Metrics in customer service – a complete guide

To compete effectively in the market, your company needs to know how effective it is. Measuring and analysing data allows you to make better decisions and become more competitive. However, sometimes the selection of specific metrics is problematic. Metrics in customer service are particularly important – choosing the right ones can significantly improve the quality of customer service.

From this article you will learn:

• What are metrics in customer service?
• What are the most important metrics in customer service?
• How to improve the values of individual metrics?

Customer service metrics – definition

Metrics in customer service refer to the various indicators used to measure and evaluate the quality of customer service, as well as to monitor the efficiency and productivity of the department responsible. Companies often use various metrics to understand how they can improve service and increase customer satisfaction. In addition to this, the various metrics are a valuable source of information and allow them to identify areas for improvement and make decisions based on hard data.

Metrics in customer service are a set of indicators used to measure and evaluate the quality of customer service and the effectiveness of the customer service department. These metrics help companies identify areas for improvement and make decisions to improve customer satisfaction.

Definition of metrics in customer service

The most important metrics in customer service

The choice of specific KPIs to measure customer service effectiveness and consumer satisfaction depends on the specifics of your company and its business requirements and goals. Many organisations often use several different metrics because they provide a broader picture and access to more information. One of the most commonly used metrics in customer service are:

Customer Churn Rate

Customer Churn Rate, also known as the customer churn rate, is used to determine the percentage of customers who have abandoned a company’s products or services during a given period. Churn can be due to a number of reasons, such as poor product quality, lack of satisfaction with customer service or taking up a competitor’s offer.

This indicator is particularly important because usually the cost of acquiring a new customer is much higher than retaining an existing one. For this reason, it makes sense to focus your efforts on minimising your churn rate and aim to increase customer satisfaction and loyalty to your brand. Churn Rate is a key indicator of the health of a business and helps to identify potential problems and introduce effective customer retention strategies.

First Response Time

First Response Time measures the elapsed time from when a customer reports an issue to when they receive an initial response from the customer service team. A fast response time to customer queries is often linked to higher levels of customer satisfaction. First response times can be minimised by investing in staff training, process optimisation and using technology such as automation and chatbots.

Ticket Resolution Time

Ticket Resolution Time measures the time from when a customer reports an issue to when the issue is fully resolved. It includes the time it takes to understand the problem, find a solution and communicate it to the customer. It is a key performance indicator and, like first response time, usually leads to higher customer satisfaction.

Net Promoter Score

Net Promoter Score (NPS) is a metric used to measure customer loyalty. It is an indicator based on one simple question: “To what extent would you recommend our company/business/product to a friend or colleague?”. Responses are scored on a scale from 0 (I would definitely not recommend) to 10 (I would definitely recommend).

Customers are then divided into three categories:

• Detractors (responses 0-6),
• Neutral (responses 7-8),
• Promoters (responses 9-10).

NPS is calculated by subtracting the percentage of detractors from the percentage of promoters. It is a valuable tool for assessing overall customer perception of a brand, loyalty and also for comparing performance with other companies in the industry.

Resolving the issue at first contact – First Contact Resolution

First Contact Resolution (FCR) measures how many customer requests are resolved first time, without the need for further correspondence or interaction. In practice, this means that a customer’s issue is resolved during the first interaction with the customer service team, whether by phone, email, chat or any other communication channel.

A high FCR is often associated with high customer satisfaction, which is why many companies seek to maximise their effectiveness in resolving issues first time, as this minimises customer frustration and increases their level of trust in the company

Average time to resolve cases – Average Ticket Time

Average Ticket Time measures the average time it takes to close a ticket or resolve a customer issue. It encompasses all stages of the process – from the customer raising the issue, to analysing and diagnosing the problem, to finding and applying an appropriate solution.

The average case resolution time is a key indicator of the efficiency and performance of the customer service department. Short average resolution times for requests usually indicate efficient customer service, while long resolution times may indicate problems in this area, which can affect customer satisfaction.

Customer Lifetime Value

Customer Lifetime Value is the projected total revenue that a company can earn from a single customer over the entire period that this customer uses its products or services. The measurement takes into account not only direct purchases, but also factors such as customer retention costs, customer loyalty to the brand or recommending the service to others. It is one of the most important metrics for any business, as it allows you to understand how much is worth investing in customer acquisition and retention. Calculating CLV also helps in planning marketing strategies, building customer relationships and making business decisions about future growth.

Customer Lifetime Value (CLV) can be calculated in a variety of ways, depending on available data and business preferences. One common formula for CLV is:

CLV = (Average annual purchase value) x (Average customer relationship duration)

It is worth noting that there are many other advanced methods for calculating CLV, which can take into account various factors such as churn rate, customer service costs and many others. Choosing the right formula depends on the individual company’s needs and objectives.

Customer retention rate

Customer Retention Rate (CRR) is a metric that measures the percentage of customers who remain loyal to a company for a specified period of time. It is a key tool for assessing how well a company retains customers and whether it is able to keep them for longer.

It is calculated by finding the difference between the number of customers at the beginning of the period and the number of new customers, then dividing this value by the number of customers at the beginning of the period and multiplying the result by 100 to get the percentage. One of the simplest formulas for customer retention is:

CRR = ((Number of customers at the end of the period - Number of new customers) / Number of customers at the beginning of the period) x 100

The higher the customer retention rate, the better, as this means that the company has a greater ability to retain customers. It is worth bearing in mind, however, that the formula given can be adapted or expanded depending on the specific characteristics of the company and the needs of the customer retention analysis.

