Measuring Customer Experience: 7 Great Reasons to do it!
Customer Experience is the overall impression you create on your customers with your products, services, interaction, and anything related to your business. Customer Experience is the core of any business. With time and increasing customer awareness and competition, it has become the most significant factor determining your relationship with your customers.
Customers are the most prominent stakeholders for any business. It would not be wrong to say that your business growth depends on customer satisfaction. If you are able to provide a great experience to your customers, they would be happy. If you are unable to provide it, they will become unhappy. But how would you know your customers are satisfied or not? The only way is to measure customer satisfaction and experience.
This article will discuss why it is essential to measure Customer Experience. We will explore some solid reasons for measuring CX and some popular metrics you can use to measure Customer Experience.
Why is Measuring Customer Experience (CX) Important?
Customer Satisfaction is the primary ingredient for a successful business. Business professionals and marketers do everything to satisfy their customers, whether it is providing a discount, free promotional products, exciting offers, competitive prices, best quality, or anything that businesses can afford to do for their customers. But what’s the use of all this when your customers do not perceive the experience you provide them as a good experience!
And how will you know about customer perceptions? Of course, by measuring Customer Experience with the help of customer feedback. Measuring Customer Experience would let you know whether your customers are happy and satisfied or not.
When you get to know this, you come in a better position to improve their experience by taking appropriate actions on the feedback. Studies suggest that around 32% of the customers stop doing business with a brand they once loved with just a single negative experience. Measuring Customer Experience informs you on time about that bad experience so that you can take action and prevent customers from churning.
Let’s explore some strong reasons to understand why Customer Experience matters so much and how it is essential and super beneficial for your business to measure it.
Reasons Why Customer Experience Matters
- Customer Experience is the greatest factor that determines satisfaction
- Good Customer Experience builds long term customer relationships and loyalty
- Good Customer Experience increases sales and revenue
- Excellent Customer Experience gives a competitive advantage
- Satisfying Customer Experience prevents churn
- Memorable Customer Experience creates good Word of Mouth
- Amazing Customer Experiences increases Brand Advocacy
Let’s learn more about these reasons and how they make it crucial for a business to measure Customer Experience.
1. Customer Experience is the greatest factor that determines satisfaction
Customer Satisfaction is the reason behind the existence and success of any business, and it is directly proportional to Customer Experience. It is the most significant factor that affects the customers’ overall satisfaction even more than price. Researches suggest that customers can happily pay around 16% more for a great customer experience.
If you provide your customers with amazing experiences, they will naturally feel happy and more satisfied. Whereas, if you ignore customer experience, they will feel unsatisfied and can switch to your competitors in no time.
2. Good Customer Experience builds long-term customer relationships and loyalty
When you provide an excellent experience to your customers, they will make repurchases from you. Researches suggest that around 65% of an organization’s business comes from repeat customers. Also, it’s almost five times costlier to acquire a new customer than maintaining a relationship with the existing ones. And you can maintain this relationship by providing an excellent customer experience.
When customers get a great experience, they come again to you and make repurchases. This builds a long-term relationship with them, and they become your loyal customers. Almost all successful businesses have a bunch of loyal customers who are a significant reason for their success. When you have loyal customers, your business will grow.
3. Good Customer Experience increases sales and revenue
A great Customer Experience encourages your customers to do business with you repeatedly, even if they have to pay a higher price. Researches suggest that around 86% of the customers are willing to pay more for a great customer experience. When your business is able to provide such an experience to your customers, it directly attracts more revenue and more sales.
Whereas around 83% of the business executives agree that an unimproved CX increases a considerable risk of diminishing market share and revenue. Therefore, measuring and focusing on providing a great Customer Experience is essential for every business to gain good income and increase sales.
4. Excellent Customer Experience gives a competitive advantage
Providing a fantastic Customer Experience is the best way to stand out among your competitors in a competitive market. Businesses nowadays use several tactics to attract new customers, but retaining your existing customers is more crucial than that. You can do this by providing amazing customer experiences.
So if you are able to provide a better Customer Experience to your customers than your competitors, You will get a good competitive advantage. This will not only prompt your customers to stay with you but recommend others also to do business with you. Whereas, if you do not provide a satisfying customer experience, your customers will deviate towards switching to your competitors.
5. Satisfying Customer Experience prevents churn
Dissatisfied customers do not take much time to switch to other brands. Studies suggest that with just one instance of poor experience, 1 out of 3 customers stop doing business with a brand they once loved. It would not be wrong to say that companies nowadays cannot afford to ignore Customer Experience.
By measuring customer experience, you will get to know whether the experiences provided to your customers were good or bad. If you know about a bad experience on time, you will be able to improve it. In this way, you can prevent customer churn by measuring and improving CX.
