To them, key performance indicators (KPIs) and customer metrics have become more than mere measurements of success—they have become actionable instruments in transcending silos, informing new product and parts sales, extending aftermarket offerings, and enabling field service teams to create more value for the customer.
The importance of customer metrics and KPIs has grown directly proportional to the increased adoption of servitization, innovative business models, and e-commerce rollouts, all of which have been pre-existent considerations within the industry. Their precocious deployment was expedited by the impact of the COVID-19 pandemic and other macro-environmental changes within the last couple of years.
In the wake of those events, suppliers are striving to design for service, better understand customer KPIs, and improve the experience for every step in the customer journey. To know if all that effort is worth it, businesses need to measure and monitor customer satisfaction—because what is measured can be more easily managed.
The benefits of measuring customer satisfaction
It’s simple: how happy a customer is with a service or a product is reflected in the brand’s image, revenue, and profit. This is pretty self-explanatory when considering customer satisfaction. However, there are specific benefits to measuring it that are sometimes overlooked.
For example, customer satisfaction increases loyalty, which means that a business that consistently makes its customers happy gets to retain them for longer, thus investing in a long-term revenue stream. From an ROI perspective, a 5% increase in customer retention can increase a company’s revenue by 25-95%. In addition to increased loyalty and profits, measuring customer satisfaction can help businesses:
- Reduce customer churn rates;
- Boost repeat purchases and service renewals;
- Raise brand awareness and enhance reputation;
- Build a solid customer base with stable sales revenue;
- Prevent customers from switching to the competition;
- Reduce marketing expenditure for new customer acquisition;
- Decrease price sensitivity and increase willingness to pay for great CX.
Such results can only be achieved by monitoring the customer experience (CX) and gauging satisfaction. Otherwise, it’s rather impossible to know what pain points should be addressed and understand the impact of your product or service on your customer’s business.
How to measure customer satisfaction
Effectively measuring customer satisfaction means acquiring data from and about the customer either by asking them the right questions using a direct measurement system or observing their purchasing behavior using an indirect measurement system.
The indirect system provides operational data (O-data) such as sales figures or performance while the direct system provides experience data (X-data), which creates context. X-data provides insights into the impact of a product or service within the customer experience and explains why a customer feels a certain way about your brand. X-data is so valuable because it closes the gap between what you think your customers are experiencing and what they are truly experiencing.
For a holistic view and informed responses to customer pain points, both types of data should be collected. The following customer satisfaction metrics cover both data types.
1. Net Promoter Score (NPS)
NPS is a top growth indicator that helps businesses determine how satisfied customers are with products or services, how loyal they are to the brand, and how likely they are to recommend the company to industry peers. At the same time, NPS can also be used to forecast customer churn and identify customers that may need an incentive to boost loyalty.
Throughout the customer lifecycle, it’s good to keep in touch with the client and NPS surveys should be a consistent part of that relationship. Depending on the service level agreement (SLA), companies can decide when it’s best to collect customer feedback using NPS surveys. Typically, brands use them via email, web, or text:
- After a purchase or product or service trial;
- After interactions with customer support;
- When a user takes a certain action on the company website;
- Before a client meeting;
- Before a long-term subscription reaches its expiration date;
- Quarterly or any time customer feedback is required.
All NPS surveys feature the same essential question: how likely are your customers to recommend your product, services, or brand to other businesses or people? Using a scale from 0 (very unlikely) to 10 (very likely), respondents answer that question in a way that makes them easy to segment:
- Those who respond with ratings from 9 to 10 are promoters who are satisfied with your company and will actively promote it;
- Those who respond with ratings between 7 and 8 are passives or customers who are ok with your company but not fully satisfied;
- Those who respond with ratings from 0 to 6 are detractors, meaning they are unhappy with your company and are at risk of churning.
To calculate your score, you have to subtract the percentage of detractors from the percentage of promoters. A more accurate and easier way of doing it is to use NPS software or a calculator.
And to ensure that you are understanding the context of a customer’s rating, your NPS survey should include an open-ended question that asks respondents to provide the context that made them give you the rating they did. You can also ask them what you can do to improve their customer experience and add more open-ended questions to enable them to give you more feedback.
Although using these types of questions can be very insightful, make sure you don’t overdo it. In the B2B space, customers are likewise busy professionals and they don’t want the NPS survey to be yet another aspect of poor customer experience.
2. Customer Service Satisfaction (CSS)
Traditionally, CSS is a very short survey that measures your customer’s satisfaction in the post-purchase stage of the buyer’s journey. Unlike the comprehensive NPS format, CSS doesn’t provide insights into the bigger picture, but its simplicity makes it ideal for pop-ups, live chat, or very short online forms in which the main question is: how satisfied was your customer with their newly acquired product or service?
