Whether you’re new to ecommerce or run a long-standing enterprise level business, now and again you’ll see a term you’re unfamiliar with. And in the world of ecommerce, there’s a lot of terminology and acronyms you need to understand. Especially when it comes to customer experience.
Knowing customer experience or CX vocabulary is essential to developing a well-rounded understanding of your store, your goals, and your customers. After all, customer experience is the new battleground for many online retailers - according to a Bain study, companies that prioritize customer experience outperform their competitors by 80%. And according to PwC, 73% of customers say that a good experience is key in influencing their brand loyalty.
So what is CX? And what’s the difference between AOV and LTV? Is churn important? We’re going to dive into our top 10 CX terms you need to know.
#1 - CX - Customer Experience
Let’s start with an easy one. CX is the acronym used for Customer Experience. This is used to describe a customer’s interactions with your brand over time. This encompasses different touch points, with varying levels of engagement.
Typically when we talk about CX, we’re talking about the experience of buying something from your store. This might include:
- How easy it is to navigate through and interact with your site
- Your product page layout and content
- If it’s simple and clear how a customer can contact support or find your FAQ
- Shipping and delivery cost and options, as well as order tracking
- Email communication after they place their order
- How fast and easy it is to resolve an issue with customer support
The experience may also include how your brand engages with the customer after the point of purchase. That could be through email or SMS using automated workflows, incentives, recommendations and more. All of these touch points have the ability to impact and influence the customer’s perception of their experience with your brand.
#2 - AOV - Average Order Value
One term which tends to frequently pop up is AOV. Short for Average Order Value, this is the average amount your customers spend in one order. Increasing AOV means that you’re bringing in more high value customers, as they’re choosing to spend more on average. If your AOV decreases, then you can implement different strategies to improve this such as offering free shipping over a certain basket total, bundling your products, or making in-cart product recommendations.
The simplest form of looking at AOV is just to look at that figure for your store as a whole. However, it’s even more valuable when you start digging deeper into your store’s data. Segmenting your customers based on different criteria and then looking at the AOV in each segment can help you learn more about how different customers choose to spend with your store. For example you could segment based on new customers vs returning customers. You may find then that your AOV with returning customers is much higher than your overall average and that was being brought down by the AOV with new customers. From here, you can strategize better ways to boost AOV with segments who typically spend less.
#3 - LTV or CLV - Lifetime Value or Customer Lifetime Value
Lifetime Value (LTC) or Customer Lifetime Value (CLTV) are figures which tell you how much a customer is worth to your brand based on how much they’ve spent over time. This will usually account for acquisition spend, retention spend, and any other costs associated with serving them.
Understanding LTV allows you to identify your most valuable customers, as well as customers who have perhaps been loyal to your brand over time but have a relatively low LTV. More high value customers is better for your business and growth, so you want to try and identify who is high value. This allows you to optimize your marketing, acquisition, and retention efforts. For example, if you segment your customers with high LTV, you can identify common attributes such as demographics or geography. You can then focus acquisition efforts on that segment, rather than putting a lot of cost into acquiring lower value customers. You’ll also be able to develop a more profitable retention strategy.
#4 - CRO - Conversion Rate Optimization
While not directly a CX term, CRO and CX do affect one another. Short for Conversion Rate Optimization, this is the process of improving a site in order to increase the percentage of users who take a specific desired action. In ecommerce, that action is usually adding a product to a cart, or making a purchase. The steps you take to improve conversion rates will inevitably be linked to customer experience. If you improve the experience, you improve conversion rates.
CRO involves using data alongside testing to optimize your site and therefore increase conversions. That might involve improving page layout, user experience, written content, imagery, and so on. Tied into this is making it simple and fast for a customer to complete the desired action. So if that’s completing a purchase, it might be that you look to reduce the number of steps involved in your checkout process.
By going through the process of CRO, you can improve the customer experience by making it easier and more engaging for a customer to interact with your site.
#5 - Retention Rate
You’ve brought the customers in, now it’s time to keep them coming back! Retention is the percentage of customers who remain active over a given period of time. By “active” that will typically mean making regular purchases. High retention rates mean you’ve got an engaged, loyal base of customers. Low retention means you have a high number of customers who are making one-off purchases. When you have a balance of high acquisition and retention, you’ve got a business that’s built for the long-term.
Retention looks different for every kind of business. Every product has a different use rate, in other words the time it takes for a customer to use a product and require a repeat purchase. Therefore it might look like a customer hasn’t been retained, when in fact they just don’t require a new product yet. Categories such as beauty, food and beverage, and pet supplies will typically have a higher use rate, whereas technology, appliances, and furniture have a lower rate. Therefore it’s important to have a retention strategy that takes the rate of use into account. If your products fall into the latter category, then you want to think about how you can continue to engage the customer until they’re ready for another purchase or what else you can promote to them in the meantime. That may be complementary products, for example if you sell coffee making equipment then you can promote cleaning accessories or coffee beans.
