How do you decide which customer experience metric is suitable for you business?
One of the common questions that I encounter when speaking to clients is, “Which metric should be used to measure customer experience?” Customer experience enthusiasts are eager to understand why a certain metric should be used, what its advantages are, and how that particular metric is relevant to their business. In this guide to NPS, CSAT, and CES, I will help you understand the various facets of those metrics: What does each metric mean? How to calculate it? What are the pros and cons of each metric? And what is its application?
Net Promoter Score (NPS)
Net Promoter Score® is a customer loyalty metric developed by Fred Reichheld, Bain & Company, and Satmetrix. It was introduced by Reichheld in his 2003 Harvard Business Review article “One Number You Need to Grow”, in which he throws light on the meeting between Chief Executives from leading companies who had gathered to exchange insights that would help them further enhance their loyalty efforts.
He says, “As part of their research into customer loyalty and growth, my colleagues and I looked for a correlation between survey responses and actual behavior—repeat purchases, or recommendations to friends and peers—that would ultimately lead to profitable growth. Based on information from 4,000 consumers, we ranked a variety of survey questions according to their ability to predict this desirable behavior. The top-ranking question was far and away the most effective across industries:
How likely is it that you would recommend [company X] to a friend or colleague?”
To calculate the Net Promoter Score®, the response to the above question is measured on a scale of 0 to 10 and respondents are classified into three categories:
Promoters (Score 9 and 10): These are your raving fans who buy from you, refer others, and then come back to buy some more.
Passive (Score 7 and 8): These are the fence sitters. They jump to next available option. They are more or less oblivious to your existence.
Detractor (Score 0 to 6): Boy, are they angry! They cost you money. They bad-mouth you. They make sure that anyone in the second degree of connection does not do business with you.
Subsequently, NPS is calculated as follows:
Net Promoter Score = % Promoters – % Detractors
- The beauty of Net Promoter Score® lies in its simplicity. It is extremely simple to calculate and focuses on addressing customer concerns. Furthermore, it’s action-oriented, not research oriented.
- Since it is just one question, customers generally do not hesitate in answering it. This results in more respondents, which translates into a more accurate picture of the customer’s sentiment towards the brand.
- It measures loyalty towards a brand, which is the ultimate representation of customer satisfaction.
- Unfortunately, there is no evidence of whether customers would recommend the company in reality. Even if the recommendation is made, there is no evidence to substantiate whether there would be an actual purchase.
- If you need to derive actionable insights from the NPS question, you need to ask a follow-up question to understand the reason behind the customer’s score
Customer Satisfaction Score (CSAT)
This is one of the most commonly used metrics to measure customer satisfaction. Post a transaction, the customer is asked the following question:
How would you rate your overall satisfaction with the service received?
Firstly, respondents rate their responses on a scale of 1-5, with 1 being least satisfied and 5 being most satisfied. Then, the average of all the scores collected is called the CSAT of the company. The closer the number is to 5, the more satisfied the customers of the company are.
Either the above or a variation of this is used to measure the customer satisfaction score. The variation can be in terms of the scale or the method of calculation. For instance, some companies use a 3-point scale, 7-point scale, or a 10-point scale. Similarly, some companies calculate CSAT by computing the average of all the ratings received from respondents. On the other hand, others derive CSAT as an index represented by the average rating as a percentage of total achievable rating. Needless to say, organizations can use whichever scale/method suits them best.
- It allows a company to ask a variety of questions against various transactions across different touch-points. This helps a company have very specific information.
- For customers, it is simple to understand and respond to.
- Satisfaction is quite subjective; it means different things to different people.
- It is observed that people in the neutral category hardly respond to the survey. It is either people in ‘highly dissatisfied’ or ‘highly satisfied’ category who fill out the survey. Hence, the results could be skewed.
- Satisfaction doesn’t mean that the customer would buy from the brand again. It doesn’t represent loyalty. Consequently, it is difficult to correlate a high CSAT score with business growth.
Customer Effort Score (CES)
CES has been conceived by CEB. Its research indicated that if a customer takes less effort in completing a transaction, then that customer is more likely to be loyal towards the brand. Hence, the question that customers were asked was:
How much effort did you have to expend to handle your request?
The customers responded on a 5 point scale that was defined as 1 for low effort and 5 for very high effort. However, this scale was the reverse of all the other scales, so it created ambiguity amongst respondents and analysts. Also, the word “effort” was not easily quantifiable. Therefore, CES was revised with an updated version of the same question, which reads:
To what extent do you agree or disagree with the following statement:
The organization made it easy for me to handle my issue
Customers rate on a 5 point scale:
1 for Strongly disagree
2 for Disagree
3 for Neutral
4 for Agree
5 for Strongly agree
This question eliminates the problems associated with a numeric scale. Further, the ambiguity related to the word ‘effort’ is also eliminated. However, the word ‘easy’ is also subjective.
- Similar to CSAT, it can help define the specific areas that have to be improved within an organization.
- According to the research by CEB, 94% of the customers who have spent a lower effort on completing a request will buy from that company again.
- This is a very service industry-specific measure.
- Though one would be able to pinpoint the areas that require improvements, the reasons behind the high effort expended are not identified by this survey.
A one page beginner’s guide to NPS, CSAT, and CES