The data collected via CSS can be very helpful in observing trends and patterns, segmenting buyers, and identifying areas for improvement. Additionally, CSS can be used as a basis for creating open-ended NPS questions. By asking CSS questions every time a customer interacts with your company, you can gather enough data to inform your next NPS and ensure you ask the right questions.
3. Customer Effort Score (CES)
CES allows you to understand the efforts customers make to interact with your services or products. Whenever you want to find out how easy or difficult it is for your customers to use your services or products, send out a CES survey. If you ask the right questions, you can also determine if your customer’s satisfaction or dissatisfaction is caused by a lack of education or expertise in using your product or service.
The best times to send out CES surveys are after your customers start using a new product or service, but also after interactions with customer support and right after a purchase or subscription.
CES questions are also used throughout the customer journey. Many industry businesses that have moved online in the past couple of years are asking their customers how easy was it for them to complete their online orders, with answers ranging from very easy to very difficult.
By calculating the average, companies can determine if the majority of their clients have difficulty using their services or products and take the necessary actions to streamline ease of use. The easier it is for a customer to use a product or service, the more value they will get from the relationship with your brand, and that is an essential factor in cultivating customer loyalty.
4. Customer Satisfaction Score (CSAT)
CSAT is a CX metric for directly measuring the levels of customer satisfaction. Whenever you want to see how happy or unhappy a customer is with the particularities of a product, service, or change in customer-facing policy, it’s a good idea to send out a CSAT survey.
The traditional question of a CSAT survey is: how would your customer rate their overall satisfaction with the service received? Customers can answer with ratings ranging from very satisfied to very unsatisfied. However, this can be tweaked depending on purpose and relevancy. You can also use multiple questions and include open-ended ones, too.
With CSAT surveys, it’s important to remember that the data collected is highly subjective. For example, two customers who have had the same exact experience with your product or service might feel different about that experience, thus resulting in different levels of satisfaction reported by each of them.
5. Customer Health Score (CHS)
If you want to identify behavioral patterns over a period of time, CHS can help you achieve that through some key parameters including:
- Product usage period
- Product type
- License level
- Level of customer support
- Willingness to participate in NPS surveys
Although these parameters will vary from business to business, CHS is meant to help companies split their customers into three essential segments: weak, healthy, or at-risk. This metric is not only used to gauge customer satisfaction but also to forecast churn rates and address them before it’s too late.
6. Customer Churn Rate (CCR)
As the name suggests, CCR is a metric indicative of the percentage of customers that your organization has lost over a certain period. It’s an important metric to keep track of because it helps you identify trends that could impact your bottom line in the near future, enabling you to strategize and take action in due time.
Keeping the CCR at a low percentage should be a priority for any business, especially considering that the cost of acquiring new customers is seven times higher than retaining existing ones.
Although measuring CCR is essential, it’s only the tip of the customer satisfaction iceberg. The O-data provided by CCR doesn’t offer any context, it merely shows how many unhappy customers have cut ties with your company instead. For action to be taken and improvements to be made, context is needed and that is something NPS surveys can provide.
7. Customer Acquisition Cost (CAC)
While CCR stresses the importance of retaining existing customers due to the high cost of new customer acquisition, CAC shows you exactly how high that cost truly is. By calculating expenditure on sales, marketing, advertising, and promotions over a certain period of time and then dividing that amount by the number of customers acquired during that time, companies can determine how much they have invested in a new customer.
Together with other metrics, such as CLTV explained below, CAC shows the return on investment in customer acquisition. But beyond that, it measures the customer’s objective satisfaction with your efforts of getting them on board and leading them toward their first purchase.
Last but not least, CAC shines a light on how effective marketing is and which channels have brought in the most customers. This can inform future marketing and advertising campaigns for increased customer acquisition ROI.
8. Customer Lifetime Value (CLTV)
CLTV or LTV shows how much your company has earned from a customer over a certain period or the anticipated lifespan of the relationship with a specific customer. With CLTV, companies can measure both the value of a customer in the client database and the future profit from existing customers.
To calculate the latter, companies multiply future purchase rates by the average monthly recurring revenue. Although the formula provides results that indicate how much a customer is willing to return to a product or service, it can also be used together with CAC to measure the potential ROI of acquiring new customers. CLTV can also be used as a benchmark for products that don’t perform as expected with customers.
9. Customer Request Volume (CRV)
CRV can help you realize how much your customers need your support. The metric tracks the number of requests your support team receives from a customer over a period of time and while it can help you gauge team capacity and ensure that support is available for every client, you can also use CRV to structure SLAs more accurately.
By assessing CRV, you can also identify patterns such as seasonal peaks, differences in diurnal phases, and geographic position, and use these factors to categorize your customers into easily manageable segments.
