3 Key Customer Experience Metrics To Measure For Acquisition And Retention
Every business owner has heard of the “power of word of mouth” when it comes to spreading the word about a business. A positive or negative word about a customer’s experience with a business can have major impacts. Which is why the customer experience is so important to track. Growing a thriving business means that it’s crucial to measure KPIs to understand what’s working and what isn’t in many areas of your business. Your growth initiatives are determined based on how well they perform against expectations. So tracking and measuring your data is important to improving your business. You can’t improve if you don’t measure. Your customer experience metrics are no different. Creating a positive customer experience is a must. Especially for businesses that are operating online. Every touchpoint a person encounters with your business is another step forward in the customer journey, and people expect a pleasant experience from brands more than ever before. So, it’s important to invest in creating positive customer experiences, and measure how well your efforts are working over time.
If your company wants to create a better customer experience, and foster more positive interactions with prospects, leads, and customers, it is important to designate and track metrics that provide more insight into the customer experience. Especially your customer acquisition and customer retention metrics. A great customer experience leads to brand advocacy, revenue growth, increased customer retention, and loyalty. So, you must understand exactly what it is you should be measuring and how you can take that data and improve your customer journey.
Why customer experience matters
The customer experience is any interaction a customer has with a business. This includes any touchpoint between discovery and the sale, even after the sale. While customer acquisition and retention are also under the customer experience umbrella, customer service is the most obvious one. Keeping the pulse on how your customers interact with your business can make the difference between growing your revenue, and brand trust, and being passed up by your competitor.
A poor customer experience impacts more than your review rating. It can lead to unhappy customers, high churn rates, lower retention rates, and declining revenue. Your business should be making sure that you’re constantly measuring, optimizing, and improving your customer experience. The first step is to track the right metrics.
While there are several experience metrics you can use to monitor customer interactions, we’ve outlined three of the most important measurements for any business.
The importance of customer experience metrics
Measuring customer experience is imperative for defining your product or service’s success and improving customer loyalty. Many interactions during the customer journey happen on different platforms and are influenced by real-world and online research. These different variables are pulled together in analytics to create a measurable set of metrics that can be used to identify pain points during the customer journey.
These analytics allow you to find and resolve those pain points as you map out your customer journey. As the customers’ experiences become more and more seamless, you will begin to see improvement in your sales funnel, customer retention, and referrals rates.
Customer lifetime value
The customer lifetime value (CLV) is a top metric to measure for any growing company. Knowing each customer’s CLV can help you distinguish high-value customers from low-value customers, which comes in handy when you’re launching customized marketing campaigns. This metric is the total revenue a business can reasonably expect from a single customer. The longer someone continues to purchase from a company, the higher their lifetime value. Throughout the customer journey, the customer experience can have a direct effect on customer lifetime value. A positive experience, like helping to solve problems or offering recommendations, encourages customers to stay loyal and keep returning for new business. So this metric is also important to project potential growth when combined with retention and churn rates.
To calculate CLV, take the average purchase value and multiply by the average purchase frequency. Let’s say the average CLV of your consumer is $50, but it costs $80 to get a new consumer due to marketing and advertising costs. Numbers like this would signal that your lead gen and customer acquisition costs are way too expensive, or you need to rethink your price points or the type of customer in your base to increase your income. A high CLV generates more profit, whereas a low CLV indicates that you need to assess the customer experience you offer.
It is harder and more costly to acquire a new customer as it is to keep an existing customer. Because of this, tracking your churn rate is extremely important as it indicates how satisfied your customers are with your company and/or its product(s). A high churn rate is a sign that something is very wrong with your product/service, lead generation model, post sale process, or a combination of the three.
Churn rate displays the percentage of customers who do not return, renew, or cancel their orders/services with a business. Churn rate is especially important with subscription business models who operate based on recurring revenue. The basic formula for calculating your churn rate is to divide your lost customers by your acquired customers and multiply by 100%.
Your business should constantly measure churn rate, and document the churn rate on a quarterly and annual basis. You can then use that historical data to better plan your future customer marketing and retention strategies against new business initiatives.
While the churn rate is the number of customers losts, the retention rate focuses on the customer with a positive perception of the brand who is likely to repurchase from a company. Retention rate is a good predictor of brand loyalty, customer engagement and emotional connection to a brand. This metric calculates the percentage of customers a company has retained over a given period of time. You can use this data to compare against the churn rate to highlight issues that you haven’t noticed and make it easier to predict realistic future revenue potential.
Retention is a key indicator of the health of your business and an important number to keep track of. Many businesses put a lot of time and effort into trying to find new customers. But, as we’ve mentioned, it’s far cheaper to keep an existing customer happy (and keep selling to them) than to attract someone new. Your current customers are educated on your brand and your product/service quality. Not only that, current customers often buy more things and even refer their friends and families—at no cost to you. So, having a high customer retention rate should be a key part of your business strategy.
To calculate the customer retention rate, identify the number of customers you have at the end of a given period (week, month, or quarter). Subtract the number of new customers you’ve acquired over that time. Divide by the number of customers you had at the beginning of that period. Then, multiply that by one hundred. So, if you had 700 customers at the beginning of Q3 and ended the quarter with 1,000 customers, after having won 300 new ones over the span of Q3, your retention rate would be 90%.
Turn metrics into results
As you collect the data from your metrics you should know how to implement that information into your strategy to create results. Put themselves in the shoes of the customer and think about how the company can make overall improvements based on the data. Spend time evaluating those pain points, and consider making widespread changes that could turn that opinion around for the better. Use the date to see where the most opportunity for change exists to improve the customer experience.
In the end, there are few things more important than customer experience. A positive customer experience will lead to increased revenue from lower churn rates, more referrals, increased customer retention, higher lifetime value, and more satisfied customers. To get started, you need to understand what’s going right and what’s not. Sales and marketing efforts should not end with the closing of new business; brands should focus on the satisfied audience that has already chosen to do business with them. By tracking these customer experience metrics, you can take the first step to become a more customer-centric, trusted brand.