If you’re measuring customer satisfaction, establishing a robust measurement framework is vital.
If you’re measuring customer satisfaction, establishing a robust measurement framework is vital. But before we dive into the must-haves, let’s get one thing straight. Throwing a bucket of KPIs at the problem, without establishing why you’re doing it and integrating it into an overarching strategy, means you’ll waste money and potentially damage your brand.
If you haven’t already, check out how to measure customer satisfaction effectively for the full story. It also covers the industry-specific slant to customer satisfaction measurement.
But with those caveats out of the way, here’s an overview of the core metrics you can use to measure CSAT effectively and consistently. We’ve divided the below into two sections: those you need a survey for, and those you can capture without a survey.
1. Top customer satisfaction metrics that need a survey
Customer Health Score his metric is the cornerstone of a successful customer satisfaction strategy. The exact criteria will be unique to your organization and will draw on the results from the metrics below.
But the goal of a customer health score is always the same: to measure the overall health of your relationship with a given customer.
Capture: Everything at your disposal. The best way to work out how a customer feels about the service they get from you, is to combine multiple streams of input.
This will cover everything from feedback from calling staff (which is why highly trained agents are a must), through to data on their product usage and current contract value.
Set clear parameters in your customer health score—for example, if your score drops too low, it should trigger a response.
Customer Satisfaction Score (CSAT) measures how satisfied your customers are—often on a scale of 1-3, 1-5 or 1-7 (there’s no hard and fast industry standard).
Capture: Customer survey (Need a template? Get one on our Survey and Questionnaire templates page).
Calculation: Total number of satisfied customers (e.g. those who gave you a score of 4 or above on 1-5 scale), divided by the total number of participants, multiplied by 100 to get the percentage.
You can drill deeper into what makes a good score in our CSAT 101 page.
Net Promoter Score® (NPS®) measures the likelihood of a customer recommending a product/service/or business to another potential customer. As such it’s also a great upsell or cross-sell opportunity indicator.
Capture: Customer survey.
Calculation: Percentage of promoters (those who gave a high score), minus the percentage of detractors (low scores). The percentage of neutrals or ‘passives’ are not used in the formula.
For example, if 10% of respondents are detractors, 20% are passives and 70% are promoters, your NPS score would be 70-10 = 60.
Customer Effort Score (CES) measures how easy your customers find using your product or service. Unsurprisingly, low-effort experiences increase satisfaction.
Capture: Customer survey.
Calculation: Sum total of all customer effort scores, divided by the total number of survey respondents.
2. Top customer satisfaction metrics that don’t need a survey
Churn Rate measures how many customers stop using your product or service in a given period. No matter how satisfied your customers are, some will leave. But keeping a watchful eye on how many and what customers are leaving gives you the intel you need to try to reduce it.
Capture: Internal data systems (e.g. CRM).
Calculation: Total number of customers lost in a given period, divided by the total number of customers at the beginning of that period. Then multiply the result by 100 to get the percentage. E.g. If you lost 12 customers over a month, and had 100 customers at the beginning, your churn rate would be 12%.
Customer Loyalty measures how likely customers are to continue buying from you in the future. Where customer satisfaction focuses a customer’s feelings or opinions towards a brand, service, or product; customer loyalty focuses more on customer’s behavior. This can include: repeat purchases, heavy usage of services or products, referral to other customers.
Capture: Internal data systems (e.g. CRM).
Calculation: Set your threshold for active engagement. Then take the number of customers who are actively engaged and divide by the total number of customers.
Customer Lifetime Value (LTV) measures the predicted (or historic) value of a customer to your business across their entire “lifetime” as a customer. This is a great measure of how—or if—your customer satisfaction strategy is setting you up for long-term wins.
Capture: Internal data systems (e.g. CRM).
Calculation: There’s a short answer below, but the calculation relies on a series of other values which we’ve outlined here:
Average purchase value – Take your business’ total revenue over a given period, and divide by the number of purchases over that period.
Average purchase frequency rate – Take the total number of transactions or purchases and divide it by the number of different customers making purchases over that period.
Customer value – This is a calculation of the two values listed in stages one and two. Take the average purchase value and multiply it by the average purchase frequency rate.
So, to calculate Customer Lifetime Value you take your newly calculated customer value, and times it by the average period your business retains customers.
If you’re looking to work out your historical customer lifetime value, you simply use the calculations above on the total data you’ve collected so far. This is a great measure of which types of customers are providing your business with the best return on your investment of acquiring them.
If you’re looking to predict the customer lifetime value of a customer, you use existing and forecast values. The benefit here is that you acknowledge the microshifts in customer behavior and can use it to pick up emerging trends.
Employee retention rate (yes, you read that right) measures how many employees left your company over a given period. Employee retention has a big impact on customer satisfaction. The longer employees stay, the better they are at their job, the better service they can provide to customers, and the more satisfied those customers are. Not convinced? Check out our page on employee satisfaction and customer satisfaction.
Capture: Internal data systems (e.g. CRM).
Calculation: Total number of employees lost in a given period, divided by the total number of employees at the beginning of that period. Then times the result by 100 to get the percentage. E.g If you lost 8 employees over a year, and had 60 at the beginning, your churn rate would be 16%.
Remember, these scores should always be tied to an overall strategy that starts with why you’re measuring them in the first place. But getting these scores is only half the battle, the next big challenge is how you improve them.
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