KPIs vs metrics: How to measure customer experience effectively

What are KPIs?

KPIs are quantifiable, strategic metrics that measure the success of your organisation in achieving its goals and objectives, helping you navigate towards desired outcomes. They are typically a select few, carefully chosen to reflect the most critical aspects of a project or the overall performance of your business. KPIs are:

1. Strategically focused: They are intricately linked to the overarching business objectives and strategic goals. 
2. Change catalysts: KPIs drive decisions to achieve desired results and are dynamic catalysts for change.
3. Simple and clear: They are intentionally limited in number as it ensures that attention and resources are concentrated on the most pivotal aspects of the business.

What are metrics?

Metrics, on the other hand, are quantifiable data points that provide information about various aspects of an organisation’s performance or processes. Metrics can be specific to a department, team or project, and they are often more granular in nature than KPIs. While they don’t always directly tie to strategic objectives, metrics are crucial for monitoring day-to-day operations and identifying areas for improvement. Metrics are…

1. Diverse Insights: Metrics cover a wide range of data points, ranging from operational efficiency to performance-related analysis.
2. Operational and Tactical: Metrics are the operational backbone of your organisation. They are crucial for guiding and monitoring ongoing activities.
3. Granular and Diagnostic: Metrics offer detailed diagnostic data points and measurements allowing organisations to drill down into specific operations.

KPIs vs metrics: Communicating progress and objectives

That said, the primary difference between KPIs and metrics is in how they communicate progress and objectives across your organisation:

1. Strategic vs. tactical – KPIs provide a high-level, strategic view of your organisation’s performance. They align with overarching goals and are instrumental in gauging whether your business is on the right track. Conversely, metrics offer tactical insights into specific areas of operation, helping teams fine-tune their processes.
2. Focus vs. depth – KPIs offer a focused snapshot of critical performance markers, clarifying whether your company is meeting its high-level strategic objectives. Metrics, being more numerous and diverse, provide a deeper dive into specific processes and areas to help identify opportunities for improvement.

KPIs vs metrics: Customer experience use cases

When measuring customer experience, you can use both KPIs and metrics to understand and measure how your organisation is performing.

KPI use cases

• Customer Satisfaction (CSAT) Score – A company aiming to improve and manage overall customer satisfaction might use CSAT as a KPI. The frequency at which CSAT is measured can vary based on the organisation’s goals and the nature of the customer interactions. This KPI helps you assess if your customer experience initiatives are having a positive impact on overall satisfaction.
  
  
• Net Promoter Score (NPS) – NPS is a useful KPI if your business wants to assess customer loyalty and advocacy. Regular NPS surveys help measure the long-term impact of customer experience initiatives on customer loyalty and demonstrate the likelihood of your customers becoming a promoter of your business.

Metric use cases

When an organisation designates CSAT as a key performance indicator (KPI), the typical supporting metrics include the following:

• First-Contact Resolution (FCR) Rate – Your customer support team may monitor the First-Contact Resolution Rate as a critical metric. This metric provides insights into your team’s ability to effectively address customer inquiries and issues during the initial customer interaction. It is particularly valuable because it directly contributes to the enhancement of CSAT.
  
  
• Customer Lifetime Value (CLV) – This metric provides a comprehensive view of the long-term financial impact of customer relationships, considering repeat business, loyalty, and referrals. When managed effectively, CLV can enhance customer satisfaction and loyalty, resulting in higher CSAT scores. It is a financial indicator and a driver of the overall customer experience.

KPIs vs metrics: Our top tips for measuring both

Choose the right KPIs for your business

Consider what truly matters to your company. Any data point can be a metric, but not all metrics provide valuable insights for improvement. In fact, measuring too much is basically futile; it’s not only confusing but also misleading. To steer clear of this trap, the solution is simple: select only the KPIs that genuinely contribute to your goals. 

Choosing the right KPIs help you chart your course to effective decision-making. We recommend using SMART goals (Specific, Measurable, Achievable, Relevant, Time-bound). This ensures that your KPIs are specific to your goals and adaptable to your evolving strategies. That way, you can distil your metrics down to a manageable pool of KPIs specific to each business goal. This precision keeps your analytical processes on course and helps you sidestep data misinterpretation.

Stay data-driven and avoid vanity metrics

Vanity metrics might be superficially appealing but ultimately lack any substance and do little to inform future business strategies. For example, if you suddenly get a swarm of social media subscribers but only a fraction of them convert into paying customers, the metric loses its value. So the key is to be objective-based and ensure that your metrics reflect the truth.

Check that your targets are realistic

For your KPIs and metrics to be measured efficiently, you must know where you’re headed. Realistic targets make that possible. Say, for example, you’re aiming for a 50% increase in customer NPS scores within a year, when historical data indicates an average increase of 5%, you’re setting yourself up for disappointment. Instead, craft targets grounded in your business context and industry benchmarks so you can work towards achievable goals. 

Both KPIs and metrics play vital roles in business performance management and reporting. The choice between the two in a given situation depends on your specific objectives and the level of detail required for effective decision-making. By understanding the differences and using them judiciously, you will better optimise your approach to customer experience success. To learn more about how to effectively manage customer experiences with the right choice of KPIs or metrics, contact the Optivia team today.