Hospitality Industry
4 min read

6 KPIs for measuring customer service performance

EHL Insights
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A happy customer is a loyal customer

It’s a fact: businesses need their customers more than the customers need their business. And because of the hospitality industry’s ruthlessly competitive nature, hoteliers and tourism operators need to work even harder to keep their customers satisfied.

According to McKinsey study, 70% of all purchase decisions are affected by customer service – essentially giving it the power to make or break your business;

Great customer service can not only turn customers into loyal customers, but also significantly reduce operating costs. In fact, studies have shown that just a 5% increase in customer retention can lead to an increase in profits of 25% to 95%.

On the flip side, dissatisfied customers can do a lot more harm than good. According to American Express, customers are twice as likely to share a negative experience than a positive experience – making it even more important to keep guests happy.

But acing customer satisfaction is no easy feat. Customer want feel valued, respected and know that they can expect the same level of quality every time they interact with your business. They’re looking for a memorable experience, dynamic service and want to know that their business is appreciated with little gestures that make them feel unique. Yet, the time and monetary resources that creep into making that happen can be immense.

KPIs for customer service excellence

So how can you go about creating an excellent customer service experience? The answer lies in KPIs, or Key Performance Indicators. Not only can KPIs help you better understand how your service team is currently performing, but they can help you manage your operations more efficiently - reducing costs and increasing job satisfaction.

Below, we’ve highlighted our top 6 essential KPIs for measuring customer service performance:

 

  1. First response time

When interacting with your customers – whether they’re disgruntled or simply have a query – it’s important to be responsive and resolve their issues as quickly as possible. That’s why it’s important to keep close track of your first response time. This is the amount of time taken between the moment your customer makes contact (whether that be a web ticket, phone call or email) and the time they receive a response to their query. Average response times range from 10 minutes to 12 hours. Studies show that there’s a direct correlation between customer satisfaction and how long it takes a customer service agent to respond, and a quick response time is the most important attribute of a good customer experience.

 

  1. Average resolution time

Similar to average response time, average resolution time is how long it takes your customer service team to resolve an issue once it’s been opened. It’s calculated by dividing the total time taken to resolve tickets by the number of tickets resolved, and should be measured in days or business hours, not factoring in the hours when your team is off the clock.

 

  1. Customer satisfaction

By sending out surveys to customers shortly after their stay, or after an interaction with your customer service team, you can gauge how satisfied they are with your service level – and why. Satisfied customers are more likely to be loyal, tell others about you and form a revenue base you can build on, so this is a critical metric. Customer satisfaction is usually scored on a scale of 1 to 5 or 1 to 10 (ranging from very dissatisfied to very satisfied), and should include open-ended questions so you can pinpoint areas for improvement.

 

  1. Customer retention rate

Did you know that it can cost 6-7 times more to win a new customer than to retain an existing one? That’s why it’s critical to keep you customers satisfied, and coming back for more. Your customer retention rate can help you understand whether your customers are coming back – or are leaving you after a one-off experience. Most CRM software offers the tools to help you identify and track your customer retention rate over time.

 

  1. Net promoter score

The net promoter score is an index ranging from -100 to 100 that measures how willing your customers are to recommend your company to others. It does so with one simple question, asking customers to rate their likelihood of recommending your company on an 11-point scale (ranging from 0 to 10). Customers are then classified into 3 categories: detractors, passives, and promoters, and the NPS is calculated by deducting the % of detractors from the % of promoters. Within the hospitality industry, average NPS scores range from 5-15, and an NPS of 30 or more is considered to be strong.

 

  1. Complaint escalation rate

Unfortunately, no matter how excellent your customer service is, receiving complaints is inevitable. But getting too many complaints, or noticing a sudden uptick in in the number of complaints relative to your overall customer growth should raise a red flag. Make sure to track your complaints closely – including their nature, severity and how efficiently they’ve been resolved – and share the feedback with the concerned departments so that they can react accordingly and avoid issues from recurring.

 

Choosing the right metrics

When configuring your KPI dashboard, make sure to choose ones that work for your business. Don’t compare yourself to your competitors – that’s a dangerous game. Focus on your own company and what areas you want to measure, and why they are important to helping you succeed.

A few things you might want to consider when it comes to defining your KPI metrics include:

  • The size and location of your business
  • The stage of your business and customer lifecycle
  • Your short and long-term goals
  • Circumstances that are unique to your business


To check whether your KPI metrics are effective for your business, make sure they check the following boxes:

  • Measures both short and long-term performance
  • Is relevant, and has a direct impact on your business
  • Is measurable, and easy to track
  • Is understandable to everyone in your business

 

At the end of the day, numbers don’t lie. If you want to stay ahead of your competitors and keep your customers satisfied, it’s important to closely monitor how your customers are experiencing your brand. Track how your team is doing both in the short and long-term, and set goals for what you want to accomplish. But don’t forget to stay flexible, reactive and solutions-oriented - and fix what needs mending.

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