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5 Reasons You Need to Measure Lifetime Value

In this post by Kustomer VP of Marketing Nelly Rinot, Nelly shares the key reasons why Lifetime Value should be your bottom-line metric for customer experience.

There is a huge number of good metrics to measure your customer service. However, Lifetime Value should always be your top consideration. Here are the top five reasons we’ve determined from our :

  1. Other metrics are geared around your agents, not your customers: Average Handle Time and First Contact Resolution are two prime examples of valuable metrics that don’t give you the insight you need beyond an operational approach. They make sense for figuring out how cost-effective your service is—how many customers your agents can handle before they’re at capacity. But while productive agents can help more customers faster, they should do more than work as fast as possible to resolve an issue. To deliver a good experience, your first consideration shouldn’t be efficiency—it should be whether your customers are happy.
  2. CSAT and NPS don’t give you the whole picture: These metrics are a great way to know whether your service is effective on a macro-level. If customers aren’t satisfied, you need to know. However, knowing that they’re unhappy and WHY they’re unhappy are two very different things. CSAT and NPS measure if you are satisfying your customers in the moment, but doesn’t tell you about their behavior after you’ve engaged. Plus, these surveys only capture a tiny, unrepresentative minority of customers. And in most cases, they’re only speaking to the interaction they just had, not their entire experience with your brand.
  3. Sentiment doesn’t tell you what your customers aren’t saying: Sentiment based on natural language processing is less biased than CSAT and NPS, because it accounts for all the interactions on every channel. That’s a huge step up, but it still won’t answer fundamental questions about your business—you still don’t know what’s going unsaid. Only 1 out of every 26 customers complain if something is wrong with their experience, so even high volume NLP only measures a fraction of what’s going on beneath the surface.
  4. Other metrics don’t take actions into account: For a total customer view, you need to understand all of your customers’ actions and behaviors on top of all the previous metrics. Other metrics don’t record how often they’ve contacted you for service or support, if their buying behaviors have changed, if they’ve abandoned items in their cart, changed their subscription tier, returned or exchanged a product, or engaged with you on social media. All of these actions will help you understand why your customers will or will not come back to buy again.
  5. Lifetime Value is the best predictor of your brand’s success: A 5% increase in customer retention can increase a company’s profitability by 75%, according to Bain & Company. Getting customers to keep buying from you is fundamental to growing your business. No matter what else you know about your customers, if you don’t know their Lifetime Value, you don’t know if you’re going to be successful.

Using a variety of customer experience metrics is crucial for getting a better understanding of your business. They all give you an important piece of the bigger picture. However, if they don’t ladder up towards Lifetime Value, then you don’t know how your service, support, and experience are contributing to overall business health. If you aren’t measuring LTV yet, good news—it’s never too late to start.

CSAT is Not Enough—8 Metrics to Better Understand Your Customers

This post originally appeared on Business 2 Community.

There are plenty of metrics, scores, and benchmarks to track your customer experience, but some are better than others. From tracking efficiency and keeping down costs, to measuring the effectiveness of your experience and the happiness of your customers, it’s important to track a medley of different metrics so you can have a complete understanding and advance all of your goals. Here are the ones I think are absolutely crucial for delivering memorable, meaningful CX.