6. Memorable Customer Experience creates good Word of Mouth
Word of mouth plays a significant role in attracting new sales prospects to the business. 74% of the customers found WOM as a critical factor influencing their purchasing decision. Researches suggest that it has the potential to bring five times more business than any paid media. And why not? We all trust our friends more than any paid advertisement, isn’t it!
If you give adequate focus on customer experience and are able to build happy and memorable experiences for your customers, they will not only approach you again but also recommend their friends and family to give you a chance. This will eventually lead to more sales and growth of your business.
7. Amazing Customer Experiences increases Brand Advocacy
When more and more customers get satisfied with the experience you provide them and recommend others also to deal with you, your business becomes a brand. Your goodwill in the market increases and people start loving you as a brand and become your loyal customers.
These loyal customers can literally become your brand advocates who support you in the market as their own brand. These customers praise you, promote your products and services, and bring significant value to your business by attracting more customers.
These are the seven reasons why Customer Experience matters and why you must perform the crucial task of measuring it. Now, let’s learn how to measure Customer Experience.
How do we Measure Customer Experience?
The only way to measure Customer Experience is to collect Customer Feedback. Customer Feedback is the vital information provided by the customers about their feelings and perceptions regarding their experience with a business and its products.
A Customer Satisfaction Survey is sent to the customers to collect feedback about their experience and measure their satisfaction levels. You can send different types of surveys depending on the nature of your product and services, like Customer Feedback Surveys, Guest Feedback Surveys, Visitor Feedback Surveys, Patient Feedback Surveys, and Student Feedback Surveys.
You can also measure Customer Experience in rating scores through various CX metrics. Let’s explore some key CX metrics that you can use to measure Customer Experience in quantitative terms.
Key Customer Experience Metrics to Measure
Customer Experience Metrics are a powerful way to measure and track Customer Experience and satisfaction with your products, services, and interactions. Here are some effective CX metrics to measure Customer Satisfaction.
- Net Promoter Score (NPS)
- Customer Satisfaction (CSAT) Score
- Customer Effort Score (CES)
- Customer Churn Rate
- Customer Retention Rate
- Customer Lifetime Value (CLV)
Let’s learn more about these CX metrics.
1. Net Promoter Score
Net Promoter Score is one of the most popular Customer Experience metrics used to measure CX in terms of Customer Loyalty. This metric is measured by using a single or a couple-questions survey. The primary or the Ultimate Question of this metric is:
“How likely are you to refer this business to your friends and colleagues?”
A scale of 0 to 10 is provided to the customers, and the customers choose a score to give a rating. Based on the ratings provided by the customers, they are divided into three categories.
- Promoters are those who give the rating of 9 and 10. These are considered the most satisfied and loyal customers and are likely to make repurchases and recommend your brand to their known ones.
- Passives are those who give a rating of 7 or 8. These are usually satisfied customers but are likely to try or switch to other brands when offered a better deal.
- Detractors are those who rate anywhere between 0 to 6. These are considered dissatisfied customers who are more likely to switch to other brands and spread lousy word of mouth for your business.
Measuring Net Promoter Score
To calculate NPS, you just need to subtract the percentage of detractors from the percentage of promoters.
For instance, you have surveyed 200 customers, out of which 120 are promoters, 50 are detractors, and 30 are passives.
- %Promoters = 120/200 x 100 = 60%
- %Detractors = 50/200 x 100 = 25%
Then your Net Promoter Score would be = 60 – 25 = 35
Your NPS can lie anywhere between 0 to -100. A positive NPS implies that you have more promoters than detractors and is generally considered good for the business. Whereas, a negative NPS means you have more detractors than promoters in your business, which is obviously not good for the business.
2. Customer Satisfaction (CSAT) Score
Customer Satisfaction (CSAT) Score is a metric to measure customer satisfaction by asking the customers to rate their satisfaction from experience with a product, service, any other aspect of the business, or the whole business. The rating options lie from 1 to 5 and can be represented in different ways like stars, emoticons, different adjectives like adjectives ranging from Excellent to Poor, etc.
The CSAT questions asked in the survey is:
“How satisfied are you with our products and services?”
Or
“How was your experience with our products and services?”
You can also modify this question by adding the name of the product, service, brand, interaction, or any other aspect of the business.
Measuring Customer Satisfaction (CSAT) Score
- CSAT Score(%) = Sum of All Scores/Sum of Maximum Possible Scores x 100
For instance, you have ten customers who responded to the CSAT Survey. Their scores are 5, 4, 2, 1, 3, 4, 4, 2, 5, 3 out of 5, where 5 means most satisfying experience, whereas 1 means most dissatisfying experience. Now, the CSAT score would be:
- CSAT Score(%) = 5+4+2+1+3+4+4+2+5+3/ 5+5+5+5+5+5+5+5+5+5 x 100
= 33/50 x 100 = 66%
3. Customer Effort Score (CES)
Customer Effort Score is a CX metric that measures the perceived efforts your customers had to make to get their job done or issue resolved.
