A quick reference guide to measuring customer experience

The axiom "you can't manage what you don't measure" is particularly true of customer experience (CX), but the multi-faceted nature of CX can make it difficult for companies to develop an accurate picture of performance.

Businesses who do crack the code on measuring customer experience can transform that information into a competitive differentiator by continuously improving what customers encounter when they engage with the organization. Enhancing CX through fact-based design is a path to higher customer loyalty, improved financial results, and a stronger brand reputation.

Realizing these benefits requires a substantial amount of data from a multitude of sources that can be processed by smart customer experience analytics tools. The right solutions can help businesses understand and predict customer behavior, analyze customer satisfaction and loyalty, and identify places along the customer journey that need improvement.

This article will provide information regarding how to measure customer experience, including top CX metrics, customer experience measurement tools, and the benefits of measuring customer experience.

Understanding customer experience (CX)

Customer experience is the perception a consumer has about a company based on a collection of interactions with the brand. These interactions can range from a retail shopping experience to social media engagement to TV commercials. In today's digital world, there are many opportunities for a business to make an impression, highlighting the importance of having a disciplined approach to customer experience management (CEM).

The need for a strong CX strategy is further reinforced by consumer research. For example, Salesforce found that 88% of customers say the experience a company provides is as important as its products or services—the highest it’s ever been.

Adding to the complexity of delivering consistently satisfying customer experiences across a plethora of touchpoints is human nature. Many factors go into how a person forms an opinion.

How an experience affects a consumer's emotions is at the top of the list of influential factors. Gartner research regarding customer loyalty revealed that about 70% of decisions are based on emotional factors and only 30% are based on rational factors. Brands can address this fact by incorporating empathy, understanding, and tailored experiences throughout the customer journey.

Psychological aspects of an interaction also influence the formation of perceptions. A human's rational side is busy with activities such as interpreting information and evaluating options when assessing the quality of an experience.

Physical and digital characteristics of an engagement affect both the emotional and psychological aspects of decision making. For example, slow-loading pages during a big sale may make the emotional side of a consumer angry at a business while the rational side is thinking that the company doesn't have its act together and doesn't deserve his trust.

The imperative of measuring customer experience

Proficiency in regularly delivering superior CX is a result of a continuous improvement cycle that creates a competitive advantage. Measuring customer experience leads to actionable insights which lead to meaningful enhancements to the customer journey.

Next comes improved customer loyalty and retention, more customer referrals, a better brand reputation, and stronger financial results. Businesses that repetitively run this cycle also gain competency in innovation as a result of always measuring customer experience and improving CX. Innovation also has a positive impact on the bottom line.

For businesses that can sustain this cycle, the financial benefits can be significant. Loyal customers are inclined to buy more products and maintain longer relationships with brands, which creates a higher average customer lifetime value (CLV). And when they become brand advocates, they fuel revenue growth by referring friends and family.

Satisfying CX can also reduce costs by improving efficiency. For example, those loyal customers who refer friends and family reduce the cost of acquiring new customers. And when customers encounter less friction during their journeys, that can reduce the cost to serve.

What kind of financial results can customer-centric companies expect? McKinsey & Company found that improving the customer experience has increased sales revenues by 2% to 7% and profitability by 1% to 2%. The same research also revealed that for businesses that improved CX the overall shareholder return has increased by 7% to 10%.

Top metrics for measuring customer experience

Because there is no single metric that can inform an organization about the quality of their CX, businesses need to use a basketful of measurements that collectively paint a holistic picture. These customer experience measurements can include the following:

• Net Promoter Score (NPS)—Net Promoter Score is a prominent metric to use when measuring customer experience. NPS gages how likely a person is to recommend a product or a brand and can be used to assess customer loyalty and predict future business growth.
• Customer satisfaction (CSAT)—Customer satisfaction is a traditional, survey-based CX metric that allows organizations to measure satisfaction at a specific point in time with a specific element of the customer journey, such as customer service, onboarding, or website enhancements. Although customer satisfaction scores won't provide a comprehensive view of CX, they are effective for taking quick temperature checks.
• Customer effort score (CES)—Requiring customers to muddle their way through poorly designed self-service and other sources of friction creates a bad experience and can erode customer loyalty and tarnish a brand's reputation. Customer effort scores help identify touchpoints that need to be streamlined so customers don't have to work so hard when doing business with a company.
• Customer retention and churn rates—Ultimately, customers vote with their wallets when CX is good or bad. A primary goal of customer experience strategies should be to create loyal customers and lifetime relationships. Retention and churn rates are lagging indicators of CX success or failure.
• First contact resolution (FCR)—Because customer service can play a significant role in shaping a person's perception of a business, contact center metrics should be included in an organization's collection of customer experience metrics. In the spirit of not making customers work too hard, measuring the percentage of "one and done" interactions, as indicated by FCR rates, is an effective way to determine if contact centers are delivering the level of convenience customers expect. FCR can also be used to monitor whether customer service resources are being used efficiently.
• Customer referral rate and monthly active users (MAU)—Another goal of a CX strategy should be to increase customer engagement. Therefore, when determining how to measure customer experience, businesses may want to monitor customer referrals and how many active users their website has each month.
• Trial-to-paid conversion rate—This metric informs organizations about the efficiency and effectiveness of their sales funnel. Low conversion rates may also indicate that prospects encountered issues during the trial process.

