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7 min read

Customer Experience Measurement: 16 KPIs the Pros are Tracking

Customer Experience Measurement: 16 KPIs the Pros are Tracking

Ask any customer experience (CX) professional and they’ll tell you that great customer experiences drive increased revenue. This is because happy customers are loyal customers that will bring both repeat and new business by word of mouth. But how can you track the return on investment (ROI) and impact of your customer experience management (CEM) program over time?

The good news is there are plenty of key performance indicators (KPIs) that you can use to measure the impact of your CEM program. In this blog, we’ll dive into the top 16 customer experience KPIs and how to calculate them so you can determine which ones are right for your program.  You can also download an easy to print PDF with just the definitions and formulas here.

  1. Customer Lifetime Value
  2. Customer Acquisition Cost
  3. Up-Sell and Cross-Sell Rate
  4. Conversion Rate
  5. Average Order Value
  6. Average Revenue per Customer
  7. Net Promoter Score
  8. Customer Churn Rate
  9. Customer Retention Rate
  10. Customer Effort Score
  11. Customer Satisfaction
  12. Net Emotion Score
  13. Problem Resolution Time
  14. First Response Time
  15. Cost Per Interaction
  16. First Contact Resolution

Customer Lifetime Value

Customer Lifetime Value (CLV) is the projected revenue a single customer will generate for a business during the time they remain a customer.

CLV ($) = (Avg. Sale Price per Customer × Avg. # of Times Customer Buys per Month) / Monthly Customer Churn Rate

It’s generally cheaper to retain existing customers than to acquire new ones. That’s why nurturing existing customer relationships by finding ways to add value to their experiences is a critical element of increasing business revenue.

Increases in customer lifetime value lead to increased customer retention, more revenue generated per customer, and less marketing dollars spent attracting new customers.

Customer Acquisition Cost

Customer Acquisition Cost (CAC) is the amount of money spent to acquire a new customer.

CAC ($) = Sales and Marketing Costs / # of New Customers Acquired

The most inexpensive and effective way to acquire new customers is through word-of-mouth. And the easiest way to get people talking about our brand is by consistently exceeding their expectations and anticipating their needs.

Pro Tip: Compare your Customer Acquisition Cost to your Customer Lifetime Value. If the cost of acquisition is much higher, think about how to increase the value of the interactions that occur after a customer has been acquired rather than the effort it takes to acquire a new one.

Up-Sell and Cross-Sell Rate

Up-Sell and Cross-Sell rates are the percentage of people who purchase an add-on or upgrade to a product or service.

Up-Sell / Cross-Sell Rate (%) = # of People Who Purchase Add-On or Upgrade / Total # of Transactions

An Up-Sell refers to a sale that is above and beyond what the customer originally intended on purchasing, whereas a Cross-Sell refers to the sale of a different product or service to an existing customer.

Customers who have a better experience spend more. On average, customers who have a high-quality experience are over three times more likely to buy additional products and services from your brand.

Conversion Rate

Conversion Rate refers to the percentage of total visitors or prospective transactions who end up completing a sale.

Conversion Rate (%) = # of Completed Sales Transactions / Total # of Interactions Handled

Whether via a website, application, or physical store, when a visitor engages with your brand with the intent to purchase but can’t easily find what they are looking for, they are likely going to get frustrated and leave.

Customers want the buying experience to be easy. The more effort required on their end, the less likely they are to make a purchase.

Understanding the customer journey, identifying gaps in the customer experience, and having the right tools in place to take immediate action is critical to maintaining a healthy conversion rate.

Average Order Value

Average Order Value (AOV) is the average amount a customer spends in a specific customer group when purchasing a product or service.

AOV ($) = Sales Revenue / Total # of Sales Transactions

AOV has a clear impact on the bottom line as an increase or decrease directly affects revenue and business growth. To increase AOV, businesses need to find more ways to generate valuable experiences by having a clear view of what matters most to customers.

Average Revenue per Customer

Average Revenue per Customer (ARPC) is the number of sales generated per customer during a specific period.

ARPC ($) = Sales Revenue / Total # of Customers

Similar to Average Order Value, ARPC is a clear indicator of how much value each customer provides to a business and how much that value is growing overtime.

Net Promoter Score

Net Promoter Score (NPS) is a customer feedback tool that measures client satisfaction and loyalty to a brand. NPS data is gathered through a scaled survey question and measured on a scale of -100 to +100.

NPS = % of Promoters - % of Detractors

Promoters are customers that are devoted to a brand and recommend them to other potential customers whereas detractors are customers who are dissatisfied and unlikely to remain long-term customers. Anyone who falls in between these two groups is considered passive.

The best way to maintain a healthy NPS score is to learn as much as you can about your promoters in order to identify ways to win over passives and detractors.

Customer Churn Rate

Customer Churn Rate is the percentage of customers who do not return to a company after making a purchase either by failing to make a repeat purchase or by canceling their service during a specific period.

Customer Churn Rate (%) = # of Lost Customers / # of Active Customers

Customer churn can mean the percentage of customers who don’t return to a business, people who unsubscribe from an email list or unfollow a brand on social media. The point is, churn is something you want to avoid as it indicates whether or not you’re meeting customer expectations.