Additionally, CRV can provide insights into which products or services compel customers to ask for further support. Based on those insights, companies can investigate those products or services and get to the bottom of what drives sudden surges in customer service requests.
10. Average Number of Replies (per request/case)
If CRV shows you how much a customer needs support, the average number of replies tells you how well you’re handling the request volume. This is the type of average that you want to be as low as possible.
This metric is directly related to CES, which shows how easy or difficult it is for a customer to use your product or service. The easier it is, the lower the average number of replies. Companies should minimize the effort on the part of the customer to keep them happy and focused on their own business.
Although first contact resolution is not always possible, companies should aim at an average number of replies per request of two or fewer. If the metric is above this standard, it may indicate that field technicians are having difficulty solving the issue. Frequent technician visits can become frustrating for customers and may lead to poor CSAT or NPS scores.
11. First Response Time (FRT)
Responsiveness is the key to the heart of the customer. People don’t like to be kept on hold or waiting for a reply from their supplier, especially when their business continuity depends on them.
Even if your first response to a customer problem doesn’t provide an immediate solution, mere responsiveness can get you a long way. It shows the customer that you care and that you are present for their need. And FRT measures how well you do that.
FRT is a valuable customer service metric that shines a light on customer expectations across different channels. Depending on which channel they used to reach out to you, their expectations will differ. According to research, 77% of customers expect instant replies over live chat, compared to the 62% of customers who reach out via email and expect a response within 24 hours.
12. First Contact Resolution Rate (FCR)
For customers, FCR is highly valuable. In many regards, their business continuity depends on your company’s ability to solve their issue on the first try. A high FCR reflects your customers’ satisfaction with your resolution and it also shows that your technicians can do a good job from the get-go.
In the past two years, this metric has become increasingly important as customers and safety norms demanded limited contact, which put pressure on technicians to get it right on the first try. To help them out, many organizations invested in visual assistance tools to either help customers remotely or help technicians on the field with remote guidance from seniors.
13. Average Handling Time (AHT)
AHT is a metric often applied to call centers and it measures how much time was spent on a customer at each interaction. Together with the FRT rate, this can show how well the customer was treated when reaching out for support.
While AHT can indicate issues within the call center team, such as lack of customer support training, the metric can also help companies realize if a customer may be unhappy with the support or lack thereof by calculating how much time they were put on hold and how much time they spent talking to the agent.
14. Contract Uptime
In conjunction with SLAs, contract uptime measurements can be used to improve customer satisfaction, retention, and ROI. Uptime refers to the total time a service is up, either a software, performance guarantee, or something else. The longer the service is up, the happier the customer.
Considering that OEMs supply their customers with products and services that they use for their own organizations, both parties aim for 100% uptime, although incidents are always tolerated as a part of business reality. From the mean time between failures to the mean time to failure, uptime rates show how well your company ensured availability for the customer or how much it disrupted their business continuity.
Tracking uptime is critical not only for operational data purposes but also to report to customers, reminding them of your positive contribution and boosting their morale when numbers are looking good. You can also use those numbers to incentivize future customers.
15. SLA Compliance Rate
The SLA between your company and that of your customer not only defines performance expectations and deliverables but also reassures the customer that their expectations will be met and that your company will hold itself accountable in the event of failure to comply with the agreement.
It’s important to calculate the SLA compliance rate to see if customer expectations are met or not. This metric reflects how efficiently service delivery truly is, how satisfied your customer is with the service provided, and if they are able to do business as usual.
A low SLA compliance rate doesn’t only reflect poorly on the service provider—it also comes at high costs, ranging from sanctions such as fees and customer credits or even an increase in churn rates.
Customer satisfaction—part of the user experience
Not all customer satisfaction metrics are created the same. Some provide O-data while others provide X-data, both of which are insightful and important in improving the customer experience. Not all businesses will use the same metrics to measure customer satisfaction. To ensure you measure what’s most relevant for your business and your customers, curate the metrics that make the most sense based on your industry and services and tweak them based on your objectives.
Likewise, keep in mind that measuring customer satisfaction is meant to be a consistent and cohesive process that paints a complete picture of how the customer interacts with your company and assets and how they feel about that interaction. To avoid developing tunnel vision during this process, use metrics that complement each other and ensure you follow up with surveys periodically or after every interaction.
On this note, remember that customer satisfaction is also part of the customer experience. It can be overwhelming for a customer to be solicited to respond to surveys after each interaction with your company, but it’s up to you to make that a pleasant experience. Use your O-data to ask the right questions for X-data. For longer surveys, formulate short and concise questions, provide options for answers, and allow space for custom replies. For short surveys or pop-ups, ensure your questions are clear and use emojis or entertaining graphics to secure a response from your customers.