Time for a Little CX Math


You don’t have to be a math genius as a CX professional. However, statistics play a big role in measuring customer satisfaction and tracking progress over time.

As a customer experience professional, do you have to be a trained statistician?

Thankfully, no. But it is important to have at least a foundational understanding of statistics. As we all know, statistics play a big role in measuring customer satisfaction and tracking progress over time. And formulas are how we develop our own parameters to capture those statistics.

There are a variety of different calculations that you should know, but below I’ve compiled a list of the ones that have been the most helpful throughout my career thus far.

From calculating Customer Lifetime Value to following the Erlang C Formula, these mathematic rules will help you better understand your customers and make more informed decisions about your CX strategy.

So, let’s dig in.

Customer Lifetime Value

Customer Lifetime Value (CLV) is a key metric for assessing the health of your customer relationships. It represents the total value of a customer to your business over the course of their lifetime and can be used to calculate how much you can afford to spend on acquiring new customers and retaining existing ones.

There are a variety of different methods for calculating CLV, but the most common one is to take the average annual value of a customer multiplied by the number of years they’re expected to remain active with your company.

So, if the average customer spends $500 per year and remains active for 10 years, then their CLV would be $5,000.

CLV is best used when assessing long-term value of your customer types. For example, if you have a high CLV in a target market, then it may be safe to begin branching out and spending more time on acquiring new customer bases.

Conversely, if your CLV is low, then you’ll need to focus on strategies for increasing it — especially for key customer accounts. There are a variety of different ways to do this, such as improving contact center processes or by establishing loyalty programs.

But that’s an article for another time.

Related Article: Companies Are Misusing Net Promoter Scores: Here’s How to Fix That

Customer Acquisition Costs

Customer Acquisition Costs (CAC) are the costs associated with acquiring new customers. In other words, it helps you assess the efficiency of your customer acquisition efforts and identify areas for improvement.

Again, there are a variety of different methods for calculating CAC, but the most common one is to take the total marketing and sales expenses during a specific period and divide it by the number of new customers acquired during that time frame.

For example, if you spend $1,000 on marketing and sales in a month and acquire 10 new customers, then your CAC would be $100.

It probably goes without saying, but if your CAC is high and your ROI is low, then you’ll need to focus on strategies for reducing that initial cost.

Related Article: Customer Acquisition Really Stinks Sometimes. Here’s Why

Service Level

Service level measures the percentage of customer service inquiries that are answered within a certain timeframe. This calculation will help you assess the quality of your customer service.

The most common method for calculating service level is to take the number of customer service inquiries that are answered within the designated timeframe and divide it by the total number of customer service inquiries received during that time frame.

For example, if you receive 100 customer service inquiries in a day and answer 80 of them within 24 hours, then your service level would be 80%.

Utilization Rate

Utilization rate is a metric that measures the percentage of time that a resource is in use. It’s an insightful metric for CX professionals to use both internally and externally.

One way to calculate your utilization rate is to take the number of hours that a resource is in use and divide it by the total number of hours that it could be in use.

For example, if your team has a meeting room that can be used for eight hours in a day and is only used for 4 hours, then the utilization rate would be 50%.

The same formula can be used for customer-facing resources as well.

Erlang C Formula

The Erlang C Formula is a mathematical equation used to calculate the number of customer service agents needed to handle a certain volume of customer service inquiries. It’s important because it can help you assess the efficiency of your contact center operations.

The Erlang C Formula is derived from the Poisson Distribution, which is a probability distribution that describes the likelihood of a certain number of events occurring in a given time period.

To use the Erlang C Formula, you need to know the following information:

  • The average number of customer service inquiries per hour.
  • The average length of time it takes to answer a customer service inquiry.
  • The desired service level (expressed as a percentage).

Once you have this information, you can plug it into the formula and solve for the number of customer service agents needed.



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