  1. Average Handle Time (AHT): Customers want their issues resolved—fast. Every extra minute they’re on the phone detracts from their experience and your bottom line. Some issues require more time to solve than others, but you need to measure AHT to have a working benchmark to figure out the sweet spot for your customers and agents.
  2. First Contact Resolution (FCR): If your customers don’t like waiting, they definitely don’t like having to call back multiple times to resolve an issue. FCR works well for determining the effectiveness of your service and the efficiency of your agents at solving customer issues—bad FCR is a sign that other things are going wrong.
  3. Zero Contact Resolution (ZCR): Even better than resolving your customers’ issues with a single touch is resolving them completely before they even have to contact you. Even good FCR may be misleading, as some customers have probably already tried to get an answer from your site or product manual, meaning that first call or email isn’t really the first touch. Proactive outreach that delights customers represents an even higher quality of experience, and is well worth tracking.
  4. Customer Satisfaction (CSAT): CSAT is extremely important for figuring out how happy your customers are with your service—it’s a crucial piece of information and any customer-centric company needs to have. However, keep in mind that customers are usually just responding to the interaction they just had, not what they think of your brand as a whole. They may be very satisfied with an agent’s service, but still feel like they shouldn’t have had to call in the first place.
  5. Net Promoter Score (NPS): NPS will tell you whether your customers would recommend your business to someone else. This is another great way to learn how happy your customers are with your service, and whether you’re generating positive word-of-mouth. However, like CSAT, it can be misleading. Customers may give you an NPS score of “10”, but only actually recommend you to people they feel are as smart and patient as them to put up with the complex support issues they faced. Also, only a minority of customers will take NPS or CSAT surveys, often only after a highly positive or negative interaction—skewing results even further.
  6. Customer Effort Score (CES): CES shines at helping prioritize the sticking points in your experience and where you can smooth out problems to exponentially improve your customer interactions. Since it asks your customers to rate an experience as a whole and not point fingers at individual agents, the results are much more impartial. You can see how your customers really feel, and make decisions about your CX accordingly.
  7. Sentiment: Using natural language processing to track sentiment across all text-driven channels can give you large-scale, unbiased insight. New analytics technologies makes analyzing almost everything your customers say about your brand a reality. You still won’t know what your customers aren’t saying, but this level of insight is becoming easier to achieve and more accurate as technology continues to improve.
  8. Lifetime Value (LTV): Lifetime Value is the ”Holy Grail” of customer metrics. Once you know how your customers are adding to your bottom line, and how experience plays into that, you can truly orient your business around your customer experience. A 5% increase in customer retention can increase a company’s profitability by 75%, according to Bain & Company—meaning that LTV should really become the crown jewel of your analytics suite.

By analyzing a spectrum of metrics, from granular performance-based ones to big-picture insights into the health of your CX as a whole, you can figure out where and how your experience needs to improve, and how it can lead your business towards explosive growth.

Tell Me How You Really Feel: The Best Metric For Finding What Your Customers Need

Brandon McFadden is Kustomer’s Customer Success & Support Manager, you can follow him on Twitter at @brandontonio. Read his post on using CES to help your product and service teams work better together here. The following was adapted from a workshop delivered at Support Driven Expo in Portland, OR.

After recently writing a piece about using CES to help your product teams, I received some questions asking, among other things, what CES even is. So I wanted to go over that here.

Customer Effort Scoring is one of the most effective ways to understand how your audience feels about their experience, and has some distinct advantages over methods like CSAT and NPS. The principle is simple: you’re asking your customers how difficult it was to solve their issue or complete a transaction. Like NPS or CSAT, it only takes one question to get the information you need. Below we can see two examples of CES survey questions:

So what makes a Customer Effort Score such a useful metric? The answer is rooted in human nature, specifically feelings. 96% of customers don’t complain when they’re unhappy, however they’re four times as likely to defect to a competitor if they have a problem. So while finding out if your customers enjoy their experience is critical, it doesn’t always tell the whole story. Here’s the kicker: 70% of buying experiences are based on how the customer feels they are being treated. So even if your service is best-in-class for your industry, if your customers have unknown, higher expectations and your service feels lacking, they’re going to retain that feeling going forward. So the real question for the data-driven team is: How do you quantify feelings?

That’s why CES is so useful—it can tell you how your customers really feel, where other methods focus on intent and how your customers see themselves instead of addressing the feelings that drive their actions. While your clients may give a high CSAT score, what they’re saying is “I really liked talking to your team, they are AMAZING!” (and who doesn’t want to hear that?) but what they might also be thinking (feeling) is, “Why did I even have to call in the first place?” Most people don’t want to speak badly about or hurt the career of an agent, especially when they solved the problem, but they will hold a negative experience against your brand as a whole when their expectation was that the fix should have been easier—or if they never expected to have this problem to start with. To make matters worse, this usually only manifests itself when it is time to recommend your service/product. Lesson? Your agents might be doing great work (of course they are, you hire great people), but that doesn’t always lead to more referrals and repeat customers.

Typically this is where NPS seems like it should provide the other half of the picture you’re missing from CSAT. If customers are satisfied but not willing to recommend you, then something in your experience is lacking, right?. There’s nothing wrong with that assumption, but NPS also has pitfalls of its own, once again sabotaged by feelings. Often, customers will say they would recommend you to their friends, but in practice, they don’t. Interestingly, the problem is found in the NPS question itself: “How likely are you to recommend this product to a friend?”. When we think of our friends, we think of people just like us, same skill aptitude, same patience, same willingness to put up with the “why did I even have to call about this” issues. But in reality, when it comes time to make the actual recommendation, they balk. They think “oh, they aren’t as technical as me” or “they likely don’t have the same patience with that issue like I did”. So while maybe they would recommend your product in general, on a one-to-one basis, they might have lingering doubts about a difficult experience and don’t feel their personal friends would have the patience to deal with your service.

