“What gets measured gets done.” That simple statement is a guiding principle for us — both at our agency and with our clients. Putting metrics in place around your customer experience (CX) shows the rest of your organization that you’re serious about CX, and gives you the data to measure progress and optimize the experience. But how do you quantify something as broad and intangible as “experience?”
To get the right metrics, ask the right questions
In earlier segments of this series, we explored a broader definition of “customer” and created profiles to better understand your audiences. We created a customer journey map and learned ways to embed a CX philosophy throughout your organization. Our goal was to demonstrate how to construct the kind of exceptional customer experience that drives better business results. Now, how do we know if it’s working?
We’ll look at five different metrics. To make it easier to compare them, let’s look at each one in terms of the question it answers.
1. What is their (ongoing) business worth to you?
The Lifetime Value of a Customer (LVC) is perhaps the most significant metric to benchmark, and one of the easiest to calculate. LVC is important because it will give you an idea of profitability. Once you know how much and how often customers typically buy from you, you can make more informed decisions about allocating resources to the customer retention programs and other services that keep your customers engaged and buying.
Calculating LVC
To calculate LVC, use the equation below. Tip: You can use estimated numbers if you’re just starting out. You can also breakdown this “lifetime” calculation into smaller time increments (such as 12 or 36 months) to align with your strategic planning and budgeting processes.
LVC = (Average Value of a Sale) X (Average Number of Repeat Transactions) X (Average Retention Time in Months or Years for a Typical Customer)
For example:
A cabinet manufacturer sells an average of 27 cabinets/home at a price of $250 each. Therefore, each home is worth $6,750 in sales annually. Now, here’s where those customer profiles come in handy. The custom home builder who averages 4.5 homes annually is worth a little over $30,000 in sales per year to the cabinet company. The regional builder who averages 450 homes per year is worth just over $3 million annually. The LVC of each customer is the annual total multiplied by the number of years the cabinet company expects to retain the business.
Using LVC
Once you know the LVC, you can view your customer acquisition costs in two ways. One is the short-term view: the amount you’re willing to spend per customer per campaign, assuming the cost is less than the profit you make on your first sale. The second is the long-term view: the cost you’re willing to spend per customer, knowing that you may take a loss on an initial transaction (such as a trial period), but other products/parts of the business will absorb your initial investment while you are betting on the customer.
Knowing the LVC can help you make more accurate projections and understand how many (and what kinds of) customers you need to reach your overall sales goals. Once you know that target number, look at your typical conversion rate to determine how many leads you need to put into the sales funnel to reach that number. Having this information can help you make more informed and targeted marketing decisions.
2. What do they say about you?
Often the most valuable feedback comes straight from the customer. So, it’s important to find a way to capture the Voice of the Customer (VOC) as accurately as possible. Approaches vary from standard quantitative surveys (which can be skewed if your questions guide them too much), to qualitative surveys that give customers more opportunity to express themselves in their own words. Try listening to your customer service calls and/or reviewing your online chat platforms. These reveal authentic, real-time VOC feedback and will tell you how well your team is delivering the customer experience you are trying to create.
Perhaps the most valuable form of VOC is not what customers say to you, but what they say about you – because this voice is totally unfiltered. And that unfiltered voice can become a very real part of your brand. As Amazon founder Jeff Bezos has said, “Your brand is what people say about you when you’re not in the room.”
Capturing VOC
Technology makes it easy to keep your ear to the ground. Numerous social monitoring tools and services exist to help you keep tabs on social media mentions, reviews, ratings, blogs, and other interaction points.
If you are not capturing that information in real time, you’re missing out on valuable and actionable data. The quicker you see problems or successes, the quicker you can fix them or leverage them for better business results.
Establish your key indicators of a great customer experience, then monitor them at regular intervals. Ongoing social monitoring can provide real-time qualitative feedback, while periodic surveys can provide more formalized quantitative data points for comparison over time. Your business cadence, budget, and other factors will play a role in the scope and frequency of your VOC efforts. The important thing is to monitor it consistently and then be able to interpret and apply your findings appropriately.
3. Would they recommend you?
Word of mouth (whether in person or online) is consistently one of the top reasons people feel confident in making any kind of purchase decision. Because of the high value of recommendations from others, one of the most utilized metrics in the field of customer experience is the Net Promoter Score, or NPS.
NPS embodies a customer’s emotional connection (and thus loyalty) to a brand, and is already used by many companies as a standard measurement of overall customer satisfaction. It boils down to one simple but powerful question: How likely are you to recommend this (product, brand or company) to others?
How to Measure the Customer Experience: by Carlos Molina
Note that only a score of 9 or 10 qualifies as a Promoter. It’s not enough to merely satisfy your customers. Customer satisfaction is simply meeting basic expectations. To be Promoters, customers must go beyond feeling satisfied”to being invested enough that they become loyal advocates.
Because of its wide acceptance and quick, simple format, NPS is usually one of the primary metrics frequently used to gauge momentum and success. But, NPS is merely a point in time; it can’t necessarily tell you where and how to improve.
