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Customer Engagement Score (CES)

A metric that evaluates the engagement of customers and free trial prospects

What is Customer Engagement Score (CES)?

Customer engagement score (CES), also known as engagement score, is a single quantitative metric that evaluates the engagement of customers and free trial prospects. CES is one of the key metrics for online businesses, particularly companies operating on the software-as-a-service (SaaS) business model.

 

Customer Engagement Score

 

Unlike “offline” businesses, their online counterparts cannot rely on human interaction between employees and customers to get insights about customer engagement. However, customer engagement scores provide a method to evaluate the engagement of the company’s customers, based on their online behavior and interactions with the company’s products.

 

Uses of Customer Engagement Scores

Generally, customer engagement scores can help a company to address the following problems:

  • Identify customers who are willing to convert from a free trial to a full product
  • Identify customers who are close to churning (i.e., ready to stop their relationships with a company)
  • Identify customers who may accept upsell or cross-sell deals

By identifying customer engagement and the problems associated with it, a company can determine a suitable set of actions to take to improve customer retention and engagement.

Typically, the customer engagement score is calculated on an individual basis. An individual CES is estimated based on a customer’s interactions with a product/service. In addition, companies frequently use the metric to compare the engagement of customers in different customer segments. A positive CES indicates that the company’s customers positively interact with a company’s product.

 

How to Calculate Customer Engagement Score?

The calculation of the customer engagement score can be relatively complex and tedious. Generally, calculating the CES requires the incorporation of numerous factors to get a precise result. The method of CES calculation can be divided into three steps:

 

Step 1: Identify factors affecting CES

The first step in this process is also the most critical. In this stage, a company must carefully assess the benefits and value that a company’s product delivers to the customers. By knowing the exact benefits of its product, a company can identify the specific events that enable tracking such benefits. For example, a social media company might track how many times customers utilize its online messaging system.

 

Step 2:  Assign weight to each event

After identifying all the benefits of a product, as well as events that allow tracking them, a company must assign a weight to each event. The general rule here is that a higher weight indicates a higher benefit.

 

Step 3: Calculate the CES

The general formula for calculating CES can be expressed as follows:

 

CES Formula

 

Where:

  • wt – the weight of a random event
  • nt – the number of occurrences of a random event

 

In some cases, the process of calculating CES is automated. There are many customer success platforms that offer calculation of customer engagement scores. Such platforms can also help to indicate the customers who are close to churning, determine whether there is a need for product training, or identify the most engaged customers.

 

More Resources

CFI is the official provider of the global Financial Modeling & Valuation Analyst (FMVA)™ certification program, designed to help anyone become a world-class financial analyst. To keep advancing your career, the additional CFI resources below will be useful:

  • Buyer Types
  • Customer Satisfaction
  • Financial Modeling for SaaS Companies
  • Network Effect