Measuring E-Commerce Success: Customer Service Metrics, KPI’s & more
It really doesn’t matter whether you are selling electronics, home and garden, food and drink, or funky clothes. At some point, after your online store takes off, measuring results becomes especially important.
When you’re taking things to the next level, you need to be sure you’re measuring the right stuff, the right way, so you stay on the path to growth.
So, if you measure (and reward) your team for lowering call time, for example, yes, you will cut costs in the short term. But, as we know from our principles and strategy pillars, lowering call time alone does not meet the needs of the customers and will not best generate customer satisfaction or loyalty.
“Lowering call time alone will not best generate customer satisfaction or loyalty”
To close off this chapter we’re going to take a look at metrics and KPIs that we believe you must measure to keep on the right track and offer a full-on KPI and metric model (and one extra goodie too).
Our advice on KPIs and metrics is based around our three principles of great customer service as well as meeting the needs of today’s online shopper at the lowest cost to you. That way, you can be certain you are heading toward a fully scalable and profitable customer service model.
Key customer service metrics
A metric is basically anything you can measure. Metrics help you make tactical decisions on a daily basis. They give you a handle on where you are and what is happening.
But not every metric is a Key Performance Indicator (KPI). KPIs are the metrics that tell you something about overall performance in relation to your overall business goals. They keep you focused on the bigger picture.
Based on the insights we’ve offered in this guide, below are the 10 metrics we think you should be measuring. Are you measuring them all?
Metric #1: Churn Rate (a.k.a., Attrition)
Churn rate is the number of customers who leave your brand over time. Depending on your product and model, this can be difficult to assess realistically. The more SKUs you carry, the easier it will be to determine.
Some web stores measure churn rate every 30 days. Others every 90 days. Remember that the length of a decision-making cycle is important to bear in mind. Choose the length of time you measure carefully.
The value of measuring churn is in developing retention strategies. RetentionGrid offers an excellent app to further help you slice and dice your customer segments. The app even offers e-mail campaign ideas to keep customers coming back.
Metric #2: Total Volume by Channel
Understanding which channel is the busiest, in terms of customer service-related questions, is key. Not every website is the same; not all customers are the same. Assessing this, you will be able to adapt your channel strategy so it best meets the needs of your customers.
One thing to note here is that it is to your advantage to pick the channel that works best for your business. This post from KISSMetrics offers a nice example of a store changing their channel strategy in response to customer demand.
Metric #3: Response Time
As per the needs of today’s online shopper (quick, friendly and effective service), it is important to measure response time.
Typically, as a small online business, you should be aiming for response times in the minutes, not hours! Of course, e-mail can be difficult. But still, you should be aiming for less than 24 hours as a baseline — and keep improving from there. That’s the only way you will out-servicethe competition.
But as Help Scout points out, pushing for shorter response times alone can actually harm your customer service — a fast but ineffective response doesn’t make sense.
Metric #4: First-Contact Resolution Rates
First-contact resolution (FCR) is extremely important. Having clear FCR metrics will tell you how well you are meeting the direct needs of your customers and if you are getting their problem solved — and questions answered — in one single interaction.
FCR works on an emotional level for the customer too. As this study from Lee Resources shows, up to 95% of customers will give you a second chance if you handle their initial complaint successfully and in a timely manner.
Metric #5: Forward Resolution Rate
You’re already familiar with auto-product suggests such as “People who bought X also bought Y.” Forward resolution is a bit like that. Only, instead, you should look out for “People who have a question about X, also often have a question about Y.”
There’s no hard and fast rule about how to set this up. F
Another good example is Pure Fix Cycles. They added the often-asked question “Which is the best type of lock to buy?” Again, adding the information into the ordering process makes things easier for your customers.
As this CEB study shows, heading off the customer’s next potential issue is one of the most cost-effective ways to build customer satisfaction and loyalty. You also get a lot less callbacks, so you have a more efficient operation to boot.
Metric #6: Customer Effort Score
We’re pretty sure you have some sort of customer satisfaction metric in place. The only problems with this is that, first, every customer has different ideas of what “satisfaction” is, and, second, satisfaction is not a very good indicator of loyalty.
If you really want to measure customer loyalty, measuring the amount of effort a customer had to personally put in to get their question answered, or their problem solved, is the way to go. This is one metric that will offer you great insight.
Either way, the idea is to assess — on a five-point scale, from “no effort” to “a lot of effort” — how much effort customers had to put in to get the response needed for their issue. We suggest you then follow the customers whose five-point scale responses you recorded in your churn rate metrics.
Metric #7: Rep Friendliness
Every customer loves a friendly conversation, and it is one of the single most effective ways to build customer satisfaction. And easy too. You can simply ask your customer in a post-interaction survey how friendly they thought their interaction was.
This will not only tell you about the likelihood of your customers being satisfied but also give you insight into the soft skills of your reps. Note: Be certain to define the channel used to interact with the customer. Every rep will have different skills in different channels.