As with many metrics in CX, it’s valuable to segment your customers based on different criteria in order to analyze retention rates more closely. Are retention rates that are higher when a customer buys a specific product? Are they lower when customers have a high AOV?
#6 - Churn
If retention is how many customers you’re keeping, then how about the opposite? Churn is the percentage rate at which a business has lost existing customers in a specific time period. In other words, how many of your existing customers have stopped purchasing from your store.
Churn is calculated by dividing the number of customers lost in a given period by the total number of customers at the beginning of the period, and multiplying the result by 100. For example if a business started the year with 10,000 regular customers, and ended it with 9000, the churn rate would be 10%. Lowering your churn rate at the same time as increasing acquisition means you’ve got a steady stream of new business while retaining existing ones.
Churn is something which comes up more commonly when discussing subscription products. It’s somewhat easier to track and calculate churn with this style of product, as you can track how many customers cancel their subscriptions. If you have a subscription product, it’s useful to keep track of this metric so you can come up with a better retention strategy.
#7 - Journey Mapping
How does a customer get from point A to point B? That’s worth knowing, and that’s why you should be journey mapping. As it sounds, this is where you map out key touch points in the customer journey from the point of discovery, through the purchasing process, and into retention. This allows you to examine each point, highlight any missed opportunities, and optimize. You’ll also better understand how customers actually use your site and engage with your brand, thus improving their experience.
One of the best ways to enhance your journey mapping is to create customer profiles, and examine the differences in their journey. Your customers aren’t one group with the same intent, product knowledge, needs, etc. Therefore it doesn’t make sense to treat them all as if they’ll take the exact same journey. For instance, someone who is looking to buy a gift and they aren’t someone who would typically buy your product will have a very different journey to someone who is very familiar with your niche and buying for themselves. Mapping these different journeys allows you to ensure you’re providing the best experience for every customer.
#8 - UX & UI - User Experience and User Interface
Customer experience encapsulates a lot of different factors that go into the overall experience a customer has with your brand. However user experience (UX) refers to the experience they have interacting with your site. This is more about their perception of your site - how easy it is to use, how easily they can navigate through your site, or if your checkout process is clear and simple.
Providing a good user experience influences the customer experience, as UX is a major touch point. According to Baymard Institute, 68% of online shopping carts are abandoned before the checkout process is complete with the leading reason being poor UX. And in another survey, 88% of consumers are less likely to return to a website after a poor user experience.
Related to UX is User Interface (UI), refers to how your store looks and functions. This is how your store is presented to the user, including visual elements such as fonts, colors, and layouts, interactive elements like buttons, and responsiveness. Some elements that you may look at when improving UI are if a user can read text easily, the size of your CTAs, or your mobile experience.
UX and UI work hand-in-hand, with UX creating a positive experience and UI controlling how that experience is presented. Both together are integral to the customer experience as without optimized UX/UI it’ll be difficult to keep customers engaged and using your store.
#9 - ART - Average Resolution Time
Customer support is integral to the customer experience. 93% of customers are likely to make repeat purchases with companies that offer excellent customer service, and 58% said that they would stop buying from a retailer due to poor customer service. ART, or Average Resolution Time, plays a key role in how customers perceive their experience with your support team. This is the time taken on average for a customer support enquiry to be fully resolved. In other words from the moment the customer gets in touch, to the final resolution.
ART is different from average response time, which is the average time taken for your support team to respond to a customer enquiry. Both play their role, as customers will want prompt responses throughout the process of contacting your support team. Low average response time combined with low ART will result in higher customer satisfaction, and therefore a higher chance at retention. If you notice that either is creeping higher, it may indicate that you need to review your customer support strategy. That may involve adding more team members to help share the workload, reviewing and simplifying escalation processes, or implementing a customer support platform to help manage tickets.
#10 - CSAT - Customer Satisfaction
Happy customers make for loyal customers, so it’s essential to keep track of how your customers feel about your customer experience. CSAT is short for Customer Satisfaction, and is a key indicator of how satisfied your customers are with your store, products and experience.
CSAT can be measured using results from surveys, and in ecommerce this is usually the customer satisfaction surveys at the end of a customer support interaction or following up on a purchase. It can then be calculated by taking the sum of all positive responses, divided by total responses, and multiplied by 100. That gives you a percentage score that indicates how satisfied your customers are with your experience.
You can calculate CSAT across different segments - these could be based on what type of issue a customer contacts support about. You’ll then be able to see for which topics your support team are providing a positive experience, and which could be improved upon. Another way to use CSAT is to track it over the customer lifecycle. Satisfaction surveys are usually quick and simple, so you can send them at different touch points such as after their order arrives, after using the product for 1 month, after support interactions etc.
There are a lot of acronyms, abbreviations, and terms in the world of ecommerce and customer experience. Understanding what these terms mean and how they can enhance your business takes you one step closer to success.