Do you remember the last time you were impressed by the company’s attitude to its clients? It’s like a text-only confirmation of delivery for introverts who don’t like to talk on the phone. Or all the possible payment methods in an online shop. The perfect customer experience (CX) is crucial for success as it helps to attract and, importantly, retain clients.
Forrester in the 2017 newsletter mentioned that 72% of enterprises consider CX their main priority. Despite entrepreneurs talk about the customer-centric model, a lot of businesses still fail to implement it in real life. It’s not an easy task. It includes dozens of aspects, from correct targeting to providing personalized services that are quite costly.
But there’s a hidden threat that can be more dangerous in the future. A significant part of current businesses doesn’t have efficient customer experience measurement (CEM) methodologies. Means, companies don’t even know whether their clients are happy or not. And this problem nullifies all development achievements.
The guide is to reveal essential info about CEM, help to establish proper measurement strategies, and choose the best metrics. Let’s begin!
The Essence of Customer Experience and Its Measurement
First things first, here’s a simple explanation of the customer experience measurement idea: it’s the practice of evaluating the customers’ satisfaction/disappointment, including exact positive/negative cases. The most comprehensive approach should count all customer actions. Surely, a relevant database with analytical features is required, too.
The best thing about proper CEM is that it helps a company to become more customer-centric. Executives often declare the importance but rarely change something. They just don’t get the entire picture. With centralized, analyzed, and visualized data from numerous customer surveys, managers can easily define the direction to move in.
Key Conditions to Implement CEM
To start the effective measurement, it’s crucial to understand the entry points. Pay attention to these basic things as they define further results:
- Cover All Departments: In other words, it’s important to cover the horizontal structure. When a company understands how each branch/team affect the final CX, it becomes easier to spot weak links and top performers. Thus, managers can change ongoing processes to improve problem spots.
- Cover All Levels of Management: In addition to the horizontal scheme, companies should focus on the vertical one. To get all the insights, it’s desired to gather data from all employees, from top C-grade executives to regular social media managers and manufacturers or engineers.
- Cover Both Emotions and Quality: Finally, the majority of enterprises tend to think about the quality of their products or services. They forget about the non-rational side. By evaluating the clients’ emotions, firms can get deeper insights that lay beneath the decisions. Wherein, emotional measurements are even trickier than rational-focused ones.
By starting with these things in mind, you have good chances to implement CEM metrics successfully. By the way, let’s look at them.
Metrics and KPIs: Choosing the Best
Well, so what about the indicators? There are several main parameters that are widely used to measure CX. Different firms can use one or a few of them. Depending on the analytical capabilities of the software, it’s even possible to add all of the existing metrics. It’s suggested to choose one or two key KPIs and use other examples as secondary only. Thus, you will not be overloaded with data.
According to Lumoa, the most popular indicator is the Net Promoter Score (NPS) that is used by 64.5% of the survey’s respondents. Customer Satisfaction (CSAT) and churn rate are close with 43.6% and 42.7%, respectively. Retention rate has 35.5% of popularity. And the fifth place is occupied by Customer Lifetime Value (CLV) that stands for 28.2%. Further, we will review all of these metrics in more detail.
1. Net Promoter Score (NPS)
This KPI shows the percentage of customers who would recommend your business to other people. Hence, the survey looks like a single scale from 0 to 10 where 0 is «wouldn’t recommend for sure» and 10 is «would recommend for sure». Rates from 0 to 6 are detractors, 7-8 are passives, and 9-10 are promoters. To calculate the NPS, you should subtract detractors by promoters. Scores above zero are good, and above 50 are excellent.
Example: 75 respondents out of 100 put a 9 or 10 mark, 15 respondents put 7 or 8, and 10 respondents rated the company from 0 to 6. Thus, the NPS is 65 (75%-10%).
2. Customer Satisfaction (CSAT)
Here’s another example of a survey. Generally, CSAT is about the actual level of customer satisfaction with specific services/goods. It’s also based on the 0-10 scale where 0 is «very satisfied» and 10 is «very disappointed». Surveys also can include the «didn’t use/didn’t experience» point. CSAT allows you to clearly see which aspects your clients love and which they want to be improved. The challenge is to formulate the lines for surveys.
Example: a restaurant can ask clients about their satisfaction with meals, service, atmosphere, etc. Each can be rated from 0 to 10 and then averaged.
3. Churn Rate
It’s a negative indicator that focuses on the percentage of the customers refused to deal with your business. It may include clients who didn’t make another purchase during a given period or those who canceled their subscriptions. Churn rate is calculated by dividing the number of lost clients by the number of all active clients. There is an annual churn, a monthly churn, and so on. Obviously, the lower it is the better.
Example: let’s say, from the total number of 20,000 users of your service, 800 persons have canceled the subscription during the last month. Thus, churn rate is 0.04 or 4% (800/20,000).
4. Retention Rate
Retention rate shows the company’s ability to retain its clients, convince them to continue using the services or purchase the products. This metric is bounded with the previous one. Actually, you can get the retention rate by subtracting 100% by churn rate. Also, to calculate the retention, you can use the formula: the total number of customers at the end of time frame subtracted by the number of new customers during this period and divided by the total number of customers at the beginning of this frame. Numbers above 90% are really good while the rates below 85% are undesirable.
Example: It will be like (21,000 – 1,200)/20,000 = 0.96 or 96%. From the example above, the retention rate will be 96%, too.
5. Customer Lifetime Value (CLV)
The long-term KPI helps to understand how valuable each customer is for the company. Instead of analyzing single purchases, you can focus on the entire lifecycle. Basically, CLV of a given client is the total sum of all his/her spending related to your business. Purchases, subscriptions, maintenance fees, insurance, whatever – everything that can be calculated, counts. Surely, in large enterprises, it becomes more difficult to analyze CLV.
Example: a regular Netflix subscriber spends from $9 to $16 per month. Users that enjoy this service for a year, have CLVs from $108 to $192, respectively.
Building Your Own CEM Platform
For all enterprises that want to optimize customer experience measurement, McKinsey offers a convenient 3-step guide. Surely, it’s possible to evaluate CX without dedicated software but the efficiency would be much lower in this case. If you’re really going to build the customer-centric enterprise, you will need a system to collect and analyze data. Ideally, it also should share some CRM features like real-time responses to feedback.
Here are three basic steps to select or build the system:
- Choose the Model: Here, the most important part is to decide on the metrics used. It should come with the desired results, not just indicators. In addition to core metrics, you can list a few additional ones. They will act as operational indicators and help to understand customer behavior.
- Design the Tools: Think about the modules you want to use. The list may include dashboards, databases, analytical tools, visualization platforms, etc. Also, design the scheme of surveys, their triggers, and targeting approaches. The more detailed your plan is the more chances you will get the most suitable system.
- Find the System: Apart from creating this platform in-house, you can cooperate with tech partners or outsourcers. Thus, you will save on the cost of software development. Eastern Europe, for example, is a viable choice as it features low rates but high quality. Just remember to check the chosen partner’s reviews and reputation.
Also, be sure to consider other parameters of the software. Ideally, it should be highly flexible and scalable to meet different business needs. Don’t forget about the costs. It’s better to invest less in the core functions than to overpay for redundant tools. Remember that the perfect measurement software is the one that meets your objectives.
Useful Tips for Efficient Measurement
Sadly, but even the companies that try to optimize CEM don’t do this job perfectly. In another study by Forrester dated to 2019, researchers focus on their CX Index that reflects how successful enterprises are. Compared to 2018, different types of businesses show tiny growth while airlines decrease their CX score. What’s more important, 81% of the evaluated brand feature stagnant scores with no firms show an excellent increase for the fourth year in a row.
Hence, we think it may be useful for readers to know how to optimize CEM. Here are a few suggestions that can help:
- Deploy efficient software. With powerful CRM and analytical systems, you will be able to track indicators in real-time.
- Focus on segments. You can use various filters like age, sex, employment, income, health, etc. Choose the most relevant group and target your metrics at it.
- Reach customers using different channels. Study your audience to know the most favorite channels. And then deliver your surveys via them.
- Use appropriate metrics at the appropriate time. Say, NPS and CSAT are good to deploy when a client has enough time to analyze his/her experience.
It’s not an easy task to evaluate CX, especially in big firms. As the number of clients increase, the complexity rises, too. Thus, each business owner and a top-manager should clearly understand the basics of CEM. It’s crucial to know the best market metrics and how to use them. Finally, it’s desired to use modern software that simplifies measurements.