Customer metrics are numerical scores that are being used to measure customer feedback, so one can understand and improve their customer experience and finally grow their business.
Customer metrics are not just a number. They are clear indicators of how customers feel about your brand - what they are satisfied or dissatisfied with, what processes they find difficult or if they would recommend your company to their friends. It is very important to get feedback, especially if you want to implement a customer-first strategy.
There is a wide spectrum of questions that customer metrics can give you a proper answer to. Today we focus on the three most common customer metrics out there: Net Promoter Score (NPS), Customer Effort Score (CES), and Customer Satisfaction (CSAT).
Net promoter score (NPS)
Net Promoter Score is probably the most widely spread customer loyalty metric. Its objective is to give a simple and clear picture of a company’s overall satisfaction score, that you can compare with different brands within the industry. It is based on a simple question: “How likely would you recommend a company/product/service to a friend/colleague/family?” The answers vary from 0 (not at all) to 10 (extremely).
The respondents are separated into three groups:
- Promoters - respondents who rated 9-10
- Passives - respondents who rated 7-8
- Detractors - respondents who rated 0-6
Promoters are the ones who are very enthusiastic about your brand and they are very likely to spread positive word of mouth. Passives are mostly satisfied, but not very enthusiastic, which means they would be more prone to go to a competitor. Detractors are the ones who are not only very unsatisfied with your brand, but are also damaging to the company - as they will let others know how unhappy they were.
How do you measure NPS?
NPS is measured by subtracting the percentage of detractors from the percentage of promoters. That ranges from -100 (if everybody is a detractor) to 100 (if everybody is a promoter).
For example, if you have 45% promoters, 20% passives, and 35% detractors, your NPS will be +10, which is considered a good NPS score. To give you a perspective, the average American company has an NPS lower than +10, while some of the top-performing brands have an NPS between +50 and +80, like Apple.
Pros of NPS
To start with a positive aspect of this customer metric, its biggest advantage is that NPS is a simple and intuitive method to use. You don’t have to be an expert to incorporate it and that is probably one of the reasons why it is so popular.
Also, studies have shown that there is a strong correlation between a high NPS and business growth. Since the promoters have a good customer experience, they tend to be more loyal and willing to repurchase. Because of their loyalty, their lifetime with the company is longer, which has a direct impact on lowering the acquisition costs. Another research showed that the correlation between a high NPS and customers' willingness to pay is even stronger.
Slack, among other successful companies, uses NPS as their measurement of growth and business health. They are now one of the fastest-growing software companies.
Cons of NPS
Many debate that this customer metric is just way too simple, as it doesn’t give you a reason why someone is a detractor. The argument behind this is that human behavior is way too complex to place all customers in three boxes and expect them all to behave the same. Especially because a customer can be both a promoter and a detractor.
If a customer is labeled as a promoter, that doesn’t mean they will recommend your brand to others. To test this statement, Harvard Business Review conducted research. Along with the question: “How likely would you recommend the product?”, they also asked “Have you ever recommended this brand?”, and “Have you ever discouraged someone from choosing this brand?” The research showed that only half of the responders did some action, while the other half only stayed with the intention.
CES (Customer Effort Score)
Customer Effort Score (CES) is a customer metric that focuses on the overall process where a customer had to go through seeking help, resolving an issue, or getting the desired response. CES is a great indication of customer loyalty. It is mostly based on a question: “How much effort did you have to put into getting your request handled?” It is typically measured by:
- Asking a direct question to find whether it was easy or difficult interacting with a certain aspect of the company
- Making a statement to see if customers agree or disagree with it
How do you measure CES?
There are different scales to use when measuring the Customer Effort Score. If you measure it using a Likert scale (1-7 range), you can get a result by dividing the number of respondents who responded positively (Somewhat Agree, Agree, and Strongly agree) by the total number of respondents, and multiply it by 10 or 100 - depends on your preferences. The same is valid for a 1-5 scale, where Easy and Somewhat easy are considered positive. For example, if 80 people responded, and there were 40 positive responses, your CES score will be 5 or 50 (40/80*10/100).
Pros of CES
Harvard Business Review found that there is a strong predictive power of this customer metric. In fact, 94% of customers that responded with “a low effort” intended to repurchase and 88% said they would increase their spendings. Only 1% of the respondents said they would speak negatively about the company. On the contrary, 81% of customers who found the process high in the effort, responded they would speak negatively about the company.
CES is a great metric to gain insights into a specific aspect of your business. This gives you a clear picture of the things that cause difficulties and ones you can improve.
Cons of CES
CES focuses on efficiency instead of quality. While it is highly beneficial to see the specifics of your business, it doesn’t provide you with an overall customer experience connected to a brand/service/product. It's just too specific. Another issue with this customer metric is that you will see if the customers found some of your process difficult, but you won't see what exactly made that process so hard for them.
Customer satisfaction (CSAT)
Customer satisfaction (CSAT) is a customer metric that tracks how satisfied your customers are with your product or service. CSAT can be measured in all phases of the customer journey to determine their happiness with brand interaction. An example of a CSAT can be to rate your experience, like on the photo:
This is a simplified version of CSAT measurement. There are also wider scales (from 1-5, and a scale from 1-10), just like with CES.
How do you measure CSAT?
To get your CSAT score, you have to divide the number of satisfied customers by the total number of respondents. Then you multiply it by 100 to get the percentage. That way, if you have 100 respondents with 70 who responded Very satisfied, Satisfied, or Somewhat satisfied, your CSAT score will be 70%. Typically, the good CSAT score varies from 75%-85%.
Pros of CSAT
The biggest benefit of CSAT is that it improves customer retention. With the results you were provided with, you can detect your missing points and improve your business. Better retention means a higher chance of spreading out the positive word which lowers down your acquisition costs.
CSAT is a simple metric that is easy to implement. For that reason, the response rate is high, because it’s not time-consuming and customers are more willing to take part.
Another thing that makes it convenient is that it is versatile. Since the rating is tied up to a recent experience, you can easily customize the survey using numbers, stars, or emoticons.
Cons of CSAT
There are a few negative aspects of this customer metric. The first one is the cultural differences, where it was noted that customers from different backgrounds tend to respond differently, even though they might feel the same. For example, people from the US usually exaggerate their ratings using either “Very satisfied” or “Very unsatisfied”, while in Asian cultures people are more likely to choose neutral options.
The second thing can be both an advantage and a disadvantage at the same time, depending on your goal. It is the correlation between customer rating and the last experience. You will gain insights based on the last touchpoint, which is good if this is what you are going for. But if you are going for a more general overview, you should maybe consider additional metrics.
To sum it all up, all three customer metrics have their advantages and disadvantages. NPS gives you overall customer satisfaction with the brand, CES detects how smoothly the interaction with the brand went, while CSAT focuses more on the last interaction with a brand. In Peekator, we use a wide range of customer metrics, as we’re aiming for the most precise analysis possible. If you want to detect specific points, you can use these customer metrics one at a time. However, it is always more advisable to use more customer metrics if you want to see the big picture.
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