- Net Promoter Score (NPS)
- Customer Satisfaction (CSAT)
- Churn rate
- Retention rate
- Customer Lifetime Value (CLV)
- Customer Effort Score (CES)
Today, our blog is going to brief you on how these KPI’s matter and how brands worldwide have been using them to provide excellent experiences to their customers.
Net Promoter Score (NPS)
NPS is an industry-standard and most widely used CX metric to measure customer satisfaction. Introduced in 2003, NPS has so far, been implemented by global organizations like Apple and Airbnb to measure their CX score
How does NPS work?
NPS is a short and simple way for measuring customer feedback. With only two questions that refers to a concept and strategy, it provides a crucial insight as to how your customers feel about your brand. NPS is often used to rate a brand, service or product in general.
For instance, here are 2 sets of questions that you can ask on an NPS survey.
- “On a scale of 0 to 10, how likely are you to recommend our business to a friend or colleague?”
- "How likely are you to recommend (product name) to a friend or colleague?”
The first question helps you identify your promoters (who score higher on the scale) and your detractors (who score less on the scale). Therefore, the overall score is calculated by
Overall NPS score = % of Detractor - % of Promoters
Likewise, the 2nd question helps you understand what your customers feel about your brand. It’s an open-ended question that helps you identify you improve your customer satisfaction score.
Why use NPS?
- It’s fast, simple and easy both for customers and companies to work on
- Follows an open text feedback mechanism that allows to dive deep and see the big picture
- It’s a widely understood industry-standard metric
- NPS is also utilized to measure word-of-mouth marketing strategies
Customer Satisfaction (CSAT)
CSAT score is measured on a scale from 1 to 5 and is one of the most widely used CX metrics. Used widely by Google or Facebook for “ratings” CSAT is extremely useful if you want to measure customer satisfaction with one-time interaction. Often asked from a customer after a transaction or after solving a customer support ticket it helps enormously to evaluate the efficiency of the customer service department. CSAT is a great way to see what your customers think about you right now.
Customer Effort Score (CES)
The third most popular of the list, Customer Effort Score is a transactional metric that involves customer's input to assesses the simplicity of a single solution. CES questions are averaged on a 5-7 point scale system with a single, straight question. Given below are some examples of CES:
How to measure CES?
CES scores help you in analyzing the complexity of the service. Therefore, to measure it, you need to follow both the average score and the distribution of scores. Analyzing distributions could help you in identifying which of your customers experience effortless service and, more importantly, find those that struggle to during the process.
By pro-actively helping and reaching out to those who are struggling, you can effectively decrease churn. CES is also a good metric for revealing your detraction drivers.
Churn rate reflects how many of your customers have stopped using your products or services. Generally, customer churn rate counts the total number of lost customers or the percentage of lost customers within a defined time period.
Churn Rate = Number of Customers Lost Over Period / Number of Customers at Start of Period
Interpreted as the lost business value, customer churn rate is a critical metric that businesses need to focus on. If your customer churn rate is high, its time you take your customer feedback to heart and work on providing better customer experience especially since acquiring a new customer is 5X times costlier than retaining an existing one.
As the name suggests, customer retention rate reflects how a business retains customers over a specific period of time. The metric is inversely proportional to the churn rate: the higher the retention is, the lower the churn rate would be.
If it doesn't make you work on your retention strategy just yet, think about this: according to a research by Temkin Group, 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.
Customer Lifetime Value (CLV)
Customer Lifetime Value (CLV) predicts the net profit attributed to the entire future relationship with a customer. CLV can either be calculated as a business value that customer brings during the whole time of the relationship with a company or as a value over a defined period of time. It is usually looked at as an average time the customer spends with the brand.
Calculating your CLV comes in 2 stages
- Stage 1 includes calculating Lifetime value
Lifetime Value = Average Value of Sale * No. of Transactions * Retention Time Period
- Stage 2 includes calculating Customer’s Lifetime value
Customer Lifetime Value = Customer Value * Profit Margin
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Ever wondered on how delighted your customers are when they visit your website? Although there are innumerable ways coming up to measure your customer satisfaction score, there are 6 key KPI’s that stand tall above others.
According to The State of the Customer Experience survey (2018), all companies track customer experience using these worldwide recognized KPIs: