Customer experience is one of the determining factors that influence the desire and decision of the latter to re-interact with the company or service. According to the PwC study ‘Future of Customer Experience Survey 2017/18’ – 64% of Europeans stated that their customer experience influences their decision to buy a product or service.
To determine the level of customer satisfaction from the interaction with the company, we use the following metrics:
- NPS – Net Promoter Score
- CSAT – Customer Satisfaction Score
- CES – Customer Effort Score
NPS – Net Promoter Score
This metric evaluates customer experience and predicts business growth by defining a client’s willingness to recommend a particular brand.
How is a Net Promoter Score calculated?
To calculate NPS, survey your customers with a single key question using a 0-10 rating scale: “How likely would you recommend [product/service] to a friend or colleague?”
NPS – an indicator that aims to assess brand loyalty’s long-term level, the perfect metric for benchmarking. The recommended frequency of research is from 4 to 2 times a year.
Interpretation of NPS results:
- Brand promoters (score 10-9) – these people are loyal and will keep buying and ready to refer your brand to others.
- Passives (score 8-7) – customers considered as satisfied but not excited and thus open to checking competitive offers;
- Detractors (score 6-1) – unsatisfied customers, people who are unhappy and might damage brand reputation by spreading their bad experience to others.
NPS formula and interpretations
NPS = (Number of promoters,%) – (Number of detractors,%)
CSAT – Customer Satisfaction Score
CSAT is a customer experience metric that determines the customer’s satisfaction and happiness with a product or service.
Typically such metric can be collected by sending a survey with a single question: “How satisfied were you with [product/service]?” Users respond with a 1-5 rating scale, where “1” is very dissatisfied, and “5” is very satisfied.
CSAT is an indicator that measures the current level of satisfaction. The best time to assess CSAT is to launch a survey immediately after a purchase or an interaction with the service.
CSAT formula and interpretations
CSAT = (number of ratings 5-4) / total number of ratings * 100%
CES – Customer Effort Score
CES – is a metric that measures how much effort a user puts into getting a result from a single interaction. And in fact, it evaluates a service touchpoint’s simplicity, speed, and intuitiveness.
The best moment to capture CES is to launch an ad-hoc survey question right after the interaction: “How easy was it to interact with (…)?.” A person answers with a 1-7 rating scale where “1” is very difficult and “7” is very easy.
This metric is essential for IT products, e-commerce, and service companies, as it directly affects the outflow of customers. Often used in conjunction with CSAT.
CES formula and interpretations
CES = (Number of ratings 7-5) / (total scores) * 100%
The higher the CES, the better the customer retention and overall loyalty to a company (NPS). According to a study by the Harvard Business Review, with a high CES – 90% of customers tend to re-interact with business. In addition, Gartner’s research indicates that in companies with a high rate of ease of achieving a goal, NPS is, on average, 65% higher than those where the process is complex.
Churn rate – is a key indicator that estimates how many customers stopped doing business with a company in a given period of time.
Churn Rate formula and interpretations
Churn = (Number of customers at the beginning – Number of customers at the end of the period) / (Number of customers at the beginning) * 100%
A high outflow indicates possible problems with the service, product, or just a fact that many non-target customers are involved in the funnel.
Churn Rate is recommended to evaluate together with RFM analysis, which allows you to segment the customer base by the number of purchases, frequency of purchases, and value in cash.
Retention rate is the percentage of customers a business retains over a given period of time.
Retention Rate formula and interpretations
Retention=Number of customers at the beginning – Number of customers at the end of the period) / (Number of customers at the beginning) * 100%
The high level of the indicator indicates the propensity of customers to repurchase, satisfaction with the experience, and, as a result – an increase in the lifetime value of the client Lifetime Value (LTV).
It is important to remember that customer experience evaluation is not static and can easily change after the first negative case. The assessment may also be influenced by comparisons with alternative experiences in meeting their needs (e.g., classic taxi service and “Uber”). If the latest was the best, then your service automatically loses points.
Therefore, our recommendation is to create a company process of regular monitoring of the level of satisfaction with the experience, which will allow you to be responsive to changes and not lose customers.
If you need support to build a loyalty assessment process inside your organization, feel free to contact our Team.