4 Data Driven Ways to Measure Customer Experience
Given all the smog and regurgitated content on this topic, here is a direct, informative, and data driven approach to the question of how to measure customer experience.By researching and strategizing around the digital ecosystem of the customer experience journey, good business decisions can be better tailored to the right audience. With this approach in mind, we’ll go over a few of the most impactful KPI’s to measure against, towards the goal of growing and retaining customers.
KPI #1 - Conversion Rate
According to a recent study done by Econsultancy and IBM Watson Marketing, channel specific optimization is one of the key areas marketers and business leaders are focusing on when thinking about the digital customer experience.In this study, they found that of the channels being optimized, 78% focused on desktop experience, 61% mobile, 53% email, and in the 30+ percentile range focused on social and search.So what are they optimizing for? If they were smart, they’d be optimizing towards increasing the conversion rates of their channels.In its most general formula, conversion rate in digital would be calculated by the number of conversions to a target / the overall visits to the target * 100. If focusing on email, this could be the number of conversions resulting from an email pop-up form divided by the number of visitors to the form.In this case, you’d split test email form variations and inbound marketing tactics to increase the conversion rate, and subsequently generate more emails to grow your list.If looking at this through an ecommerce lens, an organization would take the conversions of its checkout page divided by the overall page visits * 100. As an example, if an organization generates 20 sales a month and has 2,000 unique visitors to the page, its conversion rate would be 1%.If each sale generates 20K in revenue, then 20 * $20,000 = $400,000. Now imagine if this conversion rate was increased by just 1% with all other elements held constant? Revenue would double to $800,000 by just focusing on digital product optimization!
KPI #2 - Customer Churn Rate
Churn rate is the percentage of customers who either don’t make a repeat purchase (for transaction-based businesses) or cancel their recurring service (for subscription-based businesses).Churn rate can be calculated by dividing the total number of lost customers by total number of active customers, over a given period of time.
While churn rate is most commonly referenced by businesses that rely on recurring revenue models, many of today’s leading ecommerce companies are also tracking this metric.Calculating churn for ecommerce is a bit more complicated, but both possible and useful. Non-subscription-based ecommerce companies must clearly define what constitutes a churn event.For example, if a company knows that their customers who make a repeat purchase will most likely do so within 90 days, they may choose to designate a customer who does not complete that purchase within the significant time period as being ‘churned.’Whether or not your ecommerce store is subscription-based, tracking your churn rate will ensure the long-term growth and stability of your business.Optimizing for churn reduction could be as simple as setting up trigger-based emails through a marketing automation platform like Pardot or Marketo, or could be part of a more sophisticated approach, such as creating individualized segments through a tool like Kissmetrics to better understand and serve your customer base.
KPI #3 - Purchase Frequency
Purchase frequency is the average number of times a customer makes a purchase within a set time frame. This metric provides you with insight on how to structure your digital strategy at a pace with your audience’s buying behavior. Knowing the volume of purchases is useful, but that number should be augmented with the time between purchases.
PF can be utilized differently by changing the time frame. Any time frame can be used, but a one-year period is suggested as a default. Regardless of which time frame you choose, you should quantify unique purchasers to avoid including duplicate purchases as part of your calculation.Optimizing towards increased purchase frequency can have a direct impact on the bottom line. Tactics to drive towards this strategy include:
- Creating retention email campaigns
- Starting a loyalty program
- Using gamification
KPI #4 - Average Order Value
Before we discuss optimizing towards increased AOV, let’s first explain how to calculate this metric. Knowing your current average order value is a vital KPI when setting goals and evaluating if new strategies are working.
Depicted above is the simplest calculation of average order value, which is good for benchmarking efforts, though it does not give an accurate representation of the margin generated per order. To find a better representation, make sure to subtract your expenses plus cost of goods sold.
Digital Strategies to increase AOV could include the following:
Cross Selling
Cross-selling is presenting additional items that a shopper might consider valuable, which is generally done by recommending products that complement items which have already been put in their basket.Cross-sells can provide a significant boost to average order size by reminding the customer of products they may have forgotten or didn’t realize they needed. The additional value provided is reciprocated in additional order value: a win-win!
Product Bundling
Product bundling is a variant of cross-selling more approachable for smaller ecommerce merchants. It’s measured by combining multiple products into a single bundled item on your site. With this tactic, the cross-sell is predetermined and offered to the shopper all at once.Below are a few approaches to bundling products:
Starter Bundles
Starter bundles lead the pack in efficacy. With the decision to start a new hobby or sport often comes an uncertainty of everything needed to fully engage it. Projecting this expectation and providing the items in one convenient bundle saves your customer time, research, and money while increasing your order value.
Sampler Pack
Another effective type of bundle is a sampler pack. Food and beverage companies provide this effectively for their shoppers, who often prioritize for both discount and variety. A sampler pack lets them try multiple products with one purchase, leading customers to a product they will like, which leads to repeat purchases.Optimizing towards increased AOV metrics has a direct impact on the business's bottom line and also tells a story of increased brand loyalty which could lead to increased purchase frequency in the future.The goal and utmost purpose of a digital strategy expert are to help measure and drive digital strategy and transformation. The challenge lies in separating the wheat from the chaff and focusing on the correct measurements while taking the steps necessary to tactically execute strategies and grow them properly.If done right and with the proper partner, the effects of these focused efforts can create dramatic impacts for any business frequenting the digital space.