Many aspects of a small business—like sales numbers, revenue, or number of customers—can be measured objectively, but subjective experiences can’t. However, this doesn’t mean data is useless for improving customer experience. Key performance indicators (KPIs) are simple, targeted metrics that indicate an overall picture, and there are many KPIs you can use to indicate the quality of your customer experience.
What you need to know
- Customer experience refers to all the interactions a customer has with
your brand, and how these interactions shape their behavior and feelings. - A strong customer experience can improve your reputation, revenue, and operational efficiency, which is critical for long-term growth.
- While you can’t substitute KPIs for strategy, you can use certain metrics to identify areas of strength or weakness in your customer experience.
What is customer experience?
Customer experience (CX) refers to how customers interact with your brand from their first impression to their last. This includes any thoughts, senses, feelings, and behaviors created when you expose a customer to your brand. Different stages of the customer experience include browsing your store, purchasing and using your products, seeing your ads, and even recalling some earlier interaction.
Why customer experience matters for small businesses
Customer experience directly impacts your brand reputation and revenue. A great experience will encourage positive word-of-mouth that attracts new customers and increases the lifetime value of existing ones.
Using data to optimize your customer experience will help you identify and meet your customers’ needs and improve your operational efficiency. Improving your customer experience by streamlining your business will help you scale and grow long-term. Just avoid confusing metrics for customer experience—for example, measuring how long a customer spent in-store won’t tell you how they felt, or whether subtle brand changes would change how long they spend.
How to use KPIs to grow your business
KPIs are a powerful tool for monitoring the success of your business strategy. Here are some tips for wielding them effectively:
- Choose a handful of KPIs to track. Tracking too many KPIs will distract from your core business strategy. Choose a few specific KPIs that are relevant to your long-term goals.
- Use software to track your KPIs. Digital tools can automate your data analysis and track KPIs in real-time.
- Review results consistently, but don’t use KPIs to ignore strategy. Each KPI is one metric of many, and following any of them too closely will give you a distorted view of your company. Check your KPIs periodically, but not at the expense of a holistic customer experience strategy.
10 KPIs to measure customer experience
Choose some of the following KPIs to indicate the quality of your customer experience.
1. Net promoter score (NPS)
Measured by survey, on a scale of 1–5 or 1–10
Measures how likely a customer is to recommend your business to another person. A high NPS can lead to growth through referrals and strong customer retention, while a low NPS can signal dissatisfaction with your brand. Track NPS to correlate the impact of customer experience changes on customer enthusiasm. Survey customers on why they answered the way they did.
2. Customer satisfaction (CSAT)
Measured by survey, on a scale of 1–5 or 1–10
Measures how satisfied customers are overall with your company’s offerings. A high CSAT score indicates your customers are having good experiences with your brand, while low scores indicate poor experiences. Ask customers and your customer-facing employees which areas of your business are appreciated and which areas need to improve.
3. Customer effort score (CES)
Measured by survey, on a scale of 1–5 or 1–10
Measures the level of effort customers require to interact with your business, including site or store navigation, checkout, and support. A low CES indicates that it’s easy for customers to do what they need, and a high CES indicates a frustrating customer experience that needs streamlining.
4. Customer churn rate
Customer churn rate = ([S – E] ÷ S) x 100
S = # of customers at start of period
E = # of customers at end of period
Measures the percentage of customers who stopped doing business with you over a period of time. A high churn rate means you’re not retaining customers well, which could be related to the nature of your products, or may indicate a customer experience issue. A low churn rate indicates a stable, growing customer base.
5. Customer retention rate
Customer retention rate = (E x 100) ÷ S
S = # of customers at start of period
E = # of customers at end of period
Measures the percentage of customers who continued doing business with you over a period of time. A high retention rate means you’re retaining customers well. A low retention rate could indicate a customer experience issue, or it may be related to the nature of your products.
6. Net revenue retention (NRR)
NRR = [(MRR + ER) + (CR – CL)] ÷ MRR
MRR = Monthly recurring revenue at start of period
ER = Expansion revenue during period
CR = Contraction revenue during period
CL = Revenue lost from customer churn
Measures how much revenue from existing customers you retained or grew in a given period. A high NRR indicates you’re not only retaining customers well but also growing your revenue from them. Upselling and cross-selling can increase your NRR, and possibly promote better customer experience if you pair products well.
7. First response time (FRT)
FRT = Sum of FRTs during period ÷ Number of customer requests during same period
Measures how quickly it takes for a customer to receive a response from customer support. A short FRT indicates that you have efficient customer support, which will improve customer satisfaction. You can reduce your FRT with streamlined tools and effective training for your support team. Pursue a short FRT and a low CES for optimal results.
8. Average resolution time / mean time to resolution (MTTR)
MTTR = Sum of resolution times for all requests during period ÷ number of requests solved during same period
Measures how quickly your customer support team resolves customer issues. A short MTTR indicates an efficient support process, while a long MTTR indicates a disorganized one. You can reduce your MTTR with streamlined processes and regular training for your support team. Pursue a short MTTR and a low CES for optimal results.
9. Conversion rate
Conversion rate = Total conversions ÷ total visitors
Measures how effectively your content turns passive engagement with your brand into active engagement, such as turning a store visit into a purchase. A high conversion rate indicates your marketing and presentation are effective at driving interaction, while a low conversion rate indicates potential issues. To increase your conversion rate, analyze your marketing and sales strategies with A/B testing and develop your brand voice.
10. Customer lifetime value (CLV)
CLV = (PV × PFR × CL) ÷ CRR
PV = avg. purchase value
PFR = avg. purchase frequency rate
CL = avg. customer lifespan
CRR = customer retention rate
How to calculate CLV, step-by-step
Measures how much you stand to earn from a new customer from their first purchase to their last. Customer lifetime value indicates how well you retain customers, and how well your customer acquisition and retention strategies translate into revenue.
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