If you want to convince the C-Suite to invest in customer experience, you need to know your customer experience metrics. But not all metrics are created equal, so focus on the ones that executives will care most about.
When you have the right metrics, you can sell senior management on your customer experience initiatives and get the buy-in, budget, and resources you need.
When you have the wrong metrics, you will often achieve the opposite result. So-called “vanity” metrics, for example – followers, likes, retweets, and influencer mentions in social media, for example – will leave the CEO or CMO exclaiming that famous line from Jerry Maguire: “Show me the money!”
The best customer experience metrics tie back to the company’s bottom line, which is what executives are most focused on.
Let’s count down the top 5 customer experience metrics in terms of value to the company:
Customer Satisfaction, or CSAT, is a measurement of how satisfied customers are doing business with you.
But is satisfied enough these days? As I explain in my book, The Experience Maker: How To Create Remarkable Experiences That Your Customers Can’t Wait To Share, customers share either very positive or very negative experiences; what they don’t share is just being satisfied.
Related: Buy The Experience Maker on Amazon or Barnes & Noble, or head over to BulkBooks to get it at bulk pricing for the entire team.
Satisfied customers may stick around for a while, but not out of a sense of loyalty. They’ll likely stay until they get a better deal – or a better experience – elsewhere.
Another issue with the CSAT score is that it represents a snapshot – a moment in time – that has already happened. It may give you an indicator of how things are going, but not why. To get at the why, you need to supplement this score with qualitative customer feedback.
It may surprise some readers to see Net Promoter Score, or NPS, this low on the list, since it is perhaps the most ubiquitous customer experience metric.
NPS is a measure of customer loyalty, as it indicates how likely customers would recommend a company to others. The percentage of brand detractors is subtracted from the percentage of brand promoters to generate a score.
Research from the London School of Economics and the Temkin Group has found a connection between NPS and revenue, and NPS and Customer Lifetime Value (more on that metric later). But NPS suffers from the same problem as CSAT in that it’s a number that represents only a moment in time. Further, it indicates whether customers would recommend a company to a friend, not whether they actually have done so.
NPS does a great job of telling companies how they’re doing, but not why. So when it goes up month-over-month, everyone cheers and pats each other on the back. When it goes down, everyone scrambles for rationalizations – like the pandemic, supply chain issues, climate change, or some other uncontrollable force. Like CSAT, NPS must be accompanied by qualitative customer feedback to get the entire picture.
Customer Effort Score, or CES, gets closer to the heart of what makes a remarkable customer experience in the first place. It measures how much work a customer has to do to complete a task, such as using a product, resolving an issue or getting a question answered. Customers typically answer a question on a 7-point scale, with higher scores indicating a user-friendly and well-designed experience, and lower scores suggesting that an improvement is necessary.
According to the Harvard Business Review, the number-one most important factor in a customer’s loyalty is reducing customer effort. Or as Major League Baseball manager Joe Maddon says, “Do Simple Better.”
Credit card issuer Discover Card used a customer effort feedback question to identify pain points on its website and systematically eliminate them. The result was higher customer satisfaction and an eventual J.D. Power Award victory.
If you don’t know the lifetime value of your customer, you need to start calculating it immediately. This is the only metric on this list that is measured in dollars and cents, so that executive crying “Show me the money!” is going to respond well to this one.
Start by finding out how much it costs to acquire a new customer. Then look at the expected sales or revenue from that customer over the course of their relationship with you, and subtract out any costs associated with delivering your product or service. The total profit borne out of the relationship (profit = revenue – cost) minus the initial cost to acquire the customer is the Customer Lifetime Value.
Three key results of creating a remarkable customer experience will also improve CLV: Customers will (1) spend more, (2) stay longer, and (3) recommend others.
If a company is struggling with short-term thinking, CLV is the single metric that will change that thinking the fastest. All too often, companies focus too much on one individual transaction, losing sight of the value of the entire customer relationship. Companies that have simple and flexible return policies, for example, understand that potentially losing a little money on one transaction is an acceptable investment for long-term customer loyalty.
Wait, there are two metrics in the number-one spot? Not really, since these two are actually the inverse of each other.
Retention rate measures the percentage of customers that continue doing business with you, while churn rate measures the percentage of customers that stop doing business with you. Both can be calculated by looking at the total number of customers today vs. the total number of customers at a previous date (usually month-over-month or year-over-year).
These metrics are the most powerful at convincing senior executives that a customer experience project is worth investing in because they know that it is very expensive to acquire new customers. So when we spend all that money to bring them in, we definitely want to keep them for a while!
According to Joey Coleman’s research in Never Lose A Customer Again, between 20 and 70 percent of new customers will leave in the first 100 days of a relationship, depending on your industry. Can your company afford to lose that many customers? Even a small improvement to either of these metrics can have drastic impacts on the bottom line.
What do you think? Is your order of importance different? Are there other metrics that should be added to the list? Let me know by emailing me at email@example.com or sending me a message on LinkedIn, Twitter, or Instagram.
Image by Gerd Altmann from Pixabay