How Improving Customer Experience Metrics Increases User Retention

User retention is arguably the most important metric for any company. Without healthy retention, you don’t generate revenue, you’re less likely to get referrals, and you’ll spend a lot more money on acquisition.

That’s pretty uncontroversial. Actually achieving good user retention is much more difficult than recognizing its importance.

So what’s a company to do?

One of the most direct routes to increasing user retention is by focusing on customer experience metrics.

It makes sense, and research backs it up. McLean (2018) followed 474 app users over a 12-month period to see which factors influenced engagement with a mobile commerce app. He found that the following four factors were the most important:

  • Perceived ease of use
  • Perceived usefulness
  • Convenience
  • Enjoyment (though the importance of this fell off over time)

These four factors are crucial aspects of the customer experience. If your product is easy to use, useful, convenient, and fun, there’s no question that you’ve created a great user experience. And a good experience is key to customer loyalty.

Don’t just take my word for it, though. Andy Carvell, the creator of The Mobile Growth Stack, emphasized the importance of engagement in an interview with us last year:

“[Engagement] has a huge effect in terms of new user retention, as well. At SoundCloud, we increased retention by 5% because we got our users into a loop of engagement that was tailored to their interests.”

This doesn’t just stand for apps, either. It works for any kind of product or service. Say you’re selling laptops. If your laptops aren’t easy to use, useful, and convenient, you’re not going to keep customers.

It’s clear that engagement and user experience are crucial for retention. But what can you measure to see if you’re providing a good customer experience? Focus on these three user experience metrics.

Net Promoter Score (NPS)

“How likely are you to recommend our product/service to a friend or family member?” These answers to this question inform your Net Promoter Score – a common method for measuring the overall customer experience of your product or service.

Determining a Net Promoter Score is easy: take the percentage of people who answered with 9 or 10 and subtract the percentage of people who chose 1–6. The result is your score.

There are certainly problems with this model. Apple, for example, is known for providing world-class customer experience and having great retention among users of its products. But its NPS is only 47. Walmart, the #1 company on the Fortune 500, actually has a Net Promoter Score of -4.

So this metric isn’t the end-all-be-all of customer experience. But when you’re starting to measure customer experience metrics, it’s a good one to look at. It’s easy to measure and provides immediate feedback.

The biggest difficulty in measuring NPS is that it’s difficult to see which factors are creating a good or bad score. Offering users a comment box can help. Look at the comments from people who leave low scores and address those issues.

As you make changes to your app and improve your NPS, you should see a corresponding rise in user retention.

Customer Effort Score (CES)

McLean found that ease of use was a significant contributor to engagement. The CES gives you direct feedback on how easy a particular part of your product is to use. All you need to do is ask a customer “How easy was it to complete this task?” and give them 5–7 options, ranging from “Extremely hard” to “Extremely easy.”

The more people that choose “Extremely easy” (or something on that half of the scale), the easier your product is to use. If your users tend to say that your product is difficult to use, you need to improve your customer experience.

The advantage of using CES over NPS is that you can prompt users for feedback at any point and ask about specific actions. If you have a travel app, for example, you can ask about how difficult it was to book a flight, reserve a seat, change travel plans, or select add-ons. NPS only gives you feedback about your app in general.

Of course, you’ll want to be particular about when and where you ask for CES feedback. Customers can get annoyed if you ask them about every single interaction. It’s best to use it on your most important actions. In the travel app example, this might be booking a flight or searching for destinations.

Once you’ve made improvements in areas that are highly important, you can start looking at other areas, too.

Customer Lifetime Value (CLTV)

This is one of the most important customer experience metrics you can measure. If you’re providing a great product, your customers will continue to spend money on it.

It’s hard to know if your current CLTV is good or not. You might be able to find industry benchmarks that will help, but the ultimate way to figure out if your customers are making you enough money is to keep track of this metric over time.

If your CLTV is going down, for example, it’s time to change something. You might use an NPS or CES prompt to figure out where the problem lies.

For example, your analytics solution might tell you that your food delivery app’s CLTV is going down. That’s a warning sign, so you decide to dig into it using CES prompts or another analytical method. This might show you that fewer people are using your app on weekends. Now you can dig into that and figure out why.

Once you make changes (maybe run a weekends-only promotion or distribute a coupon code), you can see if weekend orders and CLTV are rising again.

That doesn’t mean your job is done, though. You can always strive to increase your CLTV. Targeted marketing, new features, and integrating feedback into your product can help keep your customers.

Calculating customer lifetime value also gives you an important look at your projected revenue for the future. If you’re not making as much money from your customers as you’d hoped, you can make changes to increase retention.

Improve These Customer Experience Metrics to Boost Retention

Customer experience is a central factor in improving retention. If customers have a bad experience, they’ll leave. If they have a good experience, they’ll stay.

Of course, it’s more nuanced than that. But improving the user experience of your product will always benefit your bottom line.

We’ve gone over three important customer experience metrics here: Net Promoter Score, Customer Effort Score, and customer lifetime value. Each provides a different view into your user experience. By measuring and improving these metrics, you’ll deliver a better experience for your customers.

But don’t rely on any single metric. As we saw with Apple and Walmart, single metrics can give you skewed results. Instead, combine different measures of customer experience to see how easy, useful, convenient, and enjoyable your product is.

Then take steps to improve those metrics. You’ll see better retention (and more revenue) as a result.

Featured image source: Freepik

Published by Apoorv Bhatnagar

Apoorv Bhatnagar is a Digital marketer at Freshworks Inc. He generally writes about software that improve your marketing, sales or hiring process.

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