Tracking and measuring the satisfaction levels of your customers is critical for success. Poor levels of customer satisfaction will result in lost customers and adversely affect your brand image.
Customers who have a great customer experience are 5 times more likely to become brand advocates and recommend your business to others. And people who have a great customer experience are 54% more likely to make another purchase.
That’s why it’s essential that you assess the experiences of your customers and promptly address any issues before you lose valuable business.
What are Customer Satisfaction Metrics?
Customer satisfaction metrics, also called CX metrics or customer experience metrics, are numeric scores which provide accurate and representative indications of the experiences of your customers. Well known and commonly used metrics for assessing customer satisfaction include Customer Satisfaction Score (CSAT), Net Promoter Score (NPS) and Customer Effort Score (CES). But there are others such as Customer Acquisition Cost (CAC), Customer Lifetime Value (CLTV), Average Handling time (AHT) and First Response time (FRT).
Making the right choice of metrics to measure customer satisfaction is important. No two businesses are identical so there is no ‘one size fits all’ metric which provides everything needed by all businesses. Before even thinking about metrics it is always good practice to consider and define exactly what you are aiming to achieve. By clearly identifying your aims and objectives you will be better able to select the metric or metrics which will provide accurate indications of your progress toward attaining them.
Let’s take a look at some popular CX metrics.
Customer Satisfaction Score (CSAT)
Customer Satisfaction Score (CSAT) is widely used and respected as a method to quantify and accurately represent customer satisfaction with provided services. Generally, customers are asked to rate their levels of satisfaction on a scale from 1 to a predetermined maximum, typically 5 or 10. Sometimes percentage scales from 0 to 100 might be used, lower scores reflecting lower levels of customer satisfaction.
Another approach is to use emoticons instead of numbers in surveys. These simple images, such as smiley faces, tend to be more engaging to survey respondents, encouraging them to click on the icon which most closely reflects their experience. This super-simple technique can greatly enhance survey response rates.
The universally standard CSAT question is:
“How would you rate your overall satisfaction with our service?”
Obviously, the specific wording can be changed to match your business and the customer interaction, but the question format would remain simple, clear, non-ambiguous and very easy to answer. It is crucial to ask this question while the customer’s interaction with your service is still fresh in their memory.
The benefits of using CSAT surveys include simplicity and the ability to compare scores with those achieved by others in the same industry.
On the negative side, CSAT surveys are subjective. One customer’s reported satisfaction level is not likely to be the same as another even though they may have had the exact same experiences. Also, survey response rates can be affected by many factors including cultural norms and the fact that people with neutral or negative experiences are less likely to respond at all.
Net Promoter Score (NPS)
Net Promoter Score (NPS) was developed back in 2003 as a way to measure how well a business, or organisation, treats clients or customers. It specifically examines the likelihood that a customer or client will recommend a service, product or brand.
Net Promoter Score surveys ask just one, key question:
On a scale of 0 to 10, where 0 is ‘not likely at all’ and 10 is ‘extremely likely’:
How likely is it that you would recommend [brand, product, service] to a friend or colleague?
Numeric responses are grouped together and classified as follows:
Promoters: Are respondents scoring 9 or 10. These are people who are loyal and enthusiastic about the brand, product or service.
Passives: Are those scoring 7 or 8. These are satisfied customers but they are not particularly enthusiastic and might be tempted by competitors.
Detractors: These are people scoring from 0 to 6. These are people who might be saying negative things about their experience and therefore damaging your brand.
Net Promoter Score is calculated by considering only the promoters and detractors. Subtracting the percentage of detractors from the percentage of promoters provides the Net Promoter Score.
NPS = % Promoters – % Detractors
NPS has been found to strongly correlate with repeat purchases, brand loyalty and word-of-mouth promotion.
The benefits of NPS include simplicity, ease of implementation and high response rates. NPS scores can be compared with the scores of others in the same industry and by asking customers if they would consider promoting your business they are often prompted to do so.
On the negative side, NPS can paint an unrealistic or unrepresentative picture and the scores chosen by respondents can be skewed. For example, some people will tend to select a lower than perfect score as they believe ‘there is always room for improvement’.
Customer Effort Score (CES)
Customer Effort Score or CES is an interesting customer satisfaction metric as it aims to determine how much effort a customer feels they have needed to make in order to resolve their issue. This is clearly a metric with customer service applications.
Research conducted in 2010 determined that the easiest way to increase customer loyalty is by making it easy for them to deal with their issue. Businesses create loyal customers primarily by helping them to solve their problems quickly and easily.
Rather than asking customers to gauge their satisfaction levels Customer Effort Score (CES) is measured by asking them to indicate how easy their interaction with your business was. A typical CES question might be:
To what extent do you agree or disagree with the following statement:
[Brand, department, service] made it easy to handle my issue.
Respondents are asked to select their answers from a scale of maybe 1 to 5 or 1 to 7 where 1 is ‘strongly disagree’ and the top score is ‘strongly agree’.
The benefits of CES include the fact that it is not a subjective assessment of customer satisfaction. It deals with customer’s interaction with your business and how easy they found this experience to be.
