CLV can be calculated at the company level, within customer segments, or within specific marketing channels. For instance, a company may determine that customers acquired through in-person events have a higher CLV than customers acquired through ads, and revise their marketing budgets accordingly. Customer lifetime value can also help sales teams refine cross-sell and upsell programs.
Putting CX metrics into action
In the experience economy, customers have high expectations and can act quickly to express dissatisfaction through feedback on social media and other public forums. CX metrics help organizations identify areas for improvement, understand pain points, and respond quickly to customer concerns to prevent minor issues from becoming significant losses.
No single, one-size-fits-all metric can provide customer experience epiphanies to an organization. Optimal customer experience efforts will combine a variety of metrics designed to fit the company’s industry, product or service type, and strategic goals.
To learn more about important trends affecting all CX efforts in 2023, watch our recent webinar featuring CX expert Dan Gingiss on-demand.