Survival in today’s economic climate and competitive environment needs more than just low price and fresh, original product. To compete effectively, businesses need to measure their customer experience, whether it be in store or online, so they can build trust and loyalty with their customers.
Measuring customer experience is important because it gives a clear picture on how you can improve your customer service to further grow your business. Measurement of customer experience within your business will also help you to identify the most profitable areas of your service model, as well as those that are not delivering measurable results for the time, effort or cash put into them.
Metrics for Customer Experience:-
- Customer Conversion
- Customer Acquisition vs. Customer Retention
- Customer Churn
- Mystery Shopping / Net Promoter Scores
- Customer Feedback / Focus Groups
Customer conversion rate is the percentage of visitors who take a desired action, in most cases this means those who make a purchase, but can also include membership registrations, newsletter subscriptions, Loyalty programme sign up’s, or just about any activity beyond “just browsing”.
Customer conversion is measured by dividing the number of people who purchase vs. the number of people who enter the store or visit your website.
Of course, a conversion rate alone doesn't tell the whole story. Conversion rates are a simple percentage, a ratio of people who took action (purchased an item, signed up for emails etc.) out of all the people who were presented with an option to do something (all of the stores or websites visitors). And while a 20% conversion rate looks better than a 10% conversion rate, your business could be generating more revenue off the 10% conversion rate, because conversion rate doesn't take into consideration the customers total spend. Also, not every visitor coming to your site or coming to your store intends to purchase, they could simply be browsing products, looking for contact information, opening hours, or returning an item.
It is always a good idea, to combine conversion results with monitoring the success of other Key Performance Indicators such as Average Sale Value and Items per sale (basket size)
Customer Acquisition vs Customer Retention
To measure the cost of customer acquisition divide total acquisition expenses by total new customers over a given period. This tells you whether your marketing and advertising investments are paying for themselves. Over time, your cost of acquisition should go down as growth and your brand image go up. Again, be sure to check industry norms for your type of business to see if you are competitive.
It is interesting that most businesses spend more money on acquiring new customers than they do retaining their current customers. According to research, 80% of your future profits will come from just 20% of your existing customers. That means the revenue sources you’ve been trying to find are most likely sitting right under your nose, waiting to be nurtured and cultivated.
The most traditional formula to measure customer churn would be to calculate the number of customers lost divided by the number of customers at the start of the month. Monitoring churn allows you to consider what you’re doing to keep customers, and see what actions might result in a higher retention rate, and therefore drive higher profitability.
Mystery Shopping / Net Promoter Scores
Mystery shopping is the method by which a store or a business evaluates its teams’ performance through visiting the store, interacting with the employees and assessing their ability to build a rapport with the customer in order to sell their products. Apart from evaluation of performances, mystery shoppers analyse other commercial aspects of retail stores. These aspects could be price, availability, and quality of the product; customer service via websites, telephones and in person; and housekeeping. Businesses make use of mystery shopping to uplift their sales by improving customer experience. Secret shoppers are hired wholly and solely to increase sales by improving the performance of the employees. Mystery shopping is useful not only for evaluating your teams’ performance but also for benchmarking customer service offered by competitors.
One of the most fashionable metrics in the field of customer experience is the "net promoter score," or NPS. Valuable information is extracted by a single straightforward question: "Would you recommend this company to a friend or relative?" NPS partly reflects a customer's emotional loyalty. In addition, it is highly suitable for benchmarking because many companies use it as a standard. These features, coupled with its sheer simplicity, make the NPS a favourite with company boards and executive committees.
Customer Feedback / focus groups
Customer surveys and focus groups provide the platform for businesses to directly communicate with the customer and the feedback is paramount when determining what's important to their customers. Without customer feedback, a business could not possibly meet the actual needs of the consumer. Customer feedback also allows businesses to better understand how customers rate and use their products versus competitive products or can manifest in evaluating how team members treat customers.
Effectively measuring these variables will provide an accurate account of the customer experience. Businesses can understand why customers behave the way they do and also predict how they will behave in the future. They can make business investments based on accurate customer experience analytics that will materially improve the customer experience and, ultimately, the bottom line.
Next week it’s all about the brand!
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