A high customer retention rate is a sign of good customer service, attractive products or services and an effective loyalty strategy. It is a key indicator for many companies, as retaining existing customers is often less costly than acquiring new ones.

Customer satisfaction index – Customer Satisfaction Score

The Customer Satisfaction Score (CSAT) is a popular metric used to measure how satisfied customers are with a company’s products or services. It is usually measured by a survey in which customers rate their experience on a specific scale, often from 1 to 5, where 1 means ‘very dissatisfied’ and 5 means ‘very satisfied’.

The formula for the CSAT is based on the percentage of positive responses from customers to a question related to their satisfaction. It can be represented as follows:

CSAT = (Number of positive responses / Number of total responses) x 100

However, it is worth noting that the question asked of customers and the way in which the responses are scaled may vary depending on the specific survey and the company’s preferences. Therefore, the formula may change depending on the specifics of the survey and the rating scale used to assess customer satisfaction.

The CSAT is a simple but powerful way to monitor the quality of customer service, identify areas for improvement and take action to improve customer satisfaction. The higher the score, the higher the level of customer satisfaction. It can also indicate strong customer loyalty and a positive customer experience.

Customer Effort Score

The Customer Effort Score is used to measure how easily customers use a company’s products or services. It is usually measured by a survey in which customers rate on a scale (often from 1 to 7) how much effort they had to put in to solve a problem or obtain a desired service.

The purpose of the Customer Effort Score is to identify areas where the company can reduce the amount of effort required from the customer, thereby improving overall customer satisfaction. The lower the CES, the better, as this means that customers have no problems using your company’s products or services.

The formula for CES can take the form of a simple average of customer ratings or be scaled on a specific scale. An example formula can be written as:

CES = (Total customer ratings) / (Number of customers)

If the CES is measured on a scale of, for example, 1 to 7, the formula can be adapted to this scale, for example:

CES = (Total customer ratings) / (Number of customers) x 7

It is important to adapt the scale and question to the specific needs and context of the company in order to get an accurate measurement of customer effort.

Customer Health Score

The Customer Health Score (CHS) is used to assess the overall health of the relationship between a company and its customers. The CHS is calculated based on various factors such as:

• level of customer satisfaction,
• regularity and intensity of use of the product or service,
• duration of the customer relationship,
• other company-specific indicators.

The Customer Health Score can be calculated in different ways, depending on the preferences and needs of the company in question. There is no set general formula for the CHS, as it is usually tailored to the specifics of the business and the objectives of the customer health analysis. Typically, the CHS is calculated by assigning appropriate weights and scores to individual factors and then aggregating the scores to obtain an overall customer health index. In each specific case, the relevant factors need to be defined and a calculation formula established that best reflects the level of customer health in the organisation.

The CHS serves as an early warning system that allows companies to identify customers who may be at risk of churn (leaving) and to take action to improve their experience. It is also used to identify the most satisfied customers, as they can become brand ambassadors.

Abandonment rate

The abandonment rate, also known as Abandonment Rate, is most commonly used in e-commerce and the customer service area. It measures the percentage of transactions or interactions started but not completed. In an e-commerce context, it usually refers to the phenomenon of abandoned baskets – customers who add products to their basket but do not complete the purchase process. In customer service, it can refer to customers who start but do not complete interactions, such as a phone call or chat.

A high abandonment rate may indicate problems with website usability, unsatisfactory customer service or other barriers that prevent customers from completing the purchase process or interaction.

The abandonment rate can be calculated using the following formula:

Abandonment rate = (Number of transactions or interactions started - Number of transactions or interactions completed) / Number of transactions or interactions started

The result is usually presented as a percentage and indicates the percentage of transactions or interactions that were not completed or terminated before the process was completed. The above formula is a general way of calculating the abandonment rate, but depending on the context and specifics of the business, other factors can be taken into account, such as the duration of the transaction or interaction, the cost of abandonment, etc.

Improving metrics in customer service

Improving the value of individual metrics in customer service depends on the specifics of the metric. Remember that the specific strategy also depends on the specifics of your company, industry, customers and products/services. The most common methods for improving specific metrics are:

• Customer Churn Rate – to reduce the churn rate, it makes sense to focus on improving customer service, delivering products that meet customer expectations and understanding why customers churn.
• First Response Time – automation, for example using chatbots, can speed up first response times. Also, investment in training for customer service staff can help reduce this time.
• Ticket Resolution Time – as with first response time, training and automation can help reduce the time it takes to resolve requests. Processes can also be optimised by eliminating unnecessary steps.
• Net Promoter Score – delivering excellent products and services, as well as nurturing strong customer relationships, can help increase NPS.
• First Contact Resolution – training staff to be able to resolve most issues first time can improve this metric.
• Average Ticket Time – automating and streamlining processes can help reduce average ticket resolution time.
• Customer Lifetime Value – increasing CLV can be achieved by increasing customer loyalty (e.g. loyalty programmes) and increasing transaction value (e.g. cross-selling and up-selling).
• Customer Retention Rate – improving product or service quality, as well as customer service, can help increase customer retention rates.
• Customer Satisfaction Score – listening to customer feedback, responding to customer needs and providing quality products and services can help increase the value of this indicator.
• Customer Effort Score – streamlining processes and making products or services easier to use can improve CES.
• Customer Health Score – introducing customer-centric strategies and building strong and positive relationships with customers can help increase CHS.
• Abandonment Rate – improving the UX/UI of a website, simplifying the purchase process and delivering fast and efficient customer service will significantly reduce the value of the abandonment rate.