For example, if a restaurant discontinues a popular promotion or removes an item from their menu that customers can't get enough of, their churn rate is likely to increase.

Monitoring the customer experience and gathering customer feedback is the best way to avoid these potentially fatal business decisions and is the key to making informed, proactive decisions, that will ultimately result in healthy customer churn.

Customer Retention Rate

Customer Retention Rate is the percentage of customers who remain with a company over a period of time.

Retention Rate (%) = (# of Customers at End of Period - # of Customers Acquired During Period) / Total # of Customers at Start of Period

Similar to customer churn rate, customer retention is extremely valuable for company growth. In fact, a 5% increase in customer retention can increase a company's revenue by 25-95%.

While it is always important to drive growth through acquiring new customers, as mentioned earlier, the cost savings of building long-standing customer relationships are significant in comparison to the effort spent on acquiring new ones.

Customer Effort Score

Customer Effort Score (CES) is measured through a customer satisfaction survey to determine the amount of effort a required by a customer to accomplish a task. This is typically measured on a defined number scale through a post-interaction survey with a CES score of 1 indicating low effort.

CES = % of Respondents Who Indicate Low Effort - % of Respondents Who Indicate High Effort

The customer effort score is a highly actionable piece of customer feedback as it provides insights into a specific event or circumstance along the customer's journey.

Customer Satisfaction

Customer Satisfaction (CSAT) is typically measured through a customer feedback survey represented on a scale of 0% to 100%. If the scale goes from 1 to 5, only customers who rated 4 or 5 should be included as a satisfied customer.

CSAT (%) = # of Satisfied Customers / Total # of Satisfaction Survey Responses

Measuring customer satisfaction is crucial to ensuring brand standards are aligned with customer expectations and uncovering customer pain points. Keeping customers satisfied is at the core of a successful business as one dissatisfied customer can lead to negative brand attention that has far greater repercussions than one happy customer.

Net Emotion Score

Net Emotion Score (NES) is the difference between positive and negative emotions associated with a product, service, or brand. Positive emotions are associated with feelings of happiness, pleasure, trust, and interest. Whereas negative emotions are associated with feelings of dissatisfaction, frustration, disappointment, and neglect.

NES = Avg. of Positive Emotions - Avg. of Negative Emotions

Measuring customer emotions and deriving business value can be difficult, but the fact is that over half of a customer's experience relies on emotional values which are often a key determinant of customer behaviour.

For example, what drives a customer to return for a second visit to a restaurant? It is because the restaurant fulfills a basic necessity or did the customer get something more from their experience? Maybe they enjoyed the atmosphere, the people, or the food, but there are likely other elements that are not as easy to pinpoint. These can be feelings or emotions associated with happiness, community, or trust and these feelings play a big role in the decisions customers make.

Once you've determined which emotions best reflect your brand's values and represent a competitive differentiator you can then use the NES to measure these emotions and determine the level of value being provided to customers.

Problem Resolution Time

Problem Resolution Time (PRT) is the average amount of interactions it takes between customer and company to resolve an issue.

PRT = Sum of All Interactions for Total Resolved Issues - Total # of Resolved Issues

Assess how many interactions are necessary to resolve a customer issue and then compare that to your current PRT. If the number of interactions exceeds the appropriate amount of time, customers are likely encountering difficulty interacting with your brand, driving down other customer experience metrics like NPS.

First Response Time

First Response Time (FRT) is the average amount of time between when a customer submits a case and the time customer support responds (generally measured in minutes during business hours).

FRT = Sum of All First Response Times / Total # of Cases Resolved

50% of consumers give a brand only one week to respond to a question before they stop doing business with them. This is why it is critical for businesses to solve customer problems in a quick and sincere manner.

It is important to monitor this metric as a low FRT prevents problems from escalating and less time for customers to feel negative emotions such as confusion or worry.

Cost per Interaction

Cost per Interaction, sometimes called Cost per Activity, is the business cost required to process or handle a given item. This might be a call, contact, interaction, order, click, etc.

Cost per Interaction ($) = $ Invested in Each Activity (Call, Order, etc.) / Total # of Associated Activities

If the efficiency in which customer problems are handled improves, the time it takes to handle a customer problem will go down and the cost associated with that interaction will follow suit.

Not only is reduced cost a clear benefit to a company, but it means that the you are becoming more efficient at assisting customers, which in turn makes customers more satisfied driving up customer experience metric such as CSAT and NPS.

First Contact Resolution

First Contact Resolution (FCR) is the percentage of customers whose question or request is resolved on the first attempt. This is typically measured through a post-interaction survey asking the customer if their issue has been resolved.

FCR (%) = # of Resolved Incidents on First Contact / Total # of Incidents

If a customer issue is not resolved during their first attempt to receive assistance, this can lead to disappointment and potentially a lost customer. This is why being in touch with the customer experience, understanding their issues and problems and knowing how to address them is so important.

Implementing an effective customer experience measurement program involves a lot more than just defining metrics but understanding the KPIs discussed above is the first step to identifying which metrics your business should focus on.

Ongoing tracking allows you to both measure the impact of your various initiatives as well as provide hard numbers from which to calculate your programs ROI.

CEM Pillar Article

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