The role of employee engagement in CX

Employees throughout the organization can impact CX, therefore businesses may also want to include employee engagement metrics when measuring customer experience.

Engaged employees believe in the business's mission and enthusiastically go the extra mile to help their employer meet its business objectives. Gallup found that the behaviors of highly engaged business units result in a 23% difference in profitability.

Much of the disparity in financial results could be attributed to the better CX that engaged employees are committed to providing. For example, engaged employees are more likely to go above and beyond to ensure customers are taken care of enthusiastically and with empathy.

High employee engagement can also lead to lower employee turnover, which means businesses are keeping more of their experienced workers. This is especially important for customer service CX. When customers interact with knowledgeable contact center agents, they're more likely to receive quick resolutions.

To help increase employee engagement and enhance CX, organizations should invest in employee development and empower workers to fully resolve customer issues.

Leveraging technology in customer experience measurement

The best CX measurement approaches pull both structured and unstructured data from multiple sources. This information then needs to be consolidated and transformed into actionable insights. These factors make it imperative for organizations to use state-of-the-art data collection and analysis technology, such as the following:

• Feedback management—The best feedback management systems allow users to customize surveys, distribute them to customers in multiple channels, and easily share data with other applications.
• Interaction analytics—Interaction analytics solutions leverage artificial intelligence (AI) to analyze customer service conversations and provide insights such as customer sentiment and contact drivers.
• Customer journey mapping—Mapping the customer journey is essential for customer experience measurement. Customer journey mapping tools can help businesses easily create and share journey maps, as well as identify opportunities for improvement.
• Social media monitoring—Social media monitoring applications enable organizations to analyze the nature of what's being said about them and their products on social media sites.
• Customer relationship management (CRM)—CRM systems are valuable repositories of customer data, including order history and customer lifetime value.
• Operational reporting—Operational reports also provide relevant data about CX-impacting performance such as call center wait times and first contact resolution rates.

The above isn't even a comprehensive list of CX data sources, but it provides an idea of the breadth of systems that can be involved in measuring customer experience. The vast amount of data these systems produce is best analyzed with AI-powered analytics solutions.

Artificial intelligence is built to consume and interpret immense quantities of information. Smart analytics solutions can analyze information from multiple sources to identify trends, patterns, and correlations among data. This enables organizations to perform tasks such as customer segmentation, which enhances personalization efforts. AI can also help companies predict customer behavior, such as likelihood to churn, which allows them to be more proactive with relationship management.

Machine learning enables these tools to become smarter over time, progressively becoming educated on the unique aspects of a business and its customers. Add in the ability to provide real-time insights, and it's clear that AI analytics is a must-have tool for robust customer experience programs.

Actionable insights from CX metrics

Of course, all these customer experience measurement tools and metrics will go to waste if an organization doesn't act on the insights they provide. One of the most important outcomes of measuring customer experience is making improvements to the customer journey that will result in better CX.

Acting on insights from CX metrics often follows this type of cycle:

• Collect CX data— As mentioned previously, measuring customer experience typically involves a collection of metrics that must be collected and consolidated.
• Analyze data—Once the data has been consolidated, it needs to be analyzed and transformed into useful information that can be acted upon. The output of this step may include the identification of pain points and opportunities for improvement.
• Prioritize improvement areas—Once opportunities for improvement have been identified, they should be prioritized using criteria such as number of customers affected and impact to the bottom line.
• Identify initiatives—This step involves identifying specific initiatives that will be undertaken to address the prioritized opportunities from the previous step.
• Implement and test changes—Depending on the scope of the improvement initiatives, businesses may want to pilot them before doing a complete rollout.
• Monitor and measure—Once the CX improvements have been implemented, they need to be measured to ensure they're meeting their goals and having the desired effect.
• Refine the changes—Improving customer experience is often an iterative process. Enhancements may need to be tweaked based on data and customer feedback.
• Lather, rinse, repeat—Improving CX should be a cycle that leads to a culture of innovation. A CX team’s work is never done.

The future of customer experience measurement

As artificial intelligence becomes increasingly more advanced, AI-powered technology will become ubiquitous for gathering CX data and measuring customer experience. Smart, real-time insights will be readily available so it may become a competitive race to use that data to make meaningful CX enhancements.

Artificial intelligence will also fuel the use of predictive analytics, empowering businesses to become more proactive because they have a better handle on trends and likely customer behavior.

Organizations will also be able to take personalization to the next level through metrics that help them understand how well their tailored experiences and offers match up to customer preferences.

Regardless of what time period—future or present—businesses need to make CX a priority and develop a comprehensive, multi-faceted approach to measuring customer experience. CX can be a competitive differentiator that leads to better financial results and increased shareholder value. Those organizations that are successful at creating a steady cycle of customer experience innovation will remain competitive in today's experience economy.

NICE has a roster of solutions to help organizations measure customer experience and make data-driven decisions. For more information about how we can help you become a CX leader, visit our CX analytics page.