What NPS and CSAT don’t do well is make it easy to identify your customers’ hidden frustrations and reluctance to advocate for you in the real world. Neither help you pinpoint the parts of your product or process that cause the most frustration, not simply have the most quantity. This is why 82% of US companies report that they are “customer-centric”, while only 18% of US customers agree. Clearly, there’s a disconnect between how companies see themselves, and how customers see them. But if their NPS and CSAT scores are high, why should they think otherwise?

Ultimately, this is because customers are thinking: “If you really cared about me, then why are you making it so hard to do something I think should be so easy?” It’s probably a question you’ve even asked yourself when you’ve been on the phone with customer support. Fortunately, with CES, these feelings are able to be captured and quantified.

Let’s look at an example of the Customer Expectation Gap in action. I recently had two experiences where my expectations and the reality were way off, giving me two very different opinions of the organizations I was dealing with after the fact. Those organizations were Amazon and the DMV—about as different as you can get. One is “tech” and optimized to solve your problems, and the other is the DMV.

I’m pretty sure that if I offered you the choice of getting a new license at the DMV or requesting a refund from Amazon—you would choose Amazon every time (and for good reason, their support is fantastic). While I didn’t have to choose in the moment, I did have to get a refund for a Netflix gift-card purchased through Amazon (silly me, didn’t coordinate with my brother). Given their renowned and very streamlined buying experiences, I thought the process would be just as easy. In a way, you could say that they trained me to think this would be just as easy as buying. This, frankly, is the blessing/curse of tech. We spend endless time making things easier, automating, reducing effort—meaning it hurts that much more when this doesn’t happen with Support resolutions. Inversely, around the same time, I needed to replace my license at the New York City DMV—a much-maligned experience and a staple of 90s stand up—albeit for good reasons. I expected this to be an all-day ordeal (ok, maybe half day), because it had been before in multiple states over the past 20 years for me. I had been trained to expect the worst.

However, getting my refund from Amazon was the real bureaucratic nightmare, stretching across four calls and two 15-minute chat sessions, and taking over 2 days to resolve. On the other hand, the DMV was a breeze. I booked ahead online, found an “express office”, checked-in on a screen, followed an express lane to an automated machine, and was done in less than 30 minutes. Now, I’ve been bragging about the NYC DMV to my friends (who think I’m crazy), and certainly haven’t recommended ever getting a gift card from Amazon. The funny thing is that If I had called up Amazon expecting a hassle, I wouldn’t have remarked on it, and if I had known that the DMV had become so cutting-edge (kind of), then maybe I wouldn’t have been wowed. So as you can see, it really is the combination of how I felt about the experience, my expectations, and the relative effort I had to expend that determined whether or not I became an advocate.

To be clear, none of this is to say that you shouldn’t measure NPS and CSAT. You absolutely should, and they are crucial metrics for understanding your business. But if you want to know how your customers really feel about your experience, they leave too many gaps. With CES, you can fill those gaps and get all the context you need to identify where your experience is weak, and how you can improve it. So maybe start by adding a 2nd CES question to your post-issue CSAT survey, you may just be surprised by the results. Remember, it’s not about what your customers say—it’s how they feel that creates impact at the moment of their referral, making repeat purchases, and when they decide to churn. If you would like to learn more about how you can act on this information, feel free to check out the companion piece: How CES Can Help Your CX and Product Teams Work Better Together.

To learn more about how Kustomer can help you better understand your customers, request a demo below!

Product Update: Get Deeper Insight with Custom Object Searches

Kustomer’s platform for customer experience uniquely collects, organizes, and displays all the available data about your customers in one easy to use timeline. Searches are a way of segmenting conversations, customers, and companies based on properties like customer loyalty level, conversation status, channel and more. We’ve expanded the functionality of Searches to include custom objects as well. With information from tools like Magento, Delighted, or Jira, you’ll now be able to create searches based on any customer data that exists in your business custom objects (Kobjects). And the possibilities are endless.

For example, if you’re an IoT company with a device object, you can use search segmentation to see all the devices that have been registered in the last week as well as all conversations about each model; automatically updating when new information is available.