Metric #8: Rep Knowledge
Throughout every service interaction, a customer likes to feel they are in confident, knowledgeable hands. This is partly a soft skill and partly a hard (information-based) skill.
By surveying how knowledgeable your customers thought your rep was, you will be able to manage your team by identifying any knowledge gaps and also be confident you have the right team member handling the right enquiries.
Metric #9: Cost-to-Resolution
Many online store owners focus on cost-per-call as a core metric. However, cost-to-resolution is much more effective at getting a more realistic grip on your operation’s profitability.
We suggest measuring the cost per call and multiply that by the average number of contacts to resolve an issue. Cost-per-call x average number of calls-to-resolve = cost-to-resolution.
Metric #10: Net Promoter
The Net Promoter score (NPS) has been the go-to metric for almost all small businesses over the past several years. However, the longer it has been around, the more people have pointed out the problems with it — and there are a lot!
Our suggestion is to go back to Metric #6 (Customer Effort Score) and start implementing it. Keep NPS going in the meantime.
Soon, you can start testing NPS against Customer Effort and find out for yourself which is a better predictor of customer loyalty.
One last tip: Each of these metrics focuses on your operation as a whole. However, if you have the man power, why not split out these metrics by channel? That will give you great insight into optimizing your channel strategy.
There is still more to cover (self-service metrics, issue classification, and so on), but integrating the above 10 metrics into your operation will put your team in the direction toward a more profitable operation.
Customer Service Key Performance Indicators
Metrics tell you where you are right now in individual aspects of your customer service. And a Key Performance Indictor (KPI) is also a metric. But not all metrics make for good KPIs.
Just like in a car, knowing how fast you are going is not a good indicator of if you’re heading in the right direction. KPIs often group together metrics and express them as a percentage to give insights into overall performance.
If you have a ton of metrics, but you’re not certain if your KPIs are in shape, it helps to think of them in three groups:
1. Input metrics (how much your service interactions cost)
2. Output metrics (the contribution to business goals)
3. Customer metrics (the service impact on the customer).
By looking first at your goals for each of these areas, you can then start to choose the metrics that best contribute to those goals. Not sure where to start? Below are three examples of what we think are great KPIs.
KPI #1: Percentage of customer complaints
Using this KPI will help you better understand the overall nature of your service team’s contacts. Is the majority of interactions simply questions about your product or brand? Or is the majority on handling complaints?
Of course, the lower the proportion of complaints, the better. Monitor the proportion of questions vs. complaints over time, and use it to flag insights not only to your service team but your marketing and sales folks too.
KPI #2: First-call resolution percentage
This is probably the most important KPI for many website stores looking to step up their service-level game. And it is likely that you already have this one in place.
Remember, this isn’t about the speed of resolution but about solving the customer’s issue in a single interaction that gets you the best results. So be certain not to use the speed of resolution alone in your KPIs!
KPI #3: Percentage of ’very friendly’ interactions
Bearing in mind that the level of friendliness is one of the most important criteria of customer satisfaction — and that this is where you have an opportunity to out-service bigger stores — this is a KPI to keep a very close eye on.
These KPIs should help give you a bit of clarity. As a growing online shopping destination you should be looking to reduce the number of KPIs you use, making certain they are tied as close as possible to SMART business goals.
It’s that combination of Input metrics (how much your service interactions cost), Output metrics (the contribution to business goals), and Customer metrics (the service impact on the customer) that will help you attain those goals.
Tackling the full customer experience
If you have your metrics and KPIs under control, you may want to take things to the next level and look at this white paper from Oracle. In it, Oracle offers a full framework of ideas for KPIs tied into the full customer experience.
Do not attempt to institute all of Oracle’s ideas at once. Just choose one of the three main focuses (Acquisition, Retention, or Efficiency) and use it to take a fresh look at your metrics and KPIs. Doing this will help get your head in the right place.
No doubt, all of this can be overwhelming. The key is to break things down into smaller pieces that you can experiment and work with over time. So take a look and pick and choose the metrics and KPIs that work best for you.
Customer lifetime value: your most important tool ever?
Earlier on in our guide we mentioned that most people believe it is 6 or even 7x more expensive to acquire a customer than it is to retain one. But, as with so many stats thrown about by the gurus, it’s just not entirely true.
It depends on how effective your marketing and customer service actually are. Either way, customer lifetime value is an important tool — probably the most important tool you don’t use.
At the most basic level, calculating customer lifetime value will help you understand the real financial value of your customers, so you can make smarter decisions about how much to invest in your marketing and/or customer service. It‘s a segmentation exercise that helps you discover your most valuable customers. Do it well, it can yield massive results.
However, the equation is complex. So we would suggest only tackling it if you have a financial and/or spreadsheet guru on board.
If you are eager to take a look, check out this post from KISSMetrics. If you want to apply the principle quicker — and get suggestions on how to step up your retention campaigns based on lifetime value insights — then check RetentionGrid. We highly recommend them!