7 KPIs of customer service small businesses need to focus on


As a small business owner, you very well understand the significance of customer service. Customer service is a key result area (KRA) that requires constant attention and innovation. Besides, the mathematics of customer service and customer experience is quite simple. The better customer service you deliver the better will be the prospects of business growth. 

Having said that, for small businesses or startups, each customer is immensely valuable. The big corporations can still afford to overlook the metrics of customer service at times. However, for your small business, such neglect can be rather disastrous. You have to keep delivering on the expectations customers have in terms of service and experience. In fact, to take your small business to new heights, you should rather have a knack for exceeding customer expectations.

However, the question is, how are you going to measure if your business is doing well or not at the front of customer service? What metrics are you going to apply to make these key evaluations? This is where key performance indicators come into the picture. 

These KPIs are quantifiable values that can help you in assessing the progress and performance of your strategic objectives. Needless to say, for small businesses, such quantifiable insights have a massive role to play in the decision-making process. In this blog, we shed light on the primary key performance indicators that are highly relevant to the KRA of customer service. However, before we proceed with these KPIs, let us glance at some crucial statistics linked to customer service. 

Some pivotal statistics on customer service

  1. As claimed by HubSpot, 68 percent of customers are even happy to pay premium prices to a business renowned for its excellence in customer service.
  2. As per SalesForce, 89 percent of customers would be interested in making future purchases from a business that has offered them a delightful customer experience in the past.
  3. As cited by Bain and Company, a percent augmentation in customer retention can upscale profits up to 95 percent.
  4. The acquisition of new customers can prove to be up to 25 percent more expensive than retaining existing customers by delivering extraordinary customer service as per Invesp.
  5. Harvard Business Review cites that 80 percent of businesses pay consistent attention to customer satisfaction scores to keep optimizing the value proposition they offer to their customers 

The above statistics and insights establish the imperativeness of laying emphasis on customer service. That is something you should constantly look to improve so that your customers stick to you and keep adding value to the advancement of your business. 

Besides, the above statistics also explain that a majority of businesses are already going out of the way to be creative in driving positive customer experiences. Indeed, excellent customer service is a competitive advantage that businesses should chase. Customer service in itself is a quintessential dimension of the branding of small businesses. Are you doing enough to be at the top of your game when it comes to customer service? 

Moving forward, given below are the most critical performance indicators that can help you monitor, measure, and evaluate your customer service parameters. 

Key performance indicators for gauging customer service 

  1. Customer engagement

This key performance indicator is vital in measuring the extent to which customers are engaged with a brand. Engagement here refers to how often customers interact with the brand through social media handles or the company website. The number of likes and comments on social media posts by a business is a direct indicator of customer engagement. 

Besides, it also gives quantifiable insights into how much time customers spend on the company website and the number of pages they click on. Needless to say, the engagement among customers will be high when a business offers valuable service and experience. Customers would not engage much with a brand that offered them negative experiences in the past, isn’t it?

Speaking of the calculation of customer engagement rate, there are different ways in which customer engagement can be computed across different channels. If we talk about Instagram, the customer engagement rate is yielded by the following formula.

Customer engagement on social media = 

Likes on a post + comments on a post X 100 


Total number of followers on Instagram

As per HootSuite, the average customer engagement rate should be around 4 to 5 percent. If it is in this range, the customer engagement rate is considered to be good enough. How is your engagement rate holding up on Instagram? 

  1. Customer retention

Customer retention is a key concern for every business and the reasons are quite understandable after going through the above statistics. Existing customers are far more valuable in terms of making purchases in the future than new customers. So, it is fair enough that businesses enter a tug of war with each other to retain their most valuable customers. As a business leader, your ability in terms of both customer retention and employee retention should be exemplary. 

Customer retention is a measure of the number of customers that come back to your business for a second purchase based on their service experience during the first purchase. Besides, it is also a direct measure of the loyalty that customers have for a brand. Excellent and appealing delivery of service gravitates customers to keep coming back to a business. 

The day customers begin to feel that they are not drawing the same value from a business or other businesses are offering more in terms of experience, customer retention rates will begin to dip. This, of course, will have a massive impact on the reputation and sales of a business. You would not go back to a business that offered a negative experience, would you? That is exactly how the customer service dynamics work for your business. 

Next, we must also look at the way in which customer retention rates can be calculated for better decision-making. The formula is given below.

Customer retention rate = 

Number of customers at the end of a given time frame – newly acquired customers in that period 

———————————————————————————————————————————————-Number of customers at the beginning of the time period X 100 

Of course, the ideal value of customer retention would be 100 percent. No business would want to lose even one customer. However, a 100 percent retention rate is somewhat impractical. A customer retention rate above 85 percent is good enough.