You probably also collect CSAT information and integrate it into Kustomer to make sure you provide relevant service. With Custom Object Searches it’s easy to create a search for all conversations that received a negative CSAT score in the last week and even further segment that by customer information like subscription tiers, location, or total dollars spent. Teams can then easily prioritize outreach in order to maximize customer satisfaction.

No need to invest in highly-priced enterprise software or in-house development. With Kustomer your team is now fully informed and empowered to provide the best service for  every customer.

For more information about Custom Object Searches, check out this article.

Customer Experience is Evolving. Are Your Metrics?

There are a lot of useful metrics for tracking your service, as our CEO Brad Birnbaum recently discussed. However, if you’re just looking at your service through the lens of efficiency and generating the lowest cost to your organization, the chances are that you’re not giving your customers the experience they deserve.

Metrics for Support: AHT and FCR

Many of the longest-standing metrics used to measure customer service are operational in nature: First Contact Resolution and Average Handle Time being two of the most widespread.

  • These metrics work well for determining the cost-effectiveness of your service.
  • They encourage agents to work more quickly and help more customers
  • End-goal is to lower the cost of each interaction

However, this mindset puts a premium on agents working quickly, not delivering a great experience.

  • Agents can scale service, but that doesn’t mean that service is of a high quality.
  • If customers are going away unsatisfied, or keep returning with the same problem, what is the real value of the support you’re offering?

You might be helping a lot of customers, but no matter how inexpensive it is to help each of them individually—you’re still operating your service organization at a loss.

Metrics for Service: CSAT, NPS

Many companies have evolved towards delivering more than just baseline support, but actual satisfying service. A company that delivers service goes further. They invest in their customers to create positive word of mouth and encourage repeat business. Zappos is a good example of a company that brought the benefits of providing real service to customers to the forefront. They strive to make customers happy, offering easy returns and short wait times that make you want to come back for more. If offering a discount means that an agent will save the sale, even if it lowers profitability, then they’re encouraged to take that step. As long as the customer keeps coming back, they’re worth more to the business in the long run. Companies with this service mindset still care about operational metrics, but CX remains a cost center for their business.

  • Customer Satisfaction and Net Promoter Score surveys can tell you how satisfied customers are with individual service interaction.

However CSAT really only tells you if your customers are happy with the service they’re receiving at that moment.

  • Doesn’t fully account for their sentiment around all the interactions they have before and after that engagement.
  • These surveys are biased: the majority of your customers won’t take a CSAT or NPS survey
  • Those that do are much more likely to respond if they’ve had a very good or very bad experience.

While useful as part of a larger mix, in most cases, customers are telling you about the interaction that they just had, not their overall feeling towards your service and brand as a whole.

Metrics for Experience: LTV and Sentiment

To really deliver an incredible experience, agents should prioritize generating repeat business and giving top-quality, personalized service. Beyond that, they should be thinking long term, giving valuable customers a material reason to keep shopping with offers and discounts. If your mindset is about improving your customer experience without worrying about the amount of time or cost behind it, then CX becomes an investment to gain repeat business.

  • Use NLP to track sentiment across all text-driven channels to get large-scale, unbiased insight.

However, you still won’t know what’s going unsaid. Only 1 out of every 26 customers complain if something goes wrong.

  • The key metric has to be Lifetime Value. It’s the only way to know how all the interactions around your brand contribute to a better experience and repeat customers.
  • If you invest in Lifetime Value, then your Customer Experience can drive real revenue for your business: A 5% increase in customer retention can increase a company’s profitability by 75%, according to Bain & Company.

Service doesn’t have to be a sunk cost. it can be a revenue center once you shift your mindset towards totally understanding and serving the customer.

Customer service is evolving, and the way you think about your experience needs to evolve with it. Lifetime Value has to be your top metric if you want to run a 21st century CX organization. Without knowing everything about your customer, you’ll never know how much you have to win by putting their needs first. There is a world of business to be won if you offer the best experience possible.

The Why, How, and What of Measuring Customer Service Quality

This is a guest post by Jakub Slámka, CMO at Nicereply

As customer service professionals, we’re in the business of making sure our customers get the highest quality support. We strive to help them succeed with the highest caliber guidance we can provide, and to solve their problems with excellent solutions and service. When we do that, it feels good.

To create long term relationships with your customers, you need to understand how and why they act the way they do. There are three surveys that work really well for this: Customer Satisfaction, Net Promoter Survey, and Customer Effort Score. All of them involve surveying customers to get their opinion, but they ask different questions to find out different things.