Customer Acquisition Cost (CAC)
Customer Acquisition Cost (CAC) is a measure indicating how much, on average, it costs your business to acquire a new customer. It can be calculated by totalling the amount spent on sales, marketing, promotion and advertising, over a given period of time, and dividing this by the number of new customers acquired over that time period.
CAC = Cost of marketing, advertising, promotion etc. / the number of new clients derived from this activity.
The cost of your marketing, advertising and promotional activity should be considered as an investment. By deriving a realistic measure of how much investment it takes to gain a new customer and then comparing this with the value of that customer you can determine your per-customer return on investment (ROI). Generally, CAC is considered along with customer lifetime value (CLTV) in order to determine how much revenue is derived.
Customer Acquisition Cost comparisons can be particularly useful when comparing costs associated with customer acquisition from various marketing channels.
Customer Lifetime Value (CLTV)
Customer lifetime value or CLTV (sometimes referred to as simply LTV) is generally the revenue your business derives from a customer over a given time period. The given time period might typically be the anticipated lifespan of the customer relationship.
To calculate CLTV:
- Determine the average purchase value for all customers.
- This can be achieved by totally the purchase values for a group of customers, over a given time period, and then divide by the number of customers.
- Calculate the purchase frequency rate.
- This is a measure of how often each customer makes another purchase. This can vary enormously between industries. For example, a coffee shop might sell coffee to a customer many times in one week but a new automobile showroom might only see some customers once every few years. Selecting the most appropriate time period over which to assess purchase frequency is obviously important.
- Calculate the average customers value.
- Knowing the average purchase value and the average time over which repeat purchases are made we can determine the average customer value over a given time period
- Determine the average customer lifespan.
- Here we’re not considering how long a customer will live but how long a customer remains a customer of your business.
- Calculate your Customer Lifetime Value (CLTV).
- CLTV can then be derived by multiplying the average customer lifespan (in years) by the average customer value per year.
Here’s an example:
- Average customer spend per purchase = $10
- Average purchase frequency = Every two weeks
- Average customer value per year = $10 x 26 = $260 (since repeat purchases made every two weeks).
- Average customer lifespan = 20 years (determined from business experience and expectations).
- CLTV = 20 x $260 = $5200
By combining CLTV with Customer Acquisition Cost (CAC) it’s possible to determine the overall, lifetime return on investment. By segmenting Customer Acquisition Cost, based upon acquisition channels, it is readily possible to determine which customer acquisition paths are the most profitable.
Customer Request Volume
When supporting customers it’s important to have a good appreciation of how many customer support requests yout team are receiving over a given time period. Overloading your customer service agents is a surefire way to adversely affect the quality of the service provided.
When assessing the volume of your customer service requests it important to consider factors such as seasonal influences, times of day along with geographic and cultural influences.
Monitoring the volume of your customer requests over time can also provide a valuable indication of issues which require detailed investigation. For example, investigating a sudden spike or surge in customer service requests.
Average Number of Replies per Request
The average number of replies per request is simply the total number of customer replies on resolved issues divided by the number of resolved issues.
Ideally, this number should be as low as possible in order to keep the amount of effort required from the customer low. Most customers consider first contact resolution to be highly important so, generally, you want to see the average number of replies per request to be below 2.
Higher average numbers of replies per request can indicate that agents are not able to solve your customers’ problems, prompting them to get in touch again, or it may indicate that requests are not being dealt with by the most appropriate people.
Resolution Rate is a measure of how many issues were dealt with satisfactorily over a given time period divided by the total number of support requests over the same time period.
Generally this is represents as a percentage. A 100% resolution rate indicates that all issues are being satisfactorily addressed within an acceptable timeframe.
First Response Time (FRT)
Customers like to receive quick responses to their requests, even if the initial response does not solve their problem. People do not like to be kept waiting for a reply. Measuring and monitoring your First Response Time (FRT) is therefore a very valuable customer service and satisfaction metric. Keep in mind that acceptable first response times vary across different channels such as live chat, email and social media.
First Contact Resolution Rate (FCR)
In customer service the First Contact Resolution (FCR) rate represents the percentage of issues which are resolved satisfactorily on the very first customer interaction. As noted, most customers consider first contact resolution to be highly important.
In practice this means that if, for example, a customer has contacted your service department via your live chat facility to request assistance with an issue and your agent was able to resolve their issue while they were on the call then this would be considered a first contact resolution.
It’s clearly important to ascertain exactly when an issue has been satisfactorily resolved. Generally this is achieved by either asking the customer, via an immediate, follow-up, customer satisfaction survey, if their issue was resolved satisfactorily on the initial contact with the service desk. Alternatively, service agents might indicate via the service desk whether a reported issue was resolved within the first contact.
Average Handling Time (AHT)
Average Handling or Handle Time (AHT) is a call center metric that represents the average length of time spent on a customer contact or call.
Average Handling Time is calculated by adding up the total time spent on calls with the total time customers are on hold and dividing this total time by the total number of calls over a given time period.
AHT can be a great indicator of where additional service agent training would be beneficial.
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