Measuring Customer Experience (CX)

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What is Customer Experience?

Customer experience, or CX, encompasses customers’ overall perception of a brand based on their interaction with the business across all touchpoints from the start to the end of their customer journey.

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The Importance of Measuring Customer Experience

Customer experience significantly impacts all aspects of a business, including sales, revenue, growth rate, and their bottom line. Organizations are aware that customer experience has a huge influence on their success and are often looking for ways to enhance customer experience. However, before organizations can take measures to enhance CX, they must first understand the current state of CX.

Without having a strong understanding of the current customer experience, organizations won’t be able to take the correct measures to enhance CX. This is why it is integral that companies use different metrics to measure and track CX so that plans and strategies can be devised to effectively improve it.

Customer Experience Statistics

Here are a few statistics that further reinforce the importance of tracking customer experience:

According to Forbes, businesses that focus on improving customer service experience an 80% increase in revenue.
According to Super Office, 86% of customers are willing to pay more for a better customer experience.
Another statistic by Super Office indicates that businesses can double their revenue in 36 months if they improve the customer experience of their business to a satisfactory level.

How is Customer Experience Measured

Customer experience can be measured and tracked using a range of different customer experience metrics, including:

Net Promoter Score^® (NPS^®)

Net Promoter Score^® is a widely used customer loyalty metric and an indicator of customer experience. NPS^® generally takes the form of a single question survey that asks customers to rate their likelihood to recommend the brand to others on a scale of 0 to 10. Survey results are then used to categorize customers into the following three groups:

Promoters: Respondents who select a rating of 9 or 10.
Passives: Respondents who select a rating of 7 or 8.
Detractors: Respondents who select a rating between 0 to 6.

Once respondents have been categorized, the following formula is used to calculate the organization’s NPS^® score:

NPS^® = % of Promoters – % of Detractors

Customer Churn Rate

Customer churn rate, or customer attrition rate, is a percentage that indicates the total number of customers an organization lost over a specified period of time. Various studies indicate that the cost of acquiring new customers can range from being 5 to 25 times more expensive than the cost of retaining existing customers.

The customer churn rate can be calculated using the following formula:

Customer Churn Rate = ((Total customers at the beginning of the specified time period – Total customers at the end of the specified time period)/ Total customers at the beginning of the specified time period) x 100

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Customer Lifetime Value (CLV)

Customer lifetime value, or CLV, is the cumulative value the average customer is expected to spend on your business from the start to the end of their customer journey. CLV is a very useful metric that can be employed by businesses to develop strategies to attract new customers and retain existing ones while maining profit margins.

The following formula can be used to calculate CLV:

CLV = Average number of times a customer makes a purchase each year X Average value of a purchase X Average length of a customer relationship (in years)

Customer Effort Score (CES)

Your customer effort score indicates how much effort customers have to exert in order to do business with you. It follows the principle that customers are more likely to do business with brands that are able to provide them with experiences and interactions that are seamless and therefore do not require too much effort. CES generally uses a single survey question where customers are asked to rate the ease of a certain interaction on a five-point Likert scale ranging from very difficult to very easy. Responses are used to calculate the customer effort score with the use of the following formula:

CES = Number of customers who found the interaction easy (4 or 5 on the Likert scale) / Total number of customers who responded to the survey question

Customer Satisfaction Score (CSAT)

CSAT is used to measure customer satisfaction regarding a certain touchpoint or regarding the customer’s overall experience with the organization. CSAT surveys ask customers to rate their satisfaction levels on a five-point Likert scale ranging from very unsatisfied to very satisfied.

Survey results can then be used to calculate the CSAT score with the following formula:

CSAT = (Number of customers who were satisfied with their experience (4 or 5 on the scale) / Total number of customers who responded to the survey question ) x 100

FAQs on Customer Experience

What is customer experience?

ustomer experience refers to customer perception of a brand that is influenced by customers’ cumulative experiences with the brand throughout their customer journey.

How is customer experience measured?

There are many different metrics that can be used as KPIs of customer experience, including;

Net Promoter Score^® (NPS^®)
Customer effort score (CES)
Customer satisfaction score (CSAT)
Customer churn rate
Customer lifetime value (CLV)

What is Net Promoter Score^®?

Net Promoter Score^®, or NPS^®, is an indicator of customer experience that employs the use of a single survey question that asks respondents their likelihood to recommend the brand or its products to others. Survey results are used to calculate the Net Promoter Score^®, which is indicative of CX and customer satisfaction levels.

What is Customer Churn Rate?

Customer churn rate, also known as customer attrition rate, is the percentage of customers a business loses within a specified period of time.

Net Promoter^®, NPS^®, NPS Prism^®, and the NPS-related emoticons are registered trademarks of Bain & Company, Inc., Satmetrix Systems, Inc., and Fred Reichheld. Net Promoter Score℠ and Net Promoter System℠ are service marks of Bain & Company, Inc., Satmetrix Systems, Inc., and Fred Reichheld.