It's almost universal. No matter what business you're in, you’re in the customer experience business. All aspects of your business—from product design to marketing and sales to ongoing support—should create a positive customer experience that keeps people coming back for more.
Look at the practices of top companies, and you'll see that the customer is at the center of their business models. In order for your organization to similarly create happy customers, you must first be able to measure customer experience. This is where key performance insights (KPIs) come in.
The role of a customer experience KPI in your customer experience strategy
Successful customer experiences don't happen through good intentions alone. You should consider implementing a customer experience strategy that defines every action to take at every customer touchpoint.
This strategy will likely use competitive insights, customer sentiment research, marketplace data and customer actions to determine where you can reduce friction, introduce new features, provide additional training and any other activity that can help you create a personalized customer experience.
In just about every customer experience strategy, there are five key elements that businesses can focus on delivering and improving:
- Customer satisfaction
- Customer loyalty
- Brand reputation
- Operational execution
- Staff engagement
To measure customer experience in a way that helps your business improve one or more of those elements, start by measuring a customer experience KPI. This KPI can be used to quantify the customer experience, so you can make data-driven decisions about how to prioritize investments, which goals to set, how to determine success, and when to intervene if your customer experience goes off track.
How to measure customer experience using KPIs
There are several KPIs you can use to measure customer experience. While you can measure any and all of them, it often makes sense to start with a single KPI. This will allow your team to tailor all their efforts toward driving meaningful, noticeable change instead of making lots of little efforts that might not materially impact the way your customers think about your business.
Here are four examples of KPIs you can use to measure customer experience:
- Net promoter score (NPS): To calculate NPS, ask customers to rate your business on a scale of 1-10 based on how likely they are to recommend your brand to a friend. A promoter is anyone with a score of 9 or above; a detractor is anyone with a score of 6 or below. Subtract the percentage of detractors by the percentage of promoters to calculate your score.
- Customer satisfaction (CSAT): To calculate CSAT, ask customers to rate their satisfaction with the product or service they received from your business on a scale of 1-5. Divide the number of 4s and 5s by the number of survey respondents to calculate your satisfaction score.
- Churn rate: To calculate churn, divide the number of customers lost over a specific time period by the total number of customers you had at the start of that time period.
- Customer lifetime value (CLV): To calculate CLV, multiply the average customer expenditure per visit by the number of visits per week to determine your average customer value per week, and then multiply that number by the average time a customer stays a customer before they churn.
To determine the right customer experience KPI for your business, start with your core customer goals. Do you want customers to spend more per visit? Keep coming back? Make more referrals? While the answer is likely "yes" to all three, prioritize one goal that you find particularly critical, and then choose the customer experience KPI that aligns with that goal. Once the KPI is trending in the right direction, you can consider tracking additional KPIs.
Keep in mind that even if you only measure one customer experience KPI, any improvement will likely positively impact other KPIs that you might find valuable but don't have time to track. For example, a rise in customer satisfaction may lead to reduced churn, which in turn improves customer lifetime value. More satisfied customers will also be more likely to recommend your business to a friend or colleague.
The bottom line: While there are dozens of metrics you could use to measure your business' success, a carefully targeted customer experience KPI can often tell you everything you need to know about the people who matter most to your business.
Need help moving your customer experience KPI needle? Learn how Verizon's CX Design can help you improve your KPI performance.
The author of this content is a paid contributor for Verizon.