As a customer-facing business, it is important to know how customers are experiencing your brand. Let’s face it your customers are your lifeblood. Therefore if you want to keep your business going, there are key metrics for business to measure as it relates to your customers.
These metrics will provide insight into customers’ experience with your business, how satisfied they are with the products or services you provide to them, and the likelihood to recommend you to others.
Each metric has strengths and weaknesses, so by tracking multiple metrics at the same time, you can get a more complete picture of what your customers think about their experiences. This article will cover seven key metrics every business should be measuring.
The Importance of Measuring Metrics for Business
Metrics are a critical part of any business. To understand customers, you need to be able to measure their behavior and track it over time. This allows you to identify trends, which in turn can help shape your product or service offerings for the better.
It is also important that you have metrics in place so that you can keep tabs on how your business is performing overall. These metrics can then give you insight into what’s working well, what isn’t working well, and what needs improvement — whether it be from the perspective of revenue growth or customer satisfaction levels.
Also, metrics are essential when it comes down to competition between businesses too: they allow a company’s marketing departments (along with other key stakeholders) access to how their competitors are tracking in terms of key performance indicators (KPIs).
The 7 Key Customer Metrics to Measure for Your Business
There are many different types of metrics you can use to measure your customer experience, but the following seven are what we consider to be the most important. For each metric, we’ll also give you some tips on how to interpret the data and apply it in your business.
1. Qualitative Customer Feedback
When it comes to customer feedback, the more you can learn, the better. That is why it is critical to understand what your customers are saying and how they say it.
To do this, you should ask customers for their thoughts both directly and indirectly.
Directly means asking them questions about their experience: What did they like? What did not they like? What suggestions do they have for improvement? Indirectly means taking note of things that come up in conversations with customers or on social media before asking them about them specifically (for example, if someone mentions how great your support team is online, follow up later with a survey).
How to Measure Qualitative Customer Feedback
The easiest way to collect qualitative customer feedback is to send out a survey. Ask your customers how they feel about their interactions with your business, then use the answers you get to improve your product/service delivery.
Another method is to conduct customer interviews. Invite some of your customers for a physical or virtual meeting, then talk to them one-on-one—noting their facial expressions and body language as they reflect on the service they receive and how it might be improved.
2. Customer Satisfaction Score (CSAT)
Customer satisfaction is a measure of how happy customers are with your product. It’s a great way to measure how well your business is doing at addressing your customer’s pain points. Measuring this metric for business can help you identify areas that need improvement.
If you want to improve customer satisfaction, focus on the following:
- Improve your product and make sure it meets their needs.
- Ask for feedback from customers so you know how they feel about the product or service when they’re using it. This way, if there’s something wrong or missing from your offering, then you’ll be able to address these issues before too much damage has been done.
How to Calculate Customer Satisfaction Score
A customer satisfaction score is obtained by asking customers to rate the quality of their experience with your product or service on a scale of 1 to 10 (10 being the highest). The average response gives you an idea of whether people are happy with what they get from your company.
For example, if you conducted a survey with 100 customers, and got 70 positive ratings, simply divide this by the total number of responses then multiply by 100. That is (70/100 = 0.7 X 100 = 70%).
3. Customer Health Score
The customer health score is a metric used to understand the likelihood of a customer to grow, stay consistent, or churn. It is a business metric that can be used to predict the future of a customer with your business, and how to improve on it. You can use this score as a guide when making decisions about what products and services to offer, or how to market them.
How to Measure Customer Health Score
To measure customer success, formulate a health score for each one. What do their finances look like? How many customers do they have? Get a handle on their business’ overall health and then monitor the metric over time. This will give you more insight into how your business is affecting that company’s bottom line.
4. Net Promoter Score (NPS)
Net Promoter Score (NPS) is a customer loyalty metric that measures customer loyalty. It gives you insight into how likely your customers are to recommend your business to others. You can use this score as a guide when making decisions about what products and services to offer, or how to market them.
How to Measure Net Promoter Score
To measure NPS, ask customers one question: “On a scale of 0-10, how likely is it that you would recommend our company/product/service to a friend or colleague?”
Then put the responses into three categories: Promoters (9-10), Passives (7-8), and Detractors (0-6).
5. Customer Churn Rate
Customer churn rate measures the percentage of customers that leave your business. It’s a useful metric to have because it helps you identify areas of concern and improve customer retention. By analyzing your churn rate, you can find ways to reduce customer turnover by improving service quality or offering better incentives for sticking with your brand.
How to Calculate Customer Churn Rate
To measure churn rate, simply divide the number of customers who left by the total number of customers in a given period. For example: “At the beginning of May, I had 1,000 customers; by the end of that month 25 customers churned. So my May churn rate is 2.5% (25/1000=0.025)”.
6. Customer Lifetime Value (CLV)
Customer Lifetime Value (CLV) is a metric that aims to measure the value of each customer, in terms of their spending over time. It’s a key metric to measure customer retention because it helps you understand how much revenue each customer is worth over their lifetime with your business.
How to Calculate Customer Lifetime Value
CLV can be calculated by multiplying the average revenue per customer by the average number of years a customer spends with your business.
For instance, if one of your customers spends $100 per month on average and you expect them to remain with you for five years, then their CLV would be $100 x 12 x 5 = $3,600.
7. Customer Retention Cost
Customer retention cost is the cost of having a customer. It’s the total of all your expenses, from advertising and sales to customer service and product development, minus the revenue generated by keeping that customer.
You may think that it’s easy enough to calculate this number: just add up everything you spend on marketing, or call it one-third of your total revenue for the month. But in reality, calculating CRC takes more thought than this since many of these costs are hidden in other areas (like sales) or difficult to track (like advertising).
Even if you can’t easily determine how much each step costs individually—or even which steps contribute most heavily towards creating new customers—you’ll still want to calculate CRC as accurately as possible because this metric helps businesses understand how much they’re spending on bringing new customers into their business versus maintaining existing ones.
How to Calculate Customer Retention Cost
To calculate your customer retention costs, you’ll need to audit the expenses of all of your customer success efforts—including payroll for your team members, engagement and adoption programs (like webinars or training), and professional services (such as onboarding contracts with consultants) and referral marketing.
Once you add all of these expenses up into one sum, you can divide that value by your total number of customers to get your average customer retention cost (sum of all expenses / total number of customers = average customer retention cost).
Using Customer Feedback Metrics for Business
As you can see, there are many ways to calculate your customer experience with your business. But no matter which method you use, it’s important that you’re able to accurately measure the impact of your efforts and identify areas where they could be improved.
Measuring your customer satisfaction is a critical metric for understanding how you’re doing at providing customers with an exceptional experience. Understand what areas of your business are falling short and where there’s room for improvement. You can then use this information as leverage when seeking out new opportunities or when deciding where to invest resources to improve the customer experience.
No doubt measuring customer experience metrics can help a business gain valuable insight into how its customers feel about their experiences. If you’re looking for a way to improve your customer feedback and retention, try implementing these seven key metrics today!