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.

Voice of the Customer: Are You Really Hearing What They’re Saying?

This is a guest post by Jeremy Watkin, Director of Customer Experience at FCR.

Are you in the habit of closing the loop with customers that offer negative feedback on post-interaction surveys like Customer Satisfaction or Net Promoter Score? I certainly hope so, because it’s a great practice that many companies aren’t in the habit of doing. When I led a customer service team, I was very proud of the fact that we made every attempt at closing the loop with the upset customers we knew about, and by some combination of resolving their issue and offering compensation, we managed to save a good many of them from churning.

But what about those customers that don’t complete a survey voicing their displeasure? What about those where something goes wrong and it’s “too much trouble to complain?” Or perhaps they do complain and the disinterested reply from support is enough for the customer to cut their losses and move on to a company that actually wants their business. And then there’s that statistic where upset customers tell dozens of people about negative experiences while happy customers tell a small handful of their friends. I’m convinced that someone invented that statistic to strike fear into the hearts of customer service leaders with the sole purpose of selling books, software, consulting, etc.

Regardless, it’s the upset customers I don’t hear from that keep me up at night—the unhappy ones we’ll never have the opportunity to save. There’s got to be more we can do, right? What if I told you that more customers are offering feedback about how we can improve and keep their business? It’s time that we start listening to the “voice of the customer” far beyond surveys, and the great news is that what once seemed far off in the distant future is totally possible right now. Let’s discuss further.

A Survey is Not Enough

I love surveys. The act of asking for feedback and then taking the time to act on that feedback is what fuels a great continuous improvement process, but it alone as a voice of customer program is incomplete at best. In my work at FCR, I see a wide range of response rates to surveys anywhere from 10 to 30%—and rarely beyond that.

Can a company really consider a voice of customer program robust if it doesn’t hear from 70% of its customers? If our goal is to truly understand what’s driving dissatisfaction and drive our customer churn rate down, we need to do more. Customers are giving feedback on traditional support channels and social media, and we must listen to that valuable non-survey feedback as well.

Sentiment Tells Us Much More

Consider for a moment relationships and what we know about nonverbal communication. In my own relationship with my wife, most of the feedback I receive about how to be a better husband is nonverbal. Whether it be “the look” or perhaps a tone of voice, I had better be adept at recognizing her signals long before she has to explicitly tell me she’s upset.

Natural language process (NLP) works in much the same way, by understanding not just what customers are saying but the way they’re saying it. Considering the fact that only 1 of every 26 customers actually complains when something goes wrong, the ability to capture customer sentiment from all customer interactions including social posts, voice, email, chat, and SMS significantly broadens our understanding of what customers are saying. And it allows us to recognize an upset customer—sometimes long before they give explicit feedback via a survey. Now we’re on our way to listening to 100% of customer communication with our company. But there’s still more.

But Actions Give Us the Full Picture

Traditional contact center platforms do a great job of helping us pull in customer communication from a variety of sources and respond in a timely manner. For teams of all sizes this is important, and the ability to track a myriad of KPIs helps us measure success, but these systems are almost exclusively predicated on the customer reaching out to us first. Are we to assume that if the customer doesn’t reach out, they’re happy?

If that’s your assumption, you may want to read up on customer journey mapping. This is the exercise of looking at the customer journey from A to Z, identifying all of the places customers touch your company (AKA touchpoints), and evaluating that experience. As I’ve learned about journey mapping, I’ve come to realize what a small (but important) role customer service plays in the overall customer experience.

Clearly a modern contact center platform must take into account the entire customer journey and understand what customers are telling us at each touchpoint with their actions. A few ideas where this might come in handy include:

  • Understanding whether the customer is a first-time buyer or long-time customer.
  • A regular subscription stopped or downgraded after a long history of purchasing regularly.
  • Order fulfillment or shipment is delayed.

There might be a variety of issues. The ability to see this full picture of the customer’s history allows us to take a more proactive approach and reach out to customers, sometimes before they become aggravated.

Focus on Customer Lifetime Value

Now this is starting to sound like the comprehensive voice of customer program we’re going for. We’ve moved beyond reacting to customers with known issues and are proactively acting based on patterns in the customer journey. There’s a final, invaluable ingredient, or metric, in this process that’s so often missing from the process of supporting customers: lifetime value.

Understanding how much a customer has purchased historically and potential future spending is an invaluable tool for a couple reasons. First, it allows your support team to understand what it might take to make things right when something has gone wrong. For example, if a customer spends $25 per month, a $10 coupon might be appreciated, but if they spend thousands annually, that same $10 credit might be insulting.

Second, with lifetime value, we can offer a premium level of service to those high value customers. When it comes to proactively reaching out to customers at various points in the journey we’re now working smarter, not harder by prioritizing our reach out first to those that spend the most and/or have been with us the longest.

A true voice of customer program should absolutely strive toward a 360-degree view of the customer’s experience—and this is totally possible when we can easily see support history, feedback, sentiment, actions and lifetime value. With that information, we shift our approach from a reactive to a proactive one. Once that’s occurred, I see a future where customer service leaders everywhere sleep a whole lot better at night.

Jeremy Watkin is the Director of Customer Experience at FCR. He has more than 17 years of experience as a customer service, customer experience, and contact center professional. He’s also the co-founder and regular contributor on Customer Service Life. Jeremy has been recognized many times for his thought leadership. 

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