The idea behind measuring this metric is to track the effort that your customers had to make to get their work done. It is used to measure the ease of working with your brand so that you can make things smoother for your customers and provide them with a better experience.
The question asked in a CES Survey is:
To what extent do you agree or disagree with the following statement? “The company made it easy for me to get my work done or handle my issues.”
The options provided are: Strongly Agree, Agree, Neither Agree nor disagree, Disagree, Strongly Disagree.
Measuring Customer Effort Score (CES)
For measuring CES, the average of all scores is found by dividing the sum of all scores by the number of responses.
- CES = Sum of Customer Effort Scores / Total number of Responses
For instance, you get seven responses as 5, 3, 2,1, 4, 1, and 2. Now, the Customer Effort Score would be:
- CES = Total of all Responses/Number of Responses
= 18/7 = 2.57
The lower the CES, the better it is.
4. Customer Churn Rate
Customer Churn rate is the rate or frequency at which customers stop doing business with a particular brand or organization. This metric is used to measure the percentage of the customers that leave your brand over a period of time. It is also known as the Attrition rate.
Minimal attrition is unavoidable and acceptable for any business, but it is a matter of concern for the company if it rises. By measuring this metric, you can keep an eye on the churn rate and track customer experience. The main objective of this metric is to find out the reasons for customer churn and eventually reduce it.
Measuring Customer Churn Rate
For measuring this metric, you just need to find the percentage of the churned customers. First, you need to determine the number of customers who stopped doing business with you.
Number of Churned Customers = Customers at the Start of the Period – Customers at the End of the Period
Then you need to find the percentage with this simple formula:
- Customer Churn Rate = Number of Churned Customers/Customers at the Start x 100
For instance, if you want to calculate Quarterly Customer Churn Rate, and the number of customers at the start of the quarter was 150 but at the end of the quarter is 120, then your Customer Churn Rate would be:
- Customer Churn Rate = 150-120/ 150 x 100 = 30/150 X 100 = 20%
5. Customer Retention Rate
Repeat purchases and Customer Retention is essential for business growth. Researches suggest that a 5% increase in customer retention can boost profit from 25% to 90%.
Customer Retention Rate is the frequency of the customers that continue doing business with your organization over a period of time.
When customers stay with your brand and make repeat purchases, they give you a lot of business. Customer Retention Rate is an effective way to gauge whether and how many of your customers are happy with the experience you provide and so they continue doing business with you.
Measuring Customer Retention Rate
To measure Customer Retention Rate, you need to determine the percentage of the customers who are continuously doing business with you. To find out the customers who have stayed with your from the start to the end of a time period, you need to have the number of customers at the beginning of the time period, the number of customers at the end of the time period, and the newly joined customers.
- Number of Customers in continuation = Number of Customers in the end – Number of new customers
Then you need to use this formula to find the customer retention rate:
- Customer Retention Rate = Number of Customers in continuation/Number of Customers in the Start x 100
For instance, you measure the Customer Retention Rate annually. You had 200 customers at the start of the year, 50 new customers joined in, and at the end of the year, you had 220 customers. Your Customer Retention Rate would be:
Customer Reterntion Rate = 220-50/200 x 100 = 170/200 x 100 = 85%
6. Customer Lifetime Value (CLV)
Customer Lifetime Value (CLV) measures the total expected revenue that your customers can bring into your business during the entire period of their relationship with your business. It is basically the measure of the worth of a customer for a business.
It is an important metric that helps measure the customer loyalty generated through your experience and its worth for your business. When you get to know the CLV of your customers, you can make strategies to focus on your customers to increase their value and gain more revenue and profit through them.
Measuring Customer Lifetime Value
For measuring Customer Lifetime Value, you need to use this formula:
- CLV = Average Purchase Value x Number of Purchases per year x Number of Years of Customer Relationship
For instance, you have a retail grocery store, and one of your regular customers buys groceries worth Rs 5000 every month on average. The same customer is happy with the experience and is expected to stay at the same location and do regular shopping from your store for five years until he gets transferred to another town in his public sector job. Now his Customer Lifetime Value would be:
- CLV = 5000 x 12 x 5 = Rs 300000
Conclusion
Customer Experience is the core of any business, and the success of a business highly depends on it. It is vital to focus on measuring Customer Experience to know whether the customers like the experience you provide or not. This will help you work toward delivering a better Customer Expereince each time and grow your business.
Know more about enhancing Customer Satifaction and experience through our comprehensive Customer Satisfaction Guide.
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