Let’s break them down the Simon Sinek way so you know exactly Why, How, and What to measure when it comes to customer service quality.

Customer Satisfaction Score (CSAT)

Customer Satisfaction Score (CSAT) is most often used to measure customer’s feelings about a specific interaction with your support team. It can also refer to how happy a customer is generally, though in the customer service industry it usually refers to an agent or a customer support team.

WHY should you measure CSAT?

Measuring customer satisfaction means having a better idea of what works to keep customers satisfied – and what leaves them unhappy. This way you’ll know what to keep up and what to fix. You’ll also be able to gauge performance of not just support generally, but specific teams and individuals as well.

HOW do you measure CSAT?

Customers will receive a survey asking if they were happy or satisfied with the service they received, which they can respond positively or negatively to. The customer chooses their response on a scale from bad (or not satisfied) to good (or satisfied). To calculate the CSAT score, subtract the % of customers who were unhappy from 100%.

WHAT does a CSAT survey look like?

You can set your CSAT survey in one of two different ways. Either you can send out an email with a survey after a ticket is closed, or you can measure it in every email interaction with your customers in the form of “instant ratings”. Survey itself can have many different looks. Nicereply CSAT survey usually looks like 3 smileys portraying different emotions, 2 hand with fingers facing upward or downwards or a scale of 10 stars.

Net Promoter Score (NPS)

Net Promoter Score (NPS) was specifically developed to measure loyalty and to provide you with feedback about how well your products are received. This metric will tell you, how likely your customers will recommend your services or products.

WHY should you measure NPS?

NPS brings a simple solution to finding out who is your loyal customer and transform unhappy clients into satisfied promoters. You can use NPS to enhance your customer service, but it can also be used by your marketing department to gauge your customers feeling toward your product.

How do you measure NPS?

NPS is usually measured via a regular survey (bi-monthly, yearly etc…). In this survey, customers are asked the above question “How likely are you to recommend *|COMPANY|* to a friend or colleague?” and they respond on a scale from 1 (very unlikely) to 10 (very likely).

If a customer answers lower than 6, they are a detractor. If they respond 9 or higher, they are a promoter. Customers responding 7-8 are passives.

NPS is calculated by subtracting the % of customers who replied as detractors from the % of customers who answered as promoters. NPS scores are not a percentage and range from -100 (very bad) to +100 (very good).

WHAT does an NPS survey look like?

Due to it being based on a research by Bain & Co, NPS survey will always look the same—a scale from 0 to 10. The question itself can vary slightly. One such example could be a question “On a scale from 1-10, how likely are you to recommend this organization as a good place to work?”—this is also known as Employee Net Promoter Score.

Customer Effort Score (CES)

Customer Effort Score is a highly specific measure of how much work your customer felt they had to do to solve an issue. Support teams using CES are able to find and eliminate friction points that cause high-effort experiences.

WHY should you measure CES?

Imagine having a problem you need to solve. Now imagine you have to jump through several hoops and switch multiple channels to get hold of someone willing to help you fix it. Even though this support agent might be “super nice”, there’s a big chance you won’t ever want to go through the same experience again.

The idea of CES is that customers enjoy doing business with companies, that are easy to work with. It means, that CES measure the amount of effort customers were experiencing with your company as a whole.

HOW do you measure CES?

CES is often sent as part of a post-service survey and it’s measured by surveying customers after the resolution of their customer service conversation (usually 24 hours after a ticket is closed).

Similar to the NPS before, customers are asked to rate one simple statement: “The *|COMPANY|* made it easy for me to handle my issue.” a standard 1(low) – 7(high) scale whether they agree or disagree with the statement.

Your CES will then be the averages of these ratings, although we recommend to look not just at your average score, but at their distribution as well. Afterall, if your scores are bunch of 7s and 1s, it still means your experience is confusing a lot of people.

WHAT does a CES survey look like?

Being based off of a research paper by CEB, CES survey will always ask the same question. Original CES used a scale of 5 different answers, while updated CES 2.0 uses a scale of 7.

Measure, Manage, and Improve

As the old saying goes, “Whatever gets measured gets managed.” Measuring quality and using what you learn to better meet customer expectations is what will propel your efforts to truly serve your customers and drive your business forward.

Try Nicereply for Kustomer for free and measure any and all of these metrics to get more feedback out of your customer interactions.

Jakub Slámka is CMO at Nicereply.

Schedule a demo.