Indicators for measuring and improving the customer experience

06 · 07 · 2016



When we find ourselves confronted with the challenge of improving the experience of our clients, we must put the mechanisms that will most maximize their value into motion, differentiate our offer, and surpass consumers’ expectations. Throughout all this, we, of course, must implement methods and tools that let us define, manage, and measure that experience. Good Rebels’s methodology focuses on:

  • Defining the Buyer Personas we’ll direct ourselves towards to understand what are their motivations for interacting with our brand or not;
  • Identifying the moments that either produce or incite interactions in the Customer Journey;
  • Describing the points of contact established and how crucial they are;
  • Defining, designing, prototyping, and launching ideas of improvement for every identified touchpoint or new channels of interaction
  • Setting metrics and KPIs that allow us to measure the customer experience and the successful of the implemented strategy;
  • Applying a constant improvement cycle that we’ll use to follow activated initiatives and develop new strategies to keep attracting, loving, and making our customers loyal (or potential customers).

 

 

One of the phases of this process involves the creation of a model of measurement that establishes the criteria for measuring the designed experience’s success. In the case of not achieving these set objectives, we’ll be able to react and reconsider the strategy being used up until that point.

There are several models that we could take as references for identifying the metrics and KPIs considered when evaluating the experience our customers have. They group themselves in three different groups:

  • Acquisition: geared towards measuring the experience to increase the client base.
  • Retention: geared towards maintaining and increase the volume of our client base that the organization already has.
  • Efficiency: geared towards the idea that the organization can do more for less.

Here are some of the most representative indicators:

 

Conversion Rate

The conversion rate determines how many of our leads turn into customers. The objective is to find out what are the motivations, doubts, emotions that lead the consumer to enter the online store or click on a product; maximize those actions that are work and get to the consumers the fastest, most direct, and most efficient way so they can perform the action we’re expecting.

To get the conversion rate we divide the number of achieved objectives (purchases, downloads, sign-ups, reservations, etc.) among the total number of interactions.

Average Order Value

This indicator measures the amount a customer spends on a purchase. This figure helps us understand if customers tend to buy cheaper or more expensive items, the number they usually buy, and the transaction costs regarding the type and number of products. It also lets us segment customers based on their value and make personalized recommendations for other goods and services on offer.

To get the average order value, we divide the total value of the number of purchases by the total number of purchases made in the period you’re going to analyze.

Customer Churn Rate

The customer churn rate represents the percentage of clients that are not loyal to the organization, whether by going for the pre-defined period without buying anything or unsubscribing.

Tracking this indicator lets us figure out if customers are leaving us, for what reasons, and at what time, allowing us to define mechanisms that detect customers prone to unsubscribing before they go through with it.

We get the customer churn rate by dividing the number of clients that unsubscribed or haven’t made a purchase by the total number of active clients in the period you’re analyzing.

Net Promoter Score

The Net Promoter Score measures customer loyalty based on their recommendations. According to Fred Reichheld, who created this metric in 1993, “evangelistic customer loyalty is clearly one of the most important drivers of growth, While it doesn’t guarantee growth, in general profitable growth can’t be achieved without it.”

It’s based on this question: “What’s the likelihood that someone will recommend our company or brand to a family member or friend?” It’s valued on a scale of 1 (Very unlikely) to 10 (Would definitely recommend it).

According to the results, customers are classified as Promoter (scoring 9 or 10 points), Passive (scoring 7 or 8), and Detracts (scoring 6 points or less). Once we subtract the percentage of detractors from the Promoters we get base don the Net Promoter Score, this can fluctuate between a minimum of -100 (if all subjects are detractors) to 100 (if all subjects are promoters).

Customer Satisfaction Index

Satisfaction gives us a measurement of reference throughout the entire duration of an activated strategy that also allows for changes to be detected. All this data lets us understand what factors are essential for our purposes and align our organization’s priorities with them.

A simple model stems from the following question: “How would you rate your overall experience?” We use a scale of 1 (Very bad) to 10 (Exceptional).

There are more sophisticated models out there.The Kano Model, created in 1984 by Japanese Professor Noriaki Kano, allows for the measurement and evaluation of the level of customer satisfaction based on the difference between the feeling associated with the quality perceived versus expected.

Customer Effort Score

This measure looks to find out how easy or difficult it is for a client to buy our product or service. Making an effort on the part of the customer minimal as he or she performs the desired transaction has a direct and significant impact on their satisfaction.
It answers the following question: “How much personal effort has been made to manage their request?” It’s measured on a scale between 1 (Very easy) and 5 (Very difficult).

Customer Acquisition Rate

This rate tells us how much it costs to gain a new client. This measurement is important when figuring out how much value each customer brings to the organization and for calculating the return on investment (ROI) for marketing and sales campaigns focused on user acquisition.

To get the client acquisition rate, we divide the total amount invested in the acquisition (advertising, sales, discounts, bonuses, etc.) by the total number of new customers.

Customer Retention

Customer Retention represents how much it costs to keep an existing customer. The idea is to reduce the number of clients unsubscribing through loyalty efforts that tend not to be as costly as acquisition efforts. They’re focused on those consumers that we already have a relationship with and those we don’t need to attract, are already familiar with the organization and have shown interest in our products and services.

We divide the total amount of money spent on loyalty programs by the total number of customers stemming from these incentives.

Customer Lifetime Value

The Customer Lifetime Value represents the value of a client throughout the entire time they are in a relationship with an organization. The CLV helps us determine how we can optimize acquisition costs in every touchpoint, focusing on gaining the maximum amount while yet minimizing acquisition costs.
To calculate this figure, the first thing you need is the projected consumption of a customer over the time that relationship endures and we get that value by multiplying the number of expected purchases by the average amount spent on a purchase.

We then need to subtract acquisition and customer service costs, but they can also increase the value given to potential customers that gravitate towards customer referrals, to potential price increases that a customer is willing to confront, and additional earnings coming from cross-selling or up-selling.

At Good Rebels, we believe that a successful experience design goes through gathering, analyzing, and disseminating this data throughout the organization that let us manage our relationships with customers and make decision-making agiler to increase customer loyalty.

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