  1. Customer acquisition

This is yet another crucial performance indicator to evaluate a company’s success in the KRA of customer service. Here it is important to note that this metric of customer service is a measure of cost. Customer acquisition takes into account the cost that a business has to incur for each new customer. 

The challenge for every business is to keep the acquisition costs low while also ensuring that no potential customer is lost. These costs primarily include the expenses incurred in marketing. This KPI is further facilitated by data on customer experiences. 

If you offer unparalleled positive experiences to your customers, they would be happy to refer your business to their near and dear ones. Having said that, when there is a high influx of referrals, the acquisition costs will be low by default. The key is to optimize your word-of-mouth marketing along with other forms of promotions to attract potential customers.

Speaking of the computation of acquisition cost per customer, the following methodology can be applied.

Acquisition cost per customer =

Total marketing costs incurred in a specific period of time


Number of new customers acquired in that period of time

  1. Rate of referrals

As explained above, referrals are of great importance for a business to acquire new customers. The rate of referrals is a vital performance indicator that measures the number of referrals that existing customers make on behalf of a business. The higher the number of positive referrals the greater will be the leads. 

Do you think people would recommend your business to others if they have had miserable experiences dealing with your business? Of course not! They would rather discourage others from purchasing from you. Having said that, in order to drive a greater number of referrals via your existing customers, you have to keep finding ways to offer unmatched value to them. 

Probing further, do you know what is the criterion for calculating the rate of referrals? Let’s find out how the referral rate per customer can be calculated. 

The average number of referrals per customer =

Total number of referrals in a given period ———————————————————————– Total number of customers in that period

  1. Average time to resolution

Customers like to get their queries and issues resolved with immediate effect. If any business takes too long to resolve queries or complaints, customers would, of course, rate the service of that business as negative. Having said that, the average time to resolution is a salient performance indicator in the domain of customer service.

The average time to resolution is a measure of the total time that a business takes to successfully resolve a customer’s issue. This is a measure of the time between the first instance at which a customer issue is reported and the complete resolution of it. 

Here it is imperative to note, as per HubSpot, 90 percent of customers assert that it is quintessential for a business to offer immediate response to issues. Besides, as per 60 percent of customers, the ideal time for a business to respond to an issue is within ten minutes. If a business takes longer than that to respond and take cognizance of the issue, the business will be considered insensitive to customer needs. Needless to say, that would be a measure of negative customer experiences. 

Coming to the methodology for computation, the average time to resolution can be determined by applying the following formula.

Average time to resolution =

 Summation of resolution time of all queries/complaints in a time period  


Total number of issues resolved in the corresponding period

  1. Cart abandonment rate

It is a problematic consideration for a business if customers are filling their carts during online shopping but not completing the purchase. This could mean that the customers may not be happy with the overall online shopping experience. Moreover, this is also a measure of the allegiance that customers have to a brand. Needless to say, loyal customers would not abandon their carts. 

You need to keep an eye on the proportion of carts that are left abandoned by customers. This will enable you to gauge if the mobile and web experiences offered by your business are appealing enough for your customers. In case, the percentage of unattended carts is high, you may want to mull some overhauls in the web and mobile experiences on offer as a key component of customer service.

Moving forward, the cart abandonment rate can be computed in the following way.

Cart abandonment rate = 

Total number of successful purchases online in a time period 


Total number of carts created on the website in the period

  1. Customer lifetime value  

Customer lifetime value is a quantitative measure of the value or worth (in terms of revenue) that a customer offers to a business in the course of his or her lifetime. In other words, we can define it as the returns that a business gets from investing in customers across marketing, acquisition, and so on. Of course, in the commercial world, value is a two-way thing. Businesses offer great value to customers so that they can derive greater value from them. 

Having said that, this is a sacrosanct performance indicator that gives businesses clear insights into how well their investments in customers have paid off. Entrepreneurs are quite particular about their investments, isn’t it? In fact, for smaller businesses, optimum investments are far more important given the limited budgets. Hence, the aim should be to derive the maximum customer lifetime value from each customer by exceeding their service anticipations. 

The next thing we need to look at is the calculative methodology linked to customer lifetime value. The customer lifetime value can be calculated as explained below.

Customer lifetime value = Value derived from customer X Average Customer Lifespan 

Here, the  value derived from customer = Value of average purchases X Average number of purchases 

Needless to say, the higher the customer lifetime value the greater will be the revenue generation. Besides, augmentation in customer lifetime value will also result in lower acquisition costs. 

To encapsulate, key performance indicators are of immense importance in every vertical of business operations. Everything in the contemporary world is driven by data and if you are not paying enough heed to crucial data, you are missing the trick. You have to keep tracking the success of your company at the front of customer service. While the ultimate goal of every business is profitability and massive revenues, customer service is the pathway to it. Your small business needs to keep tracking the customer service KPIs to go big. Let’s see how well you embrace this enlightenment. 

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