Measuring customer satisfaction: Methods and benefits

Measuring customer satisfaction: Methods and benefits

Customer satisfaction is an incredibly important, but often overlooked aspect of a successful business model. Many companies focus too heavily on acquiring new customers and too little on satisfying and retaining existing customers. This can be quite damaging to sustainable business success, both for small business and enterprise companies alike. That’s why measuring customer satisfaction is so important.

Luckily for business owners, with the technology available these days, satisfying customers is easier than ever. But to maintain satisfied customers, you need to know how to measure customer satisfaction, so you know whether or not your customers are truly happy.

Below, we’ll discuss some key benefits of maintaining satisfied customers and cover the three most common models for measuring customer satisfaction.

Benefits of keeping customers happy

We’ve previously written about the best tips to maintain world-class customer satisfaction levels. Here, we’ll dig deeper into the benefits of doing so.

It’s cost-effective

Did you know that on average your existing customers will spend 67% more than new customers? Also, it costs five to ten times more to acquire a new customer than to retain an existing one.

Considering these statistics, it’s logical to assume that you should be spending a decent chunk of your marketing budget on customer retention programs.

However, according to Corporate Visions, 80% of businesses spend more than 70% of their [marketing] budget on demand generation messaging and content, and less than 30% on customer retention programs.

Those who focus on customer retention as a key priority will be those that come out on top in the future. Check out some highly effective customer retention strategies.

Brand loyalty

Satisfied customers stick around longer, provide a recurring revenue stream, and develop brand loyalty.

According to Capgemini, eight in ten consumers are willing to pay more for better customer experience—and a better customer experience is what satisfies consumers and creates loyalty.

If you deliver a stellar customer experience and generate satisfied, loyal customers, they will reward you with their recurring business.

Word-of-mouth advertising

When customers are satisfied, they are much more likely to recommend your brand. Accenture reports that 55% of U.S. consumers express loyalty by recommending the brands and companies they love to family and friends.

That is important because 83% of consumers trust product recommendations from friends and family more than any other type of advertising.

Satisfied customers will share product recommendations on social media, discuss them with friends in informal settings, and even recommend products in the workplace. Essentially, this is free advertising—and it’s the most effective type of advertising as well.

Market differentiation

In today’s highly competitive business environment, you can’t afford to ignore tending to customer needs and driving increased customer satisfaction.

Generating world-class customer satisfaction levels helps to differentiate your business from the competition.

If you don’t maintain a constant focus on the customer experience and customer satisfaction, your customers can easily leave you for a vendor that does.

Measuring customer satisfaction: Three models

There are three primary models for measuring customer satisfaction. Here, we’ll discuss how to measure customer satisfaction using these three models.

Customer Satisfaction Score (CSAT)

Customer satisfaction score (CSAT) uses a scale of one to five. It is used to gauge customer satisfaction with a particular topic or product. Customers rate their satisfaction as: 1) very unsatisfied, 2) unsatisfied, 3) neutral, 4) satisfied, and 5) very satisfied.

For example, you could ask customers to rate their satisfaction with the quality of the customer support you provide to them, on that five-point scale.

If you want your CSAT survey to consist of 10 questions on different topics, you would take the average of each customer’s responses, and that would be that individual’s CSAT score. As with any survey, a large sample size is needed to generate accurate results. Ultimately, the sample size will depend on the total number of customers a business has (check out this sample size calculator).

Once enough responses have been gathered, the next step is to take each individual customer’s CSAT score, add them all up, and divide the sum by the total number of respondents. That will provide the overall CSAT score. Alternatively, one can take the average score of individual questions to produce insight on individual topics.

CSAT is an effective way to measure short-term satisfaction at a granular level. But, it’s advantageous to use CSAT in conjunction with at least one of the other metrics covered below.

Net Promoter Score (NPS)

While CSAT score can be used to measure short-term satisfaction, net promoter score (NPS) is better used to measure long-term satisfaction and thus customer loyalty. NPS is considered the most dependable measure of customer satisfaction.

It relies on a single question: How likely would you be to recommend our product or service to a friend or a colleague? Responses are measured on a scale of 0 to 10, with 0 being the least likely, and 10 being the most likely.

Those who answer 9 or 10 are “promoters,” meaning they display behaviors that indicate they will stay around longer, buy more in the future, and are likely to recommend your company to others. Those who answer 7 or 8 are “passives,” meaning they don’t have strong emotions either way. And those that score 6 or lower are “detractors,” or those that are more likely to leave, and are also the customers that may potentially dissuade others from purchasing your product or service.

Rather than being an average, like CSAT, NPS is calculated as follows:

● Calculate the total percentage of respondents that are promoters

● Then, calculate the total percentage of respondents that are detractors

● Ignore the passives as they don’t play into the equation

● Subtract the percentage of detractors from the percentage of promoters

● Then represent that number not as a percentage, but as a whole number

For example, let’s say an NPS survey has 100 respondents, with 60 promoters (60%), 30 passives (30%), and 10 detractors (10%). To get the NPS, one would subtract 10 from 60 (ignoring the 30% that are passives) to come up with 50, and 50 would be the overall net promoter score.

It is possible to have a negative net promoter score, which would be the case if there were more detractors than promoters. Because of that, an NPS above 0 is considered “good.” A score between 50 and 70 is considered “excellent,” and a score above 70 is considered “world-class.”

Customer Effort Score (CES)

Customer effort score (CES) differs from CSAT and NPS in that it doesn’t directly measure satisfaction, as such. Rather, it measures the amount of effort the customer had to put into a specific interaction with a company.

Many companies use CES to assess the effectiveness of their customer support function. In many ways, higher levels of customer satisfaction depend on reducing the effort a customer must put forth when interacting with a business.

If you solve their issue in a few minutes without putting much of the burden on their shoulders, they will leave satisfied.

On the other hand, if it is a headache for them every time they call customer support—they are on hold for 30 minutes, must dig up lots of information that support should have in front of them, etc.—they won’t view the interaction as one in which the company supported them, but rather one where they supported the company.

CES is calculated by asking customers to rate the amount of effort they had to put into an interaction, on a five-point scale, with 1 being “very low effort,” and 5 being “very high effort.”

Once all the responses are in, calculating the average of those produces the CES. A score of 2 or lower means that a company is successfully making life easy on its customers, and they are happy. A score of 4 or 5 means that the company should rethink how they support their customers with a mind towards taking some of the burden off customers’ shoulders.

Conclusion

Maintaining satisfied customers is more important today than ever before. Increased competition in nearly every industry means that you must work harder to keep customers satisfied and loyal to your brand.

When you focus on measuring customer satisfaction and implementing changes based on customer feedback, you will be able to continually improve the customer experience and retain more customers over the long haul. This translates to longevity and a bright future for your business.

How are you measuring customer satisfaction? Do you have any tips that will help our readers increase customer satisfaction? Share your thoughts with us in the comments section below!

Try Agile CRM for FREE!
FREE for 10 Users. No credit card required.

Greg Arthur

Greg Arthur has a deep understanding of marketing and sales and has been an advisor to software start-ups in the mobile and SaaS areas. Specialties: Digital Marketing, Building, and Growing companies, Marketing, Business Development, M&A.

No Comments

Leave a Comment

Tell us what you think. To comment, please fill in the required fields marked with an asterisk (*). Your email address will not be published.


This site uses Akismet to reduce spam. Learn